U.S. stocks and commodities tumbled after China retaliated with higher tariffs on a range of American goods. Treasuries jumped with the Japanese yen on demand for haven assets. The S&P 500 dropped the most in four months, the Dow Jones Industrial Average slumped more than 600 points and the Nasdaq Composite saw the biggest decline of the year after China targeted some of the nation’s biggest exporters. Both Boeing and Caterpillar Inc. fell fell nearly 5%, while Apple Inc. lost 5.8%. The new penalties also took aim at American farmers, driving down soybean and cotton prices. The dollar rallied and the 10-year Treasury yield fell to the lowest level since late March. Shares briefly came off lows during Monday’s session after President Donald Trump indicated he will speak with China’s Xi Jinping at the end of June during the G-20 summit and said he has not yet decided about fresh tariffs on the remaining $300 billion in Chinese imports. Trade rattled financial markets again, with stocks sinking for the fifth time in six sessions since China’s defiance of Trump’s warning not to retaliate for his imposition of higher tariffs Friday escalated the skirmish, driving demand for havens from gold to the yen while punishing risk assets. Several banks have warned that the eruption increases the likelihood of a slowdown in global growth that would dent corporate profits.
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For anyone following my Platinum Service it lost 30 points yesterday and is now ahead by 991 points for May, having made 955 points in April, 1027 points in March, 1013 points in February, 1671 points in January, 2803 points in December, 1541 points in November and 2094 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Stocks prices fell sharply yesterday as they continue the trade-inspired selling that started last week. Retaliatory tariffs announced by China appear to be the main catalyst pushing global stock prices lower. As a result, markets with most exposure to trade tensions and Chinese tariffs are falling the most. Most of the same stock sectors that led last week’s retreat did so again yesterday, including technology, industrials and materials. Both the S&P 500 Index and Dow Jones Industrials closed lower by 2.4%, the biggest drop since Jan. 3. Meanwhile the Nasdaq Composite Index tumbled 3.4%, the largest drop since Dec. 4. Elsewhere, European shares dropped more than 1% after the European Union said it was finalizing a list of U.S. goods to target in the event Trump imposes levies on car imports.
Despite the aggressive sell-off in stock markets the Currency Markets again traded sideways with the Bloomberg Dollar Spot Index rising just 0.2%. The Euro was little changed at $1.1232, while the British Pound fell 0.3% $1.2963. We saw some safe-haven buying in Japanese Yen which jumped 0.6% to 109.33 per dollar.
The sell-off in the US Indices saw the yield on 10-year Treasuries fell seven basis points to 2.398%, the lowest since March 28. In Europe, Germany’s 10-year yield dipped two basis points to -0.07% and Britain’s 10-year yield declined three basis points to 1.10%.
Oil turned lower after rising earlier on concerns about rising tensions in the Persian Gulf. West Texas Intermediate crude dropped 1.4% to $60.81 a barrel. Gold increased 1% to $1,300.10 an ounce. Bitcoin continued its impressive run, rising for an 11th consecutive trading session to sit above $8000 this morning as the recent gains in cryptocurrencies extended over the weekend.
This morning on the Economic Front we already had the release of German Wholesale Price Index which came in at +0.6% versus +0.3% expected. At 8.15 am we have a speech by Fed Member Clarida and this is followed at 9.30 am by UK Unemployment and Average Earnings. At 10.00 am we have the German and Euro-Zone ZEW Survey. Also at the same time we have Euro-Zone Industrial Production. Next, at 11.00 am we have the US NFIB Business Optimism Index, followed by the Export/Import Price Index at 1.30 pm. Finally, at 5.45 pm we have a speech from Fed Member George.
June S&P 500
The rout in the S&P has continued over the past 24 hours with the market trading to an overnight low of 2799.50 which is 150 Handles below its all-time high of 2955, made two weeks ago on May 1. Yesterday, shortly after I posted the S&P traded lower to my 2845 buy level before rallying to my revised 2851 T/P level. Unfortunately I emailed my Platinum Members to buy the S&P again at a price of 2834 before quickly getting stopped out of this position after the US Markets opened at 2823. Subsequently the S&P traded lower to my aggressive buy level at 2805 before thankfully having a decent rally off this area to a rebound high at 2824 and this move higher enabled me to cover this position at my 2818 T/P level and I am now flat. As a result of the 150 Handle sell-off over the past 10 days the S&P is severely oversold trading well below its Daily Bollinger Band and at the bottom of the Williams Index. The McClellan Oscillator closed near oversold territory with a -193 print last night while the Fear & Greed Index closed with a ‘’Fear’’ reading of 32. The S&P is probably one more down day away from having a more meaningful rally. Given the seriousness of the sell-off I still expect that China and the US will get a trade deal agreement as the ramifications of no such deal are enormous. The break and close of the 50 Day Moving Average (2862) could be significant and today I will now look to sell the S&P on any rally higher to 2854/2864 with a 2872 stop. The S&P has support at yesterday’s 2800 low and today I will be a buyer from 2790/2802 with a 2781 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 2763/2778 with a wider 2749 stop. The 200 Day Moving Average comes in at 2776 this morning.
No Change as I am still a seller on any rally higher to 1.1280/1.1320 with the same 1.1345 tight stop. I will now raise my buy level slightly to 1.1120/1.1160 with a higher a 1.1090 stop.
June Dollar Index
I am still reluctant to chase the Dollar lower and today I will again leave my 97.70/98.10 sell level unchanged with the same 98.45 stop.
My DAX plan worked well with the market trading lower to my 11850 buy level before rallying to my 11905 T/P level and I am now flat. So far the DAX is holding the key 11750/11820 support area and today I will be a buyer on any dip to this range with a 11695 stop.
My FTSE plan also worked well with the market trading lower to my 7110 buy level before rallying to my 7140 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7060/7100 with a 7025 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
My Dow plan did not work well with the market trading lower to my 25500 buy level before stopping me out of this position at 25375 and I am now flat. Although the Dow closed at a price of 25325 which is below its 200 Day Moving Average (25422) I am reluctant to sell the market especially as the Dow is severely oversold. On top of this most times that the 200 Day MA has been breached the market has usually recovered this key indicator within a short space of time. The Dow has strong support from 24995/25145 and today I will be an aggressive buyer on any dip to this area with a 24895 tight stop. Remember it was only last Friday week that the Dow was trading over 26600.
My stop was too tight in the NASDAQ yesterday with the market trading lower to my average buy level at 7390 before stopping me out of this position near the close at 7315 and I am now flat. This morning the market is trading higher at 7360 as I go to press which is frustrating. However, we had a nice trading month so far and we cannot win on every executed position. The NASDAQ has strong resistance from 7425/7475 and I will be a seller on any rally to this area with a 7510 stop.
Just before the close last night the Bund traded higher to my 166.60 sell level. As I wanted to be flat overnight I covered this position at 166.55. If You did sell and hold overnight the Bund is trading slightly lower at 166.45 this morning. The BUND has strong resistance above here from 166.90/167.30 where I will be a seller with a wider 167.65 stop.
Gold Rolling Contract
Gold rallied hard yesterday and I am still flat. Today I will raise my buy level to 1274/1282 with a 1265 stop.
Silver Rolling Contract
Silver has so far remained comatose in the wake of Gold’s strong rally yesterday. I am still long from last week at 14.80 and in the expectation that Silver should play some catch up with Gold I will now raise my T/P level on this position to 15.05. I will leave my 14.45 stop unchanged for now.