U.S. Equity Markets started the week lower as investors saw little progress on a Congressional spending package to blunt the fallout from the Coronavirus pandemic. Measures of corporate credit risk eased after the Federal Reserve announced a massive second wave of initiatives to support a shuttered American economy. The S&P 500 closed lower, despite a late-session surge, after lawmakers failed to agree on a stimulus bill over the weekend and again fell short of the needed Senate votes for a deal on Monday. Tech shares outperformed, with the NASDAQ 100 eking out a small gain, as negotiations continued on Capitol Hill. Trading volumes remained above average. The S&P is down almost 35% from its Feb. 19 record and marked its lowest close of Donald Trump’s presidency. The Dow Jones Industrial Average has lost almost all its gains since he was elected on Nov. 8, 2016. The central bank said it will buy an unlimited amount of bonds to keep borrowing costs low and will set up programmes to ensure credit flows to corporations and state and local governments. The cost to insure against corporate defaults fell and bond ETFs eligible for Fed purchases jumped. The Stoxx Europe 600 fell as the Continent’s leaders sought to impose more curbs on people’s movements and Italy began shutting most industrial production. Core European bonds climbed. Equities fell earlier across most of Asia, where India’s benchmark plunged a record 13% while the Rupee sank to the lowest ever amid moves to lock down widespread areas of the country. Brent crude stabilized after its 20% decline last week; West Texas crude gained, as did gold. Investors are beginning another dramatic week digesting slashed economic forecasts and news of Europeans struggling to curb the pandemic, with Italy and Spain reporting 2,000 deaths over the weekend between them. Warnings grew that a global recession is coming as cities from New York to Los Angeles all but shut down and cases rise rapidly outside Asia. The U.K. is in lockdown after Boris Johnson ordered sweeping measures to stop people leaving their homes “at this moment of national emergency.” As the coronavirus pandemic spread across the country, the Prime Minister approved a radical ban on all unnecessary movement of people for at least three weeks. Police will break up gatherings and have the power to fine individuals who defy the tough new laws. The unprecedented steps represent the most dramatic and widespread restrictions on the movement of people the country has faced in peacetime.
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For anyone following my Platinum Service it made 590 points yesterday and is now ahead by 8127 points for March, having made 2223 points in February, 2142 points in January, 818 points in December, 780 points in November, 1649 points in October, 1620 points in September and 2387 points in August Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Morgan Stanley warned the epidemic could cause U.S. GDP to shrink a record 30% in the second quarter. Federal Reserve Bank of St. Louis President James Bullard said the country’s jobless rate may hit 30%. Meanwhile, international air carriers continued to announce drastic measures to cope with the outbreak, with giants Emirates and Singapore Airlines Ltd. among the latest to slash flights, and jet maker Airbus SE withdrawing its earnings guidance.
The S&P 500 Index fell 2.9%, closing at a price of 2237.
The Dow Jones Industrial Average lost 3% for a 592 point decline closing at 18,591.
The Nasdaq 100 gained 0.2%.
The Stoxx Europe 600 Index decreased 4.3%.
The MSCI Asia Pacific Index dipped 3.4%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index gained 0.4%.
The Euro gained 0.4% to $1.0728.
The British Pound slid 1.3% to $1.1481.
The Japanese Yen fell 0.3% to 111.28 per dollar.
The yield on 10-year Treasuries declined 10 basis points to 0.75%.
Germany’s 10-year yield fell five basis points to -0.38%.
Britain’s 10-year yield decreased 14 basis points to 0.425%.
West Texas Intermediate crude rose 3.9% to $23.51 a barrel.
Gold climbed 3.7% to $1,553.97 an ounce.
This morning on the Economic Front we have German. Euro-Zone and UK Markit Services PMI at 8.30 am, 9.00 am and 9.30 am respectively. This is followed at 11.00 am by U.K. CBI Industrial Trends Survey. At 1.45 pm we have U.S. Markit Manufacturing PMI. Finally, at 2.00 pm it is New Home Sales and the Richmond Fed Manufacturing Index.
