U.S. Equity Markets fell more than 1% as political unrest in Hong Kong and Argentina fuelled a rally in Global Bonds that continues to raise the spectre of a looming recession. Gold surged. The S&P 500 Index slumped for a second day and now sits almost 5% below its all-time high as the rally in Treasuries sparked by last week’s escalating trade tensions picked up steam. Risk assets came under pressure after authorities closed Hong Kong’s airport and a Chinese official said the city was at a “critical juncture.” Argentina’s Peso and equities sank after voters turned on the President in a primary vote. Corn futures plunged the most since 2013 as more of the grain was planted than analysts had estimated. The weakness in stocks fed demand for haven assets, pushing the 10-year Treasury yield lower by 10 basis points and boosting the Japanese Yen for a fourth day. China’s Central Bank fixing continued to signal its determination to manage an orderly depreciation. Italian bonds led gains in European debt after Fitch affirmed the country’s credit rating on Friday. The Pound strengthened following three sessions of declines.
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For anyone following my Platinum Service it made 270 points yesterday and is now ahead by 648 points for August, having made 1153 points in July, 1346 points in June,1722 points in May, 955 points in April, 1027 points in March, 1013 points in February and 1671 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Yesterday’s sell-off in risk assets provided another reminder of the fragile mood across markets as it extended the tumultuous start to August. Gains for the safest Government Bonds show lingering caution by traders who have increased their bets for central bank easing in recent weeks, as the U.S. and China escalate their trade war and a slew of global data point to slowing growth. The S&P 500 Index fell 1.2% to close at 2883, while the Dow fell 390 points to close at 25897 on what turned out to be a brutal session for stocks. Meanwhile in Europe the Stoxx Europe 600 Index dipped 0.2%. Finally, Hong Kong’s Hang Seng Index declined 0.4%.
Here is a summary of the main changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose less than 0.1%.
The Euro climbed 0.1% to $1.1211.
The Japanese Yen strengthened 0.3% to 105.33 per dollar.
The flight to bonds is really the more concerning element of yesterday’s session only because it flattens the yield curve. This resulted in the yield on 10-year Treasuries falling 10 basis points to 1.65%, while the two-year rate only lost six basis points to 1.5857%. In Europe, the spread of Italy’s 10-year bonds over Germany’s declined five basis points to 2.33 percentage points. Germany’s 10-year yield decreased two basis points to -0.59%.
Gold Futures rose 1% to $1,524 an ounce.
West Texas Intermediate crude added 0.5% to $54.75 a barrel.
Corn Futures for December delivery fell by the limit of 25 cents to $3.9275 a bushel, down 6%.
This morning on the Economic Front we have German Wholesale Prices and CPI at 7.00 am. This is followed at 9.30 am by U.K Employment and Average Earnings. At 10.00 am we have German ZEW Survey, followed by the US NFIB Business Optimism Index at 11.00 am. Finally we have US CPI at 1.30 pm.
September S&P 500
After I posted early yesterday morning the S&P made a rebound high at 2931 before getting hit for 60 Handles on the growing tensions in both Hong Kong and Argentina. This move lower saw the S&P hit my average buy level at 2898 before thankfully rallying to my 2902 revised T/P level as emailed to my Platinum Members and I am now flat. Yesterday’s 1.2% fall in the S&P saw the VIX spike 17% higher to close above 20 at 21.09. The Daily NYSE Trin closed at 1.94, which pushed the 21-Day average to 1.271, its most extreme level since the Christmas 2018 Market low. The high Trin is signalling that stocks are near the end of their decline from the July highs. The S&P has support from 2858/2873 and today I will be a buyer on any dip to this area with a 2845 stop. I still do not want to be short the S&P at this time.
Thankfully the Euro traded lower to my 1.1170 revised T/P level on last week’s average 1.1190 short position and I am still flat. In contrast to the other markets the Euro has traded in a narrow range. The Euro has support from 1.1110/1.1150 and today I will be a buyer on any dip to this area with a 1.1065 stop.
September Dollar Index
No Change as I am still a seller from 98.25/98.65 with the same 99.05 stop.
I am still flat the DAX and today ahead of the ZEW Survey I will now lower my buy level to 11420/11520 with a 11360 tight stop.
The FTSE just missed my 7160 initial buy level before having a small rally into the close. Just like the DAX above I will now lower my buy level to 7100/7140 with a 7065 stop and a lower 7170 T/P level if executed.
Dow Rolling Contract
After the Dow sold off to my 26075 buy level I emailed my Platinum Members tom exit any long position at 26140. Subsequently I got them to buy the Dow again at 26000 with a 26070 revised T/P and after both levels were filled I stayed flat for the rest of the session. Given how oversold the market is trading I will again look to buy the Dow from 25630/25780 with a 25540 stop. If I am taken long I will have a T/P level at 26850.
My NASDAQ plan also worked well with the market trading lower to my 7580 buy level before rallying to my revised 7610 T/P level and I am now flat. Today I will again look to buy the NASDAQ on any further dip lower to 7460/7520 with a 7425 tight stop.
I am still flat the Bund and today I will again raise my sell level to 177.95/178.35 with a 178.70 stop.
Gold Rolling Contract
Shortly before the New York close, Gold traded higher to my 1514 sell level. As I wanted to be flat overnight I covered this position at my revised 1509.50 T/P level and I am still flat. With the DSI at such extreme levels it is only a matter of time before we see a more sustained sell-off in Gold. We have resistance from 1528/1540 and today I will be a seller in this area with a tight 1548 stop.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 16.35/16.75 with a 15.95 stop.