European Indices ended the day lower in a volatile trading session after ECB President Christine Lagarde told the Financial Times that the Central Bank was unlikely to ease Policy further at next week’s meeting. Adding to the gloomy picture was comments from Italian Prime Minister Conte who said he will not accept a compromise on the European Union’s Euro 750 billion recovery fund, ahead of the meeting to discuss support for the measure. The DAX ended the day with a loss of 1%. In the UK, Chancellor Sunak set out a £30 billion blueprint to save jobs and get the economy moving again. He announced tax cuts on home-buying and eating out and a new bonus programme for employers who do not fire their staff. Sunak announced a cut in the VAT rate from 20% to 5% for six months for restaurants and Hotels. He also announced an ‘’Eat Out to Help Out’’ discount, by offering a 50% discount on meals in participating restaurants between Mondays and Wednesdays in August. Finally. there was agreement for a £5 billion spend on infrastructure. These measures helped Sterling to rise by 1%. Meanwhile the US Indices saw plenty of two-way volatility, with the S&P rallying 1% before turning negative in the afternoon. Subsequently the Market rallied into the close after Fed Vice Chairman Richard Clarida said the Central Bank will provide additional stimulus if a Coronavirus resurgence were to hurt the economy once more. A fifth Coronavirus support package is a matter of ‘’when’’ and not ‘’if’’. Fears of a second wave grew again yesterday as the U.S. hit three million COVID-19 cases. Elsewhere, Gold broke $1800 while U.S Treasuries moved higher while the Dollar slumped.
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The S&P 500 Index rose 0.8%, closing at a price of 3170.
The Dow Jones Industrial Average rose 177 points for a 0.9% gain to close at 26,067.
The NASDAQ 100 reversed yesterday’s late sell-off to close 1.36% higher at a new all-time closing high at 10,666.
The Stoxx Europe 600 Index declined 0.7%.
The MSCI Asia Pacific Index rose 0.7%.
This morning the Nikkei closed 0.4% higher at 22, 529
Here is a Summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index dipped 0.5%.
The Euro advanced 0.5% to $1.1329.
The Japanese Yen gained 0.3% to 107.24 per dollar.
The British Pound rose 0.6% to $1.2612.
The yield on 10-year Treasuries rose one basis point to 0.65%.
Germany’s 10-year yield declined one basis point to -0.44%.
Britain’s 10-year yield was little changed at 0.18%.
West Texas Intermediate crude rose 0.6% to $40.84 a barrel.
Gold strengthened 0.8% to $1,809.32 an ounce.
This morning on the Economic Front we already had the release of the German Trade Balance which came in at Euro 7.1 billion versus 7 billion expected. Finally. We have the U.S Weekly Jobless Claims at 1.30 pm and Wholesale Inventories at 3.00 pm.
September S&P 500
Shortly after I posted the S&P rallied to my 3145 T/P level on my latest 3135 long position and I am still flat on what turned out to be a volatile two-way trading session which saw plenty of back and forth trading before the market rallied off its 3126 late afternoon low to close at 3160. As mentioned above in my economic commentary that the Fed are on their way to a fifth stimulus package, it makes it very difficult to be short especially with the NASDAQ making new highs almost every day. There is no doubt that we have a fractured market with Dow so far unable to sustain any move above its 200 Day Moving Average and this may hold they going forward. If the Dow can break higher, we should see a broadening of the rally and this would be bullish for the S&P to finally close the huge February Gap from 3258/3330. Initially we need to break back above 3200 which would negate the still outstanding and rare ‘’Island Reversal’’ from last month. Today I will be a buyer on any dip lower to 3130/3145 with a 3115 stop. My only interest in selling the S&P is still on a rally higher to 3190/3205 with a 3217 stop.
After the Euro traded higher to my 1.1340 sell level, I emailed my Platinum Members to exits any short position at my revised 1.1328 T/P level and I am still flat. This morning the Euro is trading at 1.1360, having a high so far at 1.1370. The Euro has strong resistance from 1.1410/1.1450 where I will again look to sell with a 1.1485 tight stop. I will now raise my buy level to 1.1240/1.1280 with a 1.1195 stop.
September Dollar Index
The Dollar closed 0.5% lower yesterday with this lower move not giving me a chance to get short and I am still flat. I will now lower my sell level to 96.70/97.10 with a lower 97.45 stop.
The DAX fell shy of my 12430 buy level with a low of 12470 before rallying into the close and is currently trading higher at 12600. As I mentioned yesterday as long as the DAX does not break and close below 12270 then this is a bull market. The unprecedented Euro 130 billion stimulus package from the German Government will also limit any downside for the DAX. I will now raise my buy level to 12380/12500 with a 12315 stop.
The FTSE also just missed my 6070 buy level before rallying to trade at 6150 this morning helped by the huge £30 billion stimulus package announced by Chancellor Sunak yesterday morning. I will now raise my buy level to 6070/6110 with a higher 6035 stop.
Dow Rolling Contract
Just as I posted the Dow was trading at my 25950 T/P level on my latest 25830 long position and I am still flat. As mentioned in my S&P Commentary that if the Dow can join the party by breaking and closing over its 200 Day MA (26243) then we should see the market broaden out. The Financial Stocks continue to underperform and given how oversold most bank stocks are, they are due a bounce. Today I will be a buyer on any dip lower to 25730/25930 with a 25545 wider stop. I still do not want to be short the Dow at this time.
My NASDAQ plan worked well with the market trading higher to my 10625 sell level before selling off to my 10550 T/P level and I am still flat. Today I will raise my buy level to 10380/10480 with a higher 10285 stop. The NASDAQ has strong resistance from 10730/10830 where I will be a seller with a 10905 stop.
The BUND has traded sideways for most of the past two weeks and I am still flat. I am reluctant to chase the market lower and I will leave my 176.60/177.00 sell level unchanged with the same 177.35 stop.
Gold Rolling Contract
The BPGDM Gold Miners Bullish Percent Index again closed at 100 for the fourth consecutive trading session, while the DSI is now back above 90% bulls. Despite all this Gold made a new 6-year high to hit my 1812 sell level before the market sold off to an overnight low at 1802. As I wanted to be flat I exited this trade at my revised 1808 T/P level. Today, I will be a seller from 1822/1834 with a 1843 stop. If I am taken short I will have a T/P level at 1813.
Silver Rolling Contract
I am still flat and I will now raise my buy level to 18.05/18.45 with a higher 17.65 stop. If I am taken long I will have a T/P level at 18.80.