U.S. Equity Markets ended yesterday’s session mixed as traders assessed the latest moves around the globe to relax restrictions amid the Coronavirus pandemic. The S&P 500 was little changed, the Dow Jones Industrial Average fell while the Nasdaq 100 rose for a sixth day — its longest winning streak this year. The US Dollar climbed, while Treasuries dropped. Oil wiped out gains driven by Saudi Arabia’s plan to deepen output cuts. The S&P 500 briefly rallied after New York Governor Andrew Cuomo said businesses including construction, curbside retail, drive-in movies and some recreational activities will reopen this week on a regional basis. The state reported 161 additional deaths, the lowest since late March. Earlier Monday, New York City Mayor Bill de Blasio said the lockdown is likely to continue into June. More than 33 million Americans have lost their jobs in the seven weeks since wide swaths of the U.S. economy shuttered to stem the outbreak. President Donald Trump is trying to convince Americans it’s safe to return to work, with the nation having more than 1.3 million cases of Covid-19. With infections slowing in some European countries, more governments moved to tentatively relax limits. This morning U.S. and European futures drifted lower with Asian stocks, and the US Dollar extended recent gains, amid concerns that a renewed pick-up in virus infections makes it tougher to justify current valuations.
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The S&P 500 was little changed at 2930 after a volatile trading session.
The Dow Jones Industrial Average declined 0.4%, closing at a price of 24,221.
The Nasdaq 100 Index jumped 0.9%, closing at 9298.
The Stoxx Europe 600 Index fell 0.4%.
The MSCI Asia Pacific Index climbed 0.6%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index gained 0.5%.
The Euro dipped 0.2% to $1.0817.
The Japanese Yen depreciated 0.9% to 107.66 per dollar.
The yield on 10-year Treasuries gained three basis points to 0.71%.
Germany’s 10-year yield increased three basis points to -0.51%.
Britain’s 10-year yield gained three basis points to 0.269%.
The Bloomberg Commodity Index decreased 0.9%.
West Texas Intermediate crude was little changed at $24.73 a barrel.
Gold declined 0.8% to $1,699.60 an ounce.
This morning on the Economic Front we have no data of note from either the UK or the Euro-Zone. At 11.00 am we have the U.S NFIB Business Optimism Index. This is followed at 1.30 pm by CPI. Finally, at 3.00 pm we have a speech from Fed Member Quarles.
June S&P 500
The average U.S stock is down 18%, and the Gap between the performance of the NASDAQ and the Dow Jones is the widest in two decades. A narrow number of high-tech and pharmaceutical names are rallying strongly, while the broad market is not. Not only is a wide divergence between market Indexes unhealthy for a rising trend, it can be dangerous when the trend reveres, as market declines are always more forceful than market rallies. The February-March decline of 38% is just the most recent example. Yesterday’s NASDAQ and S&P rally was attended by negative breadth, meaning there were more shares declining than advancing. Despite the headline-grabbing advance in the NASDAQ and the slight rally in the S&P, internally, yesterday was a negative day as shown by the McClellan Oscillator which fell from Friday’s +148 to last night’s +79 close. Market action was also more negative by the behaviour of the CBOE intraday equity put/call ratio which I mentioned in yesterday’s commentary. We declined to .65 in the last hour of trading, which is the lowest level since the reading of .55 on February 19, the day the S&P topped. Optimism remains elevated so we must remain vigilant to an imminent decline. Yesterday my S&P plan worked well with the market trading the whole of my buy range for a 2908 average long position. Thankfully, the S&P stopped short of my 2889 stop with a low of 2890 before rallying over 40 Handles. As I was so close to being stopped, I was happy to exit this long position at my revised 2911 T/P level and I am still flat. We still have an ‘’Open Gap’’ from March at 2972 in the Cash Market which may be filled before we eventually start the Phase 3 down move. Today, the S&P has support from 2876/2891 where I will be a buyer with a 2864 stop. I will now lower my sell level to 2950/2965 with a 2977 stop. I will continue to be an aggressive seller on any final rally higher to 3001/3021 with the same 3035 wider stop.
I am still flat the Euro and today I will lower my sell level to 1.0870/1.0910 with a lower 1.0945 stop. The Euro has support from 1.0700/1.0745 where I will be a buyer with a 1.0665 stop.
June Dollar Index
I am still flat the Dollar and today I will raise my buy level to 99.25/99.75 with a higher 98.85 stop.
My DAX plan worked well with the market trading lower to my 10760 buy level before rallying 100 points. I used this rally to exit this long position at mu revised 10800 T/P level and I am now flat. The DAX has strong support from 10500/10650 where I will be a buyer with a 10425 tight stop. I will now lower my sell level to 10990/11120 with a 11215 stop.
The FTSE never cam close to yesterday’s sell range before spending the rest of the session trading sideways to lower. The FTSE continues to be the weakest of the European Indexes. This is important as the FTSE was the first of the G7 Countries to top in early January. I will now lower my sell level to 5980/6060 with a 6115 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
The negative divergence between the Dow and both the S&P and NASDAQ shows no sign of ending as discussed at length in my S&P commentary above. The Dow is still trading 700 points below its April 30 intraday high while of course the NASDAQ has burst through its equivalent high, having closed higher for the sixth consecutive trading session. The Dow has major support from 23500/23750 which needs to be broken before we can safely say that we did make a rebound high last month. Today, I will be a buyer on any dip to this area with a 23375 stop. I will now lower my sell level to 24525/24775 with a wider 25005 stop.
Frustratingly, the NASDAQ missed my 9350 sell level with a 9346 high print before selling off to an overnight low so far at 9223. Today I will lower my sell range to 9330/9470 with a 9565 stop. I still do not want to be long the NASDAQ at this time.
I am still flat the Bund as I continue to look to buy the market on any dip lower to 172.10/172.60 with the same 171.75 tight stop.
Gold Rolling Contract
No Change as I am still a buyer from 1674/1684 with a 1665 stop.
Silver Rolling Contract
I will now lower my Silver buy level to 14.60/15.00 with a lower 14.15 stop. If I am taken long I will have a T/P level at 15.25.