U.S. stocks tumbled to the lowest since August as another disappointing report fuelled fears that the American economy is slowing. Treasuries climbed with Gold and the Japanese Yen on demand for haven assets. The S&P 500 suffered its first back-to-back drops of more than 1% this year, pushing its two-day slump to the most in two months, as private payrolls fell short of estimates a day after a manufacturing gauge slumped to the lowest in a decade. The index plunged below 2,900 and took out its average price for the past 100 days, levels it hadn’t breached in a month. Carmakers sank after quarterly sales reports from Ford and General Motors added to concern over thinning profit margins in the industry. All S&P 500 sectors but one sank more than 1%, with industries most sensitive to economic growth dropping the most. Tech and industrials plunged 2%. The Dow Jones Industrial Average tumbled nearly 500 points. The hiring numbers pushed the 10-year Treasury yield lower for a fifth straight day as it pushed below 1.6%. The Japanese Yen rose versus the US Dollar and Gold spiked above $1,500. The equity rout spread to Europe, where the Stoxx 600 saw its biggest slide in 10 months and the FTSE 100 dropped the most since 2016. Oil fell below $53 a barrel after a report showed U.S. crude inventories increased.
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The disappointing data out of the U.S. and Europe, as well as weak earnings reports from automakers this week, is forcing investors to reconsider their strategies. The most recent economic numbers are driving concerns that a slowdown, which had been mostly confined to manufacturing, may be spreading to the consumer as the U.S.-China trade war drags on. Those fears increased bets that the Federal Reserve will cut rates this month. Focus now turns to services PMI data today and the Non-Farm Payrolls data tomorrow. In addition to ISM on Tuesday, you had auto sales data where Honda, Toyota, Nissan had double-digit declines. Much worse than expected. This raises enough questions about how resilient is the consumer at this point. We haven’t seen enough to say ‘Yeah, the consumer is folding,’ but questions are starting to intensify.
The S&P 500 Index fell 1.8% closing at 2887.
The Nasdaq Composite Index dropped 1.6%, while the Dow Jones Industrial Average slid 1.9% closing just above 26000 at 26078.
The Stoxx Europe 600 Index sank 2.7%.
The U.K.’s FTSE 100 Index sank 3.2%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index fell 0.1%.
The Euro advanced 0.2% to $1.0959.
The Japanese Yen gained 0.5% to 107.19 per dollar.
The yield on 10-year Treasuries decreased four basis points to 1.59%.
Britain’s 10-year yield climbed three basis points to 0.500%.
Japan’s 10-year yield dipped two basis points to -0.164%.
West Texas Intermediate crude lost 2% to $52.56 a barrel.
Gold increased 1.1% to $1,505.60 an ounce.
This morning on the Economic Front we have German, Euro-Zone and UK Markit Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone PPI and Retail Sales. At 1.30 pm we have U.S. Weekly Jobless Claims and Challenger Job Cuts. Finally, we have Markit Services PMI and ISM Non-Manufacturing at 2.45 pm and 3.00 pm respectively.
Speaking wise today: The Fed’s Quarles at 1.30 pm followed by the Bank of England’s Tenreyro at 3.00 pm.
December S&P 500
For the second consecutive trading session my S&P call was wrong. I thought that the 2900/2920 support area would hold but the market on the back of the rout in Europe just broke this support area with ease. Fore the record I bought the S&P at 2925 before getting stopped out of this position at 2909 and I am still flat. Given the extent of the sell-off over the past 36 hours I did not do another S&P trade. The VIX breaking and closing over 20 with a 11% rise yesterday is another worry for the bulls. However, against this we have the McClellan Oscillator closing at near oversold levels with a -192 print. For the bulls to regain control we need to break and close back above 2925. Support below here is strong at 2860/2880 while the 200 Day Moving Average is just below this support area at 2838. With the Non-Farm Payrolls tomorrow and given the fact that the S&P is trading well below its Daily Bollinger Band and at the bottom of the Williams Index I would not be selling the S&P at these levels. Today I will be a buyer on any further dip lower to 2860/2872 with a 2848 stop.
My Euro plan worked well with the market trading lower to my 1.0910 buy level shortly after I posted before rallying to my 1.0940 T/P level and I am now flat. Today I will again look to buy the Euro from 1.0870/10910 with a 1.0835 stop.
December Dollar Index
Frustratingly the Dollar just missed my 99.05 initial sell level with a 99.03 high print and I am still flat. This morning the Dollar is trading at 98.80 and today I will raise my sell level slightly to 99.15/99.55 with a 99.85 stop.
The DAX had its worst day in nearly a year as the 12150 support area was easily broken to close at 11900. This move lower saw me buy the DAX at an average rate of 12110 before getting stopped out of this position at 12035 and I am now flat. All the Indices that I cover are trading below the bottom of their respective Bollinger Bands thus showing how oversold each Index is at this time. The speed of the movement in each direction is scary and this is why I am only trading in very small size. The next support level for the DAX is from 11800/11860 and I will be a buyer in this area with a 11755 stop. The DAX has strong resistance from 12090/12150 and I will be a seller on any rally to this area with a 12205 tight stop.
As three of my Indices hit at the same time yesterday I did not buy the FTSE as I was waiting to see what PM Johnson’s latest Brexit proposals were. Yesterday the FTSE fell over 3% which was its worst trading session in three years. The FTSE is now trading over 10% lower since late July. The market is severely oversold as a result. We have support just below here at 6970/7020 where I will be a buyer in this area with a 6935 tight stop.
Dow Rolling Contract
The Dow has now fallen over 1100 points since the rebound high at 2.45 pm on Tuesday. Yesterday’s 500 point sell-off saw 29 of the 30 Stocks in the Index close lower. This was the strongest day of negative breadth since September 12. The Dow has two ‘’Open Gap’’ below the market at 25,629 from August 23 and 25,332 from June 4. The 200 Day Moving Average will also offer strong support and this price is at 25840 this morning. Yesterday my Dow plan worked well as after the market traded lower to my 26380 buy level the market rebounded to my revised 26460 T/P level and I am still flat. Given how oversold the Dow is trading I will be an aggressive buyer on any further move lower to 25750/25900 with a 25670 stop. Ahead of the NFP data tomorrow I still do not want to be short the Dow at this time.
Thankfully we had no buy levels in the NASDAQ yesterday with the market now trading over 600 points lower in the past few weeks which is a huge move for this market. The NASDAQ has strong support from 7450/7510 and I will be a buyer here with a wider 7380 stop.
This morning the Bund has traded higher to my 174.30 sell level. Ahead of the key PMI data due in the next 30 minutes I do not want to hold this short position and I have now exited here for a small gain at 174.15 and I am now flat. My only interest in selling the Bund today is on a further rally to 174.50/174.90 with a 175.25 stop.
Gold Rolling Contract
Gold has now rallied almost $50 from Tuesday’s 1459 low. I am still flat and today I will raise my buy level to 1468/1480 with a 1461 stop.
Silver Rolling Contract
I am still flat Silver and today I will now raise my buy level to 16.90/17.30 with a 16.45 higher stop.