U.S. Equity Markets surged the most in almost six weeks after promising early results for an experimental vaccine sparked speculation economies could snap back quickly. Crude oil advanced and yields on Treasuries rose. The S&P 500 surged 3.2% after Moderna Inc. said its vaccine tests yielded signs it can create an immune-system response in the body. Companies that would benefit from a return toward more normal economic activity rallied. Carnival Corp. jumped 15%, while Delta Air Lines and Live Nation Entertainment climbed more than 13%. Energy producers popped 7.5% and real-estate firms added almost 5%. The risk-on rally comes as more economies around the world and within the U.S. ease restrictions that created one of the steepest downturns since the Depression. Federal Reserve Chairman Jerome Powell stressed the central bank has more ammunition to combat weakness. The Stoxx Europe 600 jumped the most since March, while indexes in Japan, Hong Kong and South Korea all posted modest advances. Gold traded at its highest price in seven years before retreating, while West Texas oil rose above $30 a barrel for the first time in two months as producers in the U.S. and elsewhere continued to cut activity. While Powell said the U.S. economy’s recovery could stretch to the end of 2021, he added that policy makers are “not out of ammunition by a long shot.” Several European countries ended bans on short selling, as they continued to report the lowest number of daily deaths from the virus since March. German Chancellor Angela Merkel and French President Emmanuel Macron agreed to support a 500 billion-euro ($546 billion) aid package to help the European Union recover from the Coronavirus pandemic in a major step toward tighter integration. Following a videoconference between the two leaders, Merkel said that Germany would accept a fund within the framework of the EU budget, financed by additional borrowing, that would make grants to Member States that have been hardest hit by the virus. Crucially, she said the bonds issued by the European Commission would be repaid from the EU budget, the lion’s share of which is covered by Germany. Italian bonds jumped. “The EU must act together, the nation state has no chance if it acts on its own,” the chancellor said in a joint online press conference with Macron. “This is the biggest challenge in the history of the EU.” The proposal marks a significant step in efforts to shore up the European project and a potential win for Macron, who has been calling for Germany and the richer northern states to do more to help those in the South who’ve suffered most. The sums involved would dwarf the commission’s existing debt issuance, a sign of Merkel’s determination to keep the EU together. ECB President Christine Lagarde praised the proposal as “ambitious, targeted and, of course, welcome” in an interview with multiple newspapers published on the central bank’s website. “They pave the way for the European Commission to borrow funds over the long term and, above all, they allow a substantial amount of direct support to be provided to the countries most affected by the crisis,” she said. “This is testament to the spirit of solidarity and responsibility.”
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The S&P 500 Index surged 3.2%%, closing near the high of the day at 2953.
The Dow Jones Industrial Average surged 3.9% higher at 24,597.
The NASDAQ 100 rose 2.0% to close at 9331.
The Stoxx Europe 600 Index advanced 4.8%.
The German DAX surged 5.7%
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index sank 0.6%%.
The Euro climbed 0.9% to $1.0917.
The Japanese Yen depreciated 0.3% to 107.33 per dollar.
The British Pound jumped 0.7% to $1.2200.
The yield on 10-year Treasuries climbed eight Basis Points to 0.72%.
Germany’s 10-year yield climbed six basis points to -0.47%.
Britain’s 10-year yield increased three basis points to 0.26%.
The Bloomberg Commodity Index advanced 0.6%.
West Texas Intermediate crude increased 10.2% to $32.43 a barrel.
Gold weakened 0.6% to $1,732.30 an ounce.
This morning on the Economic Front we already had the release of the UK Jobless Claims which soared 856K. At 10.00 am we have the German and Euro-Zone ZEW Survey. Also, at the same time we have Euro-Zone Construction Output. At 1.30 pm we have U.S Building Permits and Housing Starts. Finally, at 3.00 pm Fed Chairman Powell testifies before Congress.
