U.S. Equities closed at record highs on Wednesday as optimism grew that the global economy can recover from the impact of the coronavirus amid signs the spread of the illness is slowing. Crude rallied and Treasuries fell. The S&P 500 Index gained for the third straight session, while the Dow Jones Industrial Average and Nasdaq Composite Index also hit new heights, after China’s Hubei province reported the lowest number of new virus cases this month and suspected infections on the mainland declined. Carmakers and banks led the advance in the Stoxx Europe 600 Index, even as data showed a deep slump in Euro-Zone Industrial Output at the end of last year. Asia saw gains for most equity benchmarks, with those in Shanghai and Hong Kong outperforming. Oil climbed above $51 a barrel in New York, holding that advance even after OPEC slashed forecasts for global demand and U.S. inventories came in higher than estimated. Raw materials including copper and iron ore gained, while core European bonds tracked Treasuries lower and the Japanese Yen also slipped. New Zealand’s Dollar jumped the most in about two months after its Central Bank said the impact from the virus will be short-lived and it doesn’t project a need for rate cuts this year. Meanwhile, peripheral European bonds bucked declines and the yield on 10-year Greek debt dropped below 1% for the first time.
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Confidence is increasing among some investors that the impact of the coronavirus outbreak will ultimately prove short-lived. President Xi Jinping vowed China would meet its economic goals while winning the battle against the virus that has now claimed 1,115 lives, while Federal Reserve Chairman Jerome Powell said on Tuesday the Central Bank is keeping a close eye on fallout from the epidemic.
The S&P 500 Index increased 0.6% to close at a price of 3379, the highest on record.
The Dow Jones Industrial Average climbed 0.8% to 29,550, the highest on record.
The Nasdaq 100 closed 1% higher at 9616, also the highest on record.
The Stoxx Europe 600 Index gained 0.90%, the highest on record.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index advanced 0.1% to 1207.
The British Pound closed unchanged at $1.2960.
The Euro decreased 0.4% to $1.0875, the weakest in almost three years.
The Japanese Yen depreciated 0.3% to 110.08 per dollar.
The yield on 10-year Treasuries advanced four basis points to 1.63%.
Britain’s 10-year yield increased four basis points to 0.61%.
Germany’s 10-year yield gained one basis points to -0.38%.
West Texas Intermediate crude advanced 3.2% to $51.54 a barrel, the highest in more than a week on the biggest rise in more than 10 weeks.
Gold closed unchanged at $1,567.20 an ounce.
Copper rose 1.4%.
This morning on the Economic Front we already had the release of German Final CPI for January which came in as expected at +1.7%. At 1.30 pm we have U.S. CPI and the Weekly Jobless Claims. Finally. At 5.00 pm we have a speech from ECB Member Panetta.
March S&P 500
For the second consecutive trading session the S&P fell shy of my 3385 sell level with a 3381 high print and I am still flat. More concerns about the Coronavirus in China has led to a decline in the Futures Market overnight with the S&P currently trading at 3365. Sentiment is at extreme levels while the latest AAII report shows that investors are so optimistic right now that they have just 13.8% of their portfolio allocated to the safety of cash. This is the second lowest percentage since the peak in the Dot.Com Mania from January to March 2000. AAII investors are literally ‘’all in’’ Financial Assets with little to-no margin for safety in my opinion. Another good example of how investing is non-rational is the yield in Greek 10-year Bonds relative to the yield of U.S. 10 -year Government Bonds. Greece is a country that sports a junk rating on its debt by all three major rating agencies. The United States debt is rated AAA by two of the three main rating Agencies and AA+ by the third. One would think that bonds of lower-rated Countries and Companies would spot higher yields to compensate investors for the added risk of owning paper that has a higher chance of turning into trouble. Not today as Greek Yields closed below 1% which is insane. In the modern era, Greece has defaulted on its debt a total of five times. Since 2010, Greece has been bailed out three times by other Euro-Zone Member States and the IMF to a tune of $360 billion. Yet Bond buyers are currently acting as if their 10-year debt is a better risk than the U.S proving yet again that trading has little to do with earnings, credit ratings or valuations. It is non-rational. Today I will leave my 3385/3410 sell level unchanged with the same 3425 stop. I will now raise my buy level to 3338/3350 with a higher 3329 stop.
The Euro fell to a three-year low yesterday and had now closed lower for seven of the last eight trading sessions. I bought the Euro at 1.0885 and I will add to to this position at 1.0835 with a now lower 1.0795 stop. My T/P level will be at 1.0910 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
March Dollar Index
No Change as I am still a seller from 99.00/99.40 with a 99.70 stop.
My DAX plan worked well with the market rallying to my 13740 sell level before opening lower this morning at 13690. As I wanted to bank some points for yesterday’s session I covered this trade at 13725 and I am still flat. Given the fact that the DAX is severely overbought with strong resistance from 13790/13860, I will be a seller in this area with a 13905 stop.
I am still flat the FTSE and today I will lower my buy level to 7340/7380 with a lower 7295 stop.
Dow Rolling Contract
I am still flat the Dow and today I will lower my sell level to 29610/29770 with a lower 29885 stop. Despite the Dow closing at a new all-time high I am not going to chase the market higher given all my concerns as mentioned in the S&P above. Therefore my 29020/29170 buy level will remain unchanged with the same 28920 stop.
My NASDAQ plan worked well with the market trading higher to my 9620 sell level before selling off overnight to my 9580 T/P level and I am now flat. There is every chance that the NASDAQ can trade as high as 9890/9940 before we finally see more than just a normal correction. Today I will move my buy level higher to 9430/9490 with a 9370 stop. My only interest in selling the NASDAQ today is from 9680/9740 with a 9795 stop.
The BUND opened in my sell range and I have gone short in small size at 174.45. I will add to this trade at 174.85 with a higher 175.15 stop. I will now raise my T/P level on this position to 174.20 and if any of the above levels are executed, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Despite the Dollar making new highs, Gold continues to trade sideways. I still do not trust this market and today I will leave my 1538/1548 buy level unchanged with the same 1532 stop.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 16.95/17.35 with a 16.60 stop.