June S&P 500
Coming into yesterday, the Fed had a problem. It had already used up half of its entire $700bn QE5 announced last weekend. Which, together with the plunge in stocks, it announced at 12.00 pm an unprecedented expansion to its mandate, announcing Open-Ended QE which also gave it the mandate to buy Corporates Bonds in both the Primary and Secondary Markets. This will enable to unclog the frozen Corporate Bond Market. We are now just one step away from a full Fed Nationalisation of the market as only Fed stock purchases remain now. The S&P spiked to a high of 2384 on this news, 210 Handles higher than the initial limit lock down from the re-open on Sunday night. I emailed my Platinum Members to buy the S&P at 2240 before we rallied to my 2270 T/P level and I am now flat. Subsequently the S&P traded below 2180 which enabled my Premium Members to buy the market before we also rallied to my 2225 T/P level as outlined in yesterday’s Daily Commentary. This was an incredible reaction to yesterday’s unlimited QE with the S&P closing 2.9% lower. Despite the fall in the S&P and Dow the VIX closed 6.75% lower at a still very high 61.59. U.S. and European Futures climbed this morning after global equities hit their lowest level since 2016, as appetite for riskier assets revived. Contracts on the S&P 500 rose over 4%, more than making up what the Index lost yesterday. Benchmarks in Tokyo, Hong Kong and Sydney climbed at least 3%. Korean shares jumped almost 9% as the government announced measures to stabilise financial markets. The S&P is now trading 90 Handles higher than last night’s Chicago close. This is yet another huge ‘’Open Gap’’. Today I will be an aggressive buyer on any dip lower to 2220/2260 with a 2195 stop. If I am taken long I will have a T/P level at 2288. Given how severely oversold on a Daily, Weekly and Monthly basis I still do not want to be short the S&P at this time.
My latest 1.0710 long Euro position worked well with the Euro rallying on the Fed QE announcement to my 1.0750 T/P level and I am now flat. This morning the Euro is trading higher at 1.0840. The Euro has strong resistance from 1.0950/1.1030 where I will be a seller with a wider 1.1105 stop. My only interest in buying the Euro is still from 1.0670/1.0720 with a 1.0615 stop.
June Dollar Index
This morning the Dollar is opening lower, snapping a 10-day rally. The dollar retreated against developed and emerging currencies alike, in a tentative sign of reduced stress after the steepest appreciation since the global financial crisis. I am still flat the Dollar and today I will lower my sell level to 102.80/103.30 with a 103.75 lower stop.
Frustratingly the DAX just missed my 8350 buy level by 50 points before surging to trade at 9155 this morning. Encouragingly the DAX has made a series of higher lows since last Tuesday. The DAX is severely oversold as we trade over 4600 points lower than the February high. Today I will raise my buy level to 8800/8950 with a 8815 stop.
The FTSE also missed my 4880 buy level before rallying to trade over 5100 this morning. Today I will raise my buy level to 4880/4980 with a 4805 stop.
Dow Rolling Contract
The two-way volatility in the Dow continues to amaze with the market moving 200/300 points every 20 minutes. Yesterday after the Fed announced QE I emailed my Platinum Members to buy the Dow at 18700 before we rallied to my 18950 T/P level and I am now flat. With the Dow trading heavy into the close and looking like we were going to trade to new lows, the market turned around in late trading and rallied. This morning we are trading at 19400 as we wait to see when Congress passes the Stimulus Package. The Dow continues to rally out of my 17500/19000 target zone. Today I will be a buyer from 18400/18700 with a 18050 stop. If I am taken long I will have a T/P level at 18290. The Dow has short-term resistance from 19800/20150 where I will be a small seller with a 20305 stop.
The NASDAQ Index closed higher yesterday, breaking from the NASDAQ Composite, Dow and S&P which all closed lower. The NASDAQ did not come close to my 6580 buy level and is trading 600 points higher at 7300 this morning from where I marked prices 24 hours ago. The NASDAQ has resistance from 7460/7580 where I will be a seller with a 7670 tight stop. I will now raise my buy level to 6850/6930 with a 6770 stop.
No Change as I am still a buyer on any dip lower to 169.45/170.05 with the same 168.95 stop.
Gold Rolling Contract
What could be more bullish for Gold that the Fed’s announcement of unlimited QE. Gold is trading $90 above yesterday morning’s 1485 low. However large Speculators are still long a near record number of Gold Futures Contracts at 281,916. This is one of the main reasons that I have stayed flat Gold over the past week. I am scared to go short given the amount of QE but against that I see that everyone I talk to is long Gold. On top of this Gold is now trading $530 above its December 2015 low of $1046 while Silver again closed below this key pivot level from that day at $13.62. I am going to stay flat Gold for now until I feel I have a better edge in this market.
Silver Rolling Contract
Silver just missed my 12.10 buy level before rallying over 10% after the Fed announced unlimited QE. Today I will raise my buy level to 12.80/13.30 with a 12.45 tight stop.