June S&P 500
As I just said in an email to my Platinum Members earlier this morning, that apart from March, this month has been one of the most volatile months in points terms in many years. The S&P has now rallied over 210 Handles since the low of 2759.75 last Thursday as the market looks to test the key 200 Day Moving Average which comes in at a price of 2993 for the June Contract. This has been a brutal month for my S&P trading. I had the correct view in looking for a rally but I was stopped out twice with a long position last week before the turnaround on Thursday afternoon. To compound matters I went short at an average 2915 price yesterday before getting stopped out of this trade at 2937 and I am still flat. A report that a vaccine developed by Moderna showing positive results helped the US Indices to surge across the board. Moderna shares closed 20% higher yesterday at $80. In March these shares were trading sideways below $20. Even if we do get a vaccine in the next few months it will take many months to mass produce this vaccine. There is no doubt that we will be living with this virus for the next few years. The S&P has strong resistance from 2995/3035 where I will be an aggressive seller with a 3051 stop. I have to respect yesterday’s price action and as a result I will be a strong buyer on any dip lower to 2904/2920 with a 2892 stop.
Risk on saw the Dollar fall 1% yesterday. This move lower saw the Euro hit my sell level at 1.0920. I am still short and I will now raise my stop slightly to 1.0971. I will also raise my T/P level on this position to 1.0890 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
June Dollar Index
With all of my calls getting hit yesterday I waited to buy the Dollar which I did at the bottom of my buy range at 99.60. I am still long and today I will leave my stop unchanged at 99.25. I will now lower my T/P level on this position to 99.90.
The DAX rallied an incredible 6% yesterday, helped by the 500 billion Euro aid package agreed between Germany and France. After the DAX traded higher to my 10920 sell level I was lucky that the DAX traded lower to my revised 10870 T/P level and I am still flat. This morning the DAX of 11225 before selling off 150 points in the last 20 minutes. Given how overbought the DAX is trading I will be a small seller from 11200/11325 with a 11405 stop. The DAX has support from 10890/10970 where I will be a buyer with a 10815 stop.
The FTSE traded the whole of yesterday’s sell range and I am now short at 6020. I will leave my stop unchanged at a closing price of 6105. I will now raise my T/P level on this position to 5985. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Dow Rolling Contract
Yesterday’s open occurred with a higher ‘’Gap’’ and a NYSE Tick reading of +2049. This was the most lopsided open in terms of Tick since late-1989, when the Tick data was first reported. The CBOE equity intraday Put/Call ratio pushed to .61, a small jump from matching the extreme at the February 19 peak in the S&P (.55). These measures reflect optimism on steroids. Shortly after I posted yesterday the Dow traded higher to my second sell level at 24200 for a 24075 average short position before stopping me out of this position a few minutes later on the vaccine news at 24325. Subsequently I emailed my Platinum Members to go short the Dow again at 24810. This trade was filled earlier this morning before the market dipped to my 24705 revised T/P level and I am still flat. The Dow has now rallied nearly 2100 points since its 22789 low print on Thursday afternoon. Given how overbought the Dow is trading I will be a seller from 24900/25150 with a 25325 stop. The Dow has strong support from 24150/24350 where I will be a buyer with a 23990 stop.
Yesterday the NASDAQ traded higher to my 9290 sell level before hitting my second sell level at 9400 this morning. I am now short at an average rate of 9345. I will raise my T/P level on this position to 9310, while lowering my stop to 9475. If any of these levels are hit I will be back with a new update for my Platinum Members.
I bought the Bund at the bottom of my buy range at 172.80. I am still long and I will now lower my T/P level on this position to 173.15. I am not going to risk too many points on this trade and I will now raise my stop to 172.42.
Gold Rolling Contract
My Gold plan worked well with the market trading lower to my 1730 buy level before rallying to my 1738 T/P level and I am still flat. Gold made a new high yesterday and this is reflected in the Daily Sentiment Index which closed at 91% bulls. Today I will be a seller from 1748/1760 with a 1771 stop. I do not want to be long Gold at this time.
Silver Rolling Contract
After Silver hit my 16.95 buy level I covered this position at my revised 17.15 T/P level and I am now flat. Today I will be a buyer from 16.30/16.70 with a 15.95 stop.