European Indices started July on the defensive after comments from German Chancellor that European Union Members were still far apart in agreeing a recovery fund and a budget. This changed shortly before the U.S Markets opened after Pfizer/BioNech announced a vaccine that was showing positive results. The DAX rallied 300 points off its morning low on this news but still closed lower by 0.4%. Reports of Airbus and Air France cutting jobs was a stark reminder of the long-road to recovery. This weighed on rebound-related sectors like Industrials Travel & Leisure. The vaccine news was positive for US Indices with the NADDAQ again leading the market higher to close with a gain of 0.95%. ADP Employment Change data was weaker than expected for June, but May’s data was revised sharply higher. This revision means that jobs were actually added in May. Meanwhile ISM U.S Manufacturing for June came in above estimates, hitting the highest level in 14 months. Oil closed 1% higher after the Energy Information Agency showed a large than expected drawdown in Crude Inventories. Elsewhere, the US Dollar weakened along with Gold which fell 1% as investors rotated into risk assets on optimism surrounding the vaccine.
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The S&P 500 rose 0.5% to close at a price of 3116.
The Dow Jones Industrial Average fell 77 points for a 0.30% loss to close at 25,734.
The NASDAQ 100 closed 1.2% higher at 10,279.
Stoxx Europe 600 Index closed with a gain of 0.2%.
The FTSE 100 closed 0.15% lower at 6145.
This morning the Nikkei closed 0.11% higher at 22,145.
Here is a summary of the main Changes in F.X. Markets:
The Euro increased 0.2% to $1.1255.
The Japanese Yen closed 0.4% higher at $107.46.
The British Pound closed 0.8% higher at 1.2478 per Dollar.
The yield on 10-year Treasuries closed two basis points higher at 0.68%.
Germany’s 10-year yield rose five basis points to -0.40%.
Britain’s 10-year yield increased five basis points to 0.21%.
West Texas Intermediate crude rose 1.1% to $39.71 a barrel.
Gold closed 1.0% lower at $1770.
This morning on the Economic Front we have Euro-Zone Unemployment and PPI at 10.00 am. This is followed at 1.30 pm by the US Non-Farm Payrolls where the expectation is for continued growth of between 2.8 and 3 million. The Unemployment Rate is forecast to fall to 12.5% while the expectation for Average Earnings is a fall of 0.7%. The NFP is being released a day early due to the US Independence Day Holiday tomorrow. The Weekly Jobless Claims will also be released at the same time. At 2.45 pm we have ISM New York, followed by Factory Orders at 3.00 pm. Finally, we have speeches from ECB Members Mersch and Schnabel at 4.00 pm and 6.00 pm respectively.
September S&P 500
Just when it looked like the S&P was going to break lower we got news of the encouraging trials from a vaccine by Pfizer which led to an S&P rally from a low of 3063 to trade at 3114 this morning. When Fed Chair Powell noted in his Testimony on Tuesday that the $250 billion Secondary Market Corporate Credit Facility has only acquired $10 billion in bonds and exchange funds. On top of this $600 billion Main Street Lending Facility has also yet to be used. The above combination will insulate any sell-off in the S&P going forward. In my opinion this puts a floor under the market. As mentioned yesterday, the yield for the S&P is 1.9%, well above the 10-Year Treasury Yield of 0.66%. The Buy the dip will continue as long as the Fed are there to support the US Indices. Yesterday my S&P plan worked well with the market trading higher to my 3110 sell level before falling 20 Handles and I used this move lower to exit at my revised 3104 T/P level and I am now flat. Ahead of the long-weekend in the U.S., Plus the fact that the markets are closed for a half-day with the Cash Indices closing at 6.00 pm London time, most traders will want to go home flat this evening. The S&P has resistance from 3138/3153 where I will be a small seller with a 3162 stop. I will also raise my buy level to 3065/3080 with a higher 3053 stop.
My Euro plan worked well with the market trading lower to my 1.1185 buy level before rallying to my revised 1.1212 T/P level and I am now flat. This morning the Euro is trading higher at 1.1272. I will leave my 1.1340/1.1380 sell level unchanged with the same 1.1435 stop. I will continue to buy the dip in the Euro and today my buy level will be from 1.1180/1.1220 with a 1.1135 stop.
September Dollar Index
I am still flat as the Dollar again fell shy of my 97.80 sell level. I will now lower this range to 97.55/97.95 with a lower 98.35 stop. I still do not want to be long the Dollar at this time.
My DAX plan worked well with the market trading lower to my 12120 buy level before rallying to my 12200 revised T/P level and I am still flat. This morning the DAX is trading higher at 12375. I still do not like the price action in the DAX and I am reluctant to chase the market higher. Today my buy level will be from 12120/12220 with a 12045 stop which is just below yesterday’s low print.
My FTSE plan also worked well with the market trading the whole of my buy range for a 6070 average long position before rallying to my 6110 revised T/P level and I am still flat. The FTSE continues to struggle as it underperforms both the European and U.S. Indices. Today I will again look to buy the market on any dip lower to 6050/6120 with a 5995 stop.
Dow Rolling Contract
Despite the Dow underperforming both the S&P and NASDAQ, buying the dip in the Dow continues to pay dividends. Yesterday after the Dow hit my 25580 buy level we rallied back above 26000 and this move higher enabled me to cover this position at my revised 25735 T/P level and I am still flat. Ahead of the NFP, I am not going to chase the market higher. The Dow will continue to be a buy as long as we do not close below 25400. Today my buy level will be from 25450/25650 with a 25295 stop. Ahead of the American long-weekend I still do not want to be short the Dow at this time.
My NASDAQ game-plan worked really well yesterday. Shortly after I posted the market traded lower to my 10115 T/P level on my latest 10140 short position. Subsequently the NASDAQ traded lower to my second buy level at 10075. Unfortunately, I covered this position too early at 10130 with the market now trading above 10300 this morning, to new all-time highs. The NASDAQ is severely overbought but with the Fed continuing to support equities it is extremely to see a meaningful decline anytime soon. Today I will be a buyer on any dip lower to 10110/10210 with a 10025 stop. The NASDAQ has strong resistance from 10440/10540 where I will be a seller with a 10615 stop. If I am taken long I will have a T/P level at 10275. If I am taken short I will have a T/P level at 10370.
The BUND got hit hard yesterday with the Yield rising 7 basis points to close at -0.40%. I am still flat and I will now lower my sell level to 175.90/176.40 with a 176.75 stop.
Gold Rolling Contract
My Gold plan worked well with the market trading lower to my 1763 buy level before rallying to my 1770 revised T/P level and I am now flat. Tuesday’s rally to 1800 saw the Daily Sentiment Index rise to 90% bulls. Almost everytime we see a DSI reading over 90%, Gold subsequently falls. However ahead of the long weekend I am reluctant to go short especially as the US Dollar is weak. Gold has support from 1730/1740 where I will be a buyer with a 1719 stop.
Silver Rolling Contract
Silver traded lower to my 17.85 buy level. I am still long and I will now lower my T/P level on this position to 18.00. I will also raise my stop on this trade to 17.35 and if any of the above levels are hit I will be back with a new update for my Platinum Members.