U.S. Equity Markets started the week strong as investors looked past the potential economic hit from the spreading Coronavirus to prepare for more corporate earnings. The S&P 500 Index rose to a new high Monday, with most sectors advancing. Energy company shares proved the exception, declining as West Texas crude fell below $50 a barrel. Treasuries and European Bonds edged higher, and the US Dollar held steady versus a basket of its major peers. Asia’s main equity gauges fell everywhere apart from Shanghai. Traders monitored the restart of Chinese factories and the possible chaos that may ensue as several hundred thousand people begin returning to work at companies like Apple Inc. supplier Foxconn. General Motors Co. will restart production in China beginning Feb. 15. With cases of the Coronavirus outside of China on the rise and various companies pulling back from international meetings, investors are trying to figure out whether the rate of contagion is stabilizing. In the meantime, monetary authorities across Emerging Markets have stepped in to help shore up the financial system. The People’s Bank of China moved to keep liquidity ample Monday through reverse-repurchase agreements. The Euro declined after the region was buffeted by political headlines. German Chancellor Angel Merkel’s succession plan collapsed, and polls put Sinn Fein in place for a possible role in Ireland’s government, depressing the Country’s banking stocks. European Equities closed higher.
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Earnings are due this week from major names like Alibaba Group Holding Ltd., Credit Suisse Group AG and Nestle SA.
The S&P 500 Index increased 0.7% to close at a price of 3352.
The Dow Jones Industrial Average rose 175 points, closing at 29,276.
The Nasdaq 100 surged 1.2%, closing at 9516.
The Stoxx Europe 600 Index gained 0.1%.
The MSCI AC Asia Pacific Index fell 0.5%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot closed unchanged.
The British Pound climbed 0.2% to $1.2912.
The Euro fell 0.3% to $1.0913, the lowest level in 19 weeks on its sixth consecutive decline.
The Japanese Yen was little changed at 109.74 per dollar.
The yield on 10-year Treasuries fell three basis points to 1.54%.
The two-year rate dropped to 1.38%
Britain’s 10-year yield fell one basis point to 0.56%.
Germany’s 10-year yield dipped two basis points to -0.41%.
West Texas Intermediate crude fell 1.5% to $49.58 a barrel, hitting its lowest level in more than 13 months.
Gold added 0.2% to $1,574.20 an ounce.
Copper fell 1.3%.
This morning on the Economic Front we have UK GDP, Industrial/Manufacturing Production, Trade Balance and Index of Services at 9.30 am. At 10.00 am the European Commission releases its latest Economic Forecasts. This is followed at 11.00 am by the U.S NFIB Business Optimism Index and at 3.00 pm by the JOLTS Job Openings Index.
Finally, Federal Reserve Chairman Jerome Powell delivers his semi annual testimony in Congress on Tuesday also at 3.00 pm.
March S&P 500
Frustratingly the S&P just missed my 3310 buy level with a 3315 low print before rallying to trade at 3362 as I go to press. Remember a market that does not fall on bearish news has to respected as yet again the buy the dip wins the day as the S&P closed at yet another new all-time high. The S&P has massive resistance from 3385/3410 where I will look to set up a long-term short position with a wider 3425 stop. The S&P has initial support from 3335/3345 and I will be a buyer on any dip to this area with a 3327 tight stop.
The Euro closed lower for the sixth consecutive trading session. My view of buying the Euro was wrong and I was stopped out of my latest 1.0970 long position at 1.0915 and I am now flat. The Euro is oversold and has strong support from 1.0840/1.0880 where I will be an aggressive buyer with a 1.0795 stop. Despite the negative price action I still do not want to be short the Euro at this time.
March Dollar Index
I am still flat the Dollar and today I will again raise my sell level to 98.95/99.25 with a higher 99.55 stop.
Despite a combination of much weaker than expected Economic data and a worsening political situation the DAX continues to strengthen. The DAX has strong resistance from 13690/13750 and I will be a seller in this area with a 13795 stop.
Just like the S&P above the FTSE also missed my buy level by a few points before rallying over 100 this morning and I am still flat. Thankfully we had no sell levels in our Index positions yesterday as yet again anyone shorting equity markets for more than a few hours are getting slammed. Today I will move my buy level higher to 7375/7415 with a higher 7335 stop.
Dow Rolling Contract
Incredible volatility in the Dow with the market trading 500 points higher from where it was early yesterday morning. Thankfully the Dow sold off to my 28980 buy level before rallying to my 29060 T/P level with an overnight high of 29390 and I am now flat. Today I will be a buyer on any dip lower to 29020/29170 with a 28920 stop. Meanwhile I will leave my 29650/29800 sell level unchanged with the same 29905 stop.
The NASDAQ again just missed my buy level before surging to yet another all-time high with a gain of 1.25%. This market is now severely overbought but so far shows no signs of any retracement. The NASDAQ has strong resistance from 9620/9680 and I will be a seller in this area with a 9725 stop. I will now raise my buy level to 9360/9420 with a 9305 stop.
No Change as I am still a buyer on any dip lower to 173.30/173.70 with a 172.95 stop.
Gold Rolling Contract
Despite the stronger Dollar and stronger US Equity Markets, Gold continues to trade sideways and I am still flat. Today I will still be a buyer on any dip lower to 1540/1550 with a 1532 stop.
Silver Rolling Contract
No Change as I am still a small buyer from 17.10/17.50 with a 16.70 stop.