U.S. Equity Markets started the new week in the red, led by the NASDAQ 100 which closed lower by 1.55%. Markets sold off at the open and remained lower for the rest of the day. There were no clear catalysts for yesterday’s sell-off, though some profit-taking was likely after markets hit all-time highs on Friday. And there are still concerns over stretched valuations, with billionaire investor Jeffrey Gundlach saying that valuations are extraordinarily high. President-elect Joe Biden says he will unveil a Coronavirus aid plan Thursday worth trillions of dollars that will include additional stimulus cheques and expanded unemployment benefits. And of course, earnings season kicks off on Friday. European Markets also closed lower. German Finance Minister Olaf Scholz said he anticipates an economic recovery as fiscal stimulus has prevented the Coronavirus-related economic decline from being worse. Euro-Zone Investor Confidence data for January were weaker than expected, but rose versus December, as economic expectations for six months ahead hit an all-time high. Spanish Industrial Production data for November were weaker than expected, declining versus October, as production of footwear and apparel were the main drags. The Italian government was said to be pushing for an increased budget deficit in order to enact more support for struggling businesses and workers. Elsewhere, Bitcoin fell almost 25% on profit taking having traded above $40,000 over the weekend, while Oil closed 0.27% lower after a mixed trading session.
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The S&P 500 closed 0.66% lower at a price of 3799.
The Dow Jones Industrial Average closed 89 points lower for a 0.29% loss at a price of 31008.
The NASDAQ 100 closed 1.55% lower at a price of 12902.
The Stoxx Europe 600 Index closed 0.5% lower.
The MSCI Asia Pacific Index rose 0.2%.
This morning the Nikkei is closed 0.09% higher at a price of 28,164.
The Bloomberg Dollar Spot Index closed 0.2% higher.
The Euro closed 0.5% lower at $1.2165.
The British Pound closed 0.1% lower at $1.3518.
The Japanese Yen closed 0.1% higher at 104.12 per dollar.
Germany’s 10-year yield closed five basis points lower at -0.48%.
Britain’s 10-year yield closed two basis points higher at 0.31%.
US 10 Year Treasury closed five basis points higher at 1.15%.
West Texas Intermediate crude closed 0.27% lower at $51.43 a barrel.
Gold closed 0.59% higher at $1,853.20 an ounce.
This morning on the Economic Front we have no date of note due from either the UK or the Euro-Zone. At 11.00 am we have the U.S NFIB Business Optimism Index. Finally, we have the JOLTS Job Openings at 3.00 pm. Both the Fed’s Brainard and Rosengren are due to speak at 2.45 pm and 7.00 pm respectively.
March S&P 500
Although the NASDAQ got hit hard yesterday both the Dow and S&P had a mild decline. However the VIX surged 11.69% to close at a price of 24.08.The VIX has strong resistance at 28.93 which is it’s 200 Day Moving Average. A break and close over the 200 Day MA will see a dramatic sell-off in US Indices. It is imperative that you keep a close on the VIX at this time. The S&P is severely overbought and due a correction. However, with more stimulus to be announced by President Elect Biden on Thursday, this news will probably continue to underpin the S&P at this time. I will now raise my buy level to 3762/3777 with a 3749 stop. The S&P has strong resistance from 3827/3847 where I will continue to be a seller with the same 3861 ‘’Closing Stop’’.
Frustratingly, the Euro just missed my initial 1.2130 buy level by two points before rallying to sit at 1.2160 this morning. I will now lower my buy level slightly to 1.2070/1.2115 with the same 1.2035 stop. I will also lower my sell level to 1.2260/1.2310 with a lower 1.2365 stop.
March Dollar Index
No change as I am still a small buyer from 89.50/89.90 with the same 88.95 wider stop.
My DAX plan worked well with the market trading lower to my 13820 buy level before rallying to sit at 13975 this morning. I covered this long position at my revised 13870 T/P level and I am still flat. This morning, I will again be a small buyer from 13780/13850 with the same 13695 stop. I still do not want to be short the DAX at this time.
The FTSE traded the whole of my buy range for a 6750 average long position. Subsequently the FTSE rallied to my 6780 revised T/P level and I am still flat. The FTSE has struggled since it had it’s 5% one day rally last week. We have near-term support from 6690/6730 where I will be an aggressive buyer with a 6645 stop. If I am taken long I will have a T/P level at 6775.
Dow Rolling Contract
The Dow just missed my 30720 initial buy level with a morning low of 30742 before the market surged 300 points into the close and I am still flat. I am not going to chase the Dow higher and I will continue to be a strong buyer from 30520/30750 with the same 30325 ‘’Closing Stop’’. I will continue to be a small seller on any further rally to 31340/31520 with the same 31635 stop.
My NASDAQ plan worked well with the market trading lower to my 12910 buy level before rallying to my revised 12950 T/P level with a rebound high over 13000 and I am now flat. Today, I will be an aggressive buyer on any further move lower to 12850/12770 with a 12695 tight stop. Despite yesterday’s 200 point fall I still do not want to be short the NASDAQ at this time.
The BUND has continued to follow the US Treasury Market lower. Interestingly the US Bond Futures have closed lower for six consecutive trading sessions, the longest streak in 2 ½ months. It has been 8 ½ years since the Long Bond closed lower for more than seven consecutive days. Therefore, a snapback rally may occur at anytime. The move lower in the Bund has me long in small size here at 176.80. I will add to this trade at 176.40 while leaving my stop unchanged at 175.95. I will now lower my T/P level to 177.10 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
No Change. I am still an aggressive buyer from 1800/1815 with the same 1789 stop.
Silver Rolling Contract
I am still flat and I will now raise my buy level to 24.10/24.70 with a higher 23.65 stop.