European Equity Markets recovered earlier losses but still closed lower on the day. An easing of new Coronavirus infections in Germany following a spike last week tied to a meat-processing plant helped the recovery. The DAX which was lower by 1.5% eventually closed 0.7% lower in thin trading. US Indices are buoyed by the fact that vaccine expectations are building on Wall Street with the hope that the White House will have one or two approved ahead of the November Elections. Bank of England Governor Bailey said the Central Bank would reduce the size of its Balance Sheet before it raised Interest Rates again. This is still a long-way off. In contrast, US Indices closed higher led by the NASDAQ which closed at a new all-time high. White House Economic Advisor Larry Kudlow said he was not concerned about rising COVID-19 cases stalling the economic restart, saying that the U.S is not seeing a ‘’second wave’’. He said that another stimulus package would likely come by the end of the summer. On top of this, President Trump said he backed another round of stimulus cheques to households, in an interview with Scripps. Apple led the NASDAQ higher after revealing plans to build its own Chips. Elsewhere, Oil gained 2.14% after Bank of America raised it Crude price outlook. Gold closed 0.5% higher while the Dollar weakened as risk increased. Bitcoin rose 3% after reports that Paypal will soon allow the buying and selling of Cryptocurrencies.
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The S&P 500 closed 0.65% higher at a closing price of 3118.
The Dow Jones Industrial Average rose 153 points for a 0.6% gain to close at 26024.
The NASDAQ 100 closed 1.25% higher at a new all-time high at 10130.
Stoxx Europe 600 Index closed with a loss of 0.6%.
The FTSE 100 closed 0.7% lower.
This morning the Nikkei closed 0.50% higher at 22,549.
Here is a summary of the main Changes in F.X. Markets:
The Euro increased 0.7% to $1.1260.
The Japanese Yen closed little changed at 106.83.
The British Pound rose 0.8% to 1.2465 per Dollar.
The yield on 10-year Treasuries rose two basis points to 0.70%.
Germany’s 10-year yield declined three basis points to -0.45%.
Britain’s 10-year yield declined four basis points to 0.20%.
West Texas Intermediate crude rose 1.8% to $40.46 a barrel.
Gold closed 0.5% higher at $1751.
This morning on the Economic Front we have German, Euro-Zone, UK and U.S Markit Services PMI at 8.30 am, 9.00 am, 9.30 am and 2.45 pm respectively. Finally, we have New Home Sales and the Richmond Fed Manufacturing Index at 3.00 pm.
September S&P 500
Yesterday the S&P recovered most of the losses registered on Friday as yet again trying to hold a short position is difficult given the support from the Fed who as I have consistently said are now the largest Hedge Fund Manager in the world. Given the late rally in the S&P, I emailed my Platinum Members to raise their S&P sell level to 3118. After this level was hit (High 3124.75), we saw some fireworks in Asia after Trade Secretary Peter Navarro’s interview with Fox News where he said the trade deal with China was over. The S&P fell over 60 Handles on this headline to a 3060 low print and this move lower enabled me to cover this position at my 3106 T/P level and I am now flat. Subsequently these Navarro comments were denied by Economic Advisor Kudlow and President Trump and the S&P is now trading back to where we were last night at 3120. Internally the S&P was weak with the McClellan Oscillator closing unchanged with a -71 print. Island Reversals are rare signals and unless the S&P can break and close over 3200 this reversal is bearish for lower prices. The S&P has resistance from 3142/3156 where I will be a small seller with a 3167 tight stop. I will now raise my buy level to 3080/3095 with a 3067 stop.
I am still flat the Euro. Looking at the Commitment of Traders Report which was released after the close last Friday, large speculators in Euro Futures and Options have increased their net-long positions to over one million Contracts. This is the highest level since the February 2018 high. Normally this is a bearish sign. However, it will take a sell-off in Equity Markets for the Dollar to rally. Today, I will leave my 1.1340/1.1390 sell level unchanged with the same 1.1425 stop. I will now raise my buy level to 1.1165/1.1215 with a higher 1.1119 stop.
September Dollar Index
The Dollar is still in a downtrend with the 200 Day Moving Average well above current prices at a price of 98.30. I will now lower my sell level to 97.35/97.90 with a 98.35 stop. I still do not want to be long the Dollar at this time.
The DAX never came close to my buy range, rallying as soon as I posted yesterday morning and I am still flat. Just like the US Indices, it is very difficult to be short the DAX following the massive stimulus from Chancellor Merkel. Today I will raise my buy level to 12120/12220 with a higher 12045 stop.
I am still flat the FTSE and with Interest Rates unlikely to be raised for a long time following comments from Bank of England Governor Bailey yesterday, this will support the FTSE. Today I will raise my buy level to 6160/6210 with a higher 6175 stop. If I am taken long I will have a T/P level at 6265.
Dow Rolling Contract
Yesterday I mentioned that the Dow has strong support at the 25500 area which is a trendline that has held for the last three months. Shortly after the US Markets opened the Dow made a low at 25668 before rallying after the close to my 26180 sell level. Subsequently after Navarro’s comments the Dow tested yesterday’s low as my 26005 T/P level was filled and I am still flat. Today I will raise my buy level to 25650/25850 with a 25475 stop. Remember a break and close below 25500 is bearish. The Dow has short-term resistance from 26375/26575 where I will be a small seller with a 26725 stop.
My NASDAQ plan worked well with the market trading higher to my 10100 sell level before selling off overnight to my revised 10040 T/P level and I am still flat. The negative divergence between the NASDAQ and Dow is reminiscent of the 2000 top in the market. The NASDAQ is severely overbought as we closed at yet another all-time high. The NASDAQ has resistance from 10240/10340 where I will be a seller with a 10405 stop. I will now raise my buy level to 9850/9950 with a 9775 tight stop.
No Change as I am still a buyer on any dip lower to 174.75/175.15 with the same 174.40 stop.
Gold Rolling Contract
Gold continues to trade at seven- year highs, helped by a weaker Dollar. I am still flat and I will now raise my buy level to 1715/1725 with a 1703 stop.
Silver Rolling Contract
Silver continues to underperform Gold and I am still flat. I will now raise my buy level to 17.10/17.50 with a higher 16.75 stop. If I am taken long I will have a T/P level at 17.79.