U.S. and European Equity Futures rose with Asian stocks Tuesday despite escalating geopolitical risks, with Japan leading gains as the world’s third-largest economy reopened. Treasuries dipped in early European trading after the three-day U.S. weekend, while the US Dollar retreated. Futures on the S&P 500 were up on Friday’s close, suggesting a positive open on Wall Street. Shares rose more than 2% in Tokyo, Sydney and Hong Kong, which showed signs of stabilizing after weekend unrest. Seoul and Shanghai saw more modest gains. Crude oil advanced past $34 a barrel in New York. Tensions between Washington and Beijing remain in focus with China condemning the U.S. for adding 33 Chinese entities to a trade blacklist, but without announcing any retaliatory steps. Meanwhile, China sought to reassure Hong Kong that its judiciary would remain independent under a new national security law. Cutting against the tensions are mounting signs that Coronavirus infection rates are moderating. The Japanese government ended its nationwide state of emergency yesterday, while a rise in a gauge of German business expectations provided another glimmer of hope for equity bulls. Construction and industrial-goods shares led a broad advance in the Euro Stoxx Index. Bayer AG leaped almost 8% after Bloomberg reported it reached agreements to resolve some cancer lawsuits over its Roundup weed killer. Contracts on all three major U.S. gauges rose more than 2%. In Asia, Hong Kong shares closed higher after Friday’s slump, following police clashes at the weekend with protesters marching against China’s move to crack down on dissent. Benchmarks in Tokyo and Sydney led advances in the region’s stocks.
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The Euro Stoxx Index gained 2.3%.
Futures on the S&P 500 rose 2.1% as of 7.00 am.
The MSCI Asia-Pacific Index climbed 1.9%.
Japan’s Topix index advanced 2.2%.
Hong Kong’s Hang Seng rose 2.1%.
Here is a summary of the main Changes in F.X Markets:
The Bloomberg Dollar Spot Index was little changed.
The Japanese Yen weakened 0.1% to 107.71 per dollar.
The Euro strengthened to $1.0895.
Germany’s 10-year yield was little-changed -0.494%.
West Texas Intermediate crude added 1.4% to $33.72 a barrel.
Gold dipped 0.3% to $1,729.68 an ounce.
This morning on the Economic Front we already had the release of the German GFK Consumer Confidence which fell 18.9 versus -18.0 expected. At 11.00 am we have the UK CBI Distributive Trade Survey and this is followed at 1.30 pm by the Chicago Fed National Activity Index, and at 2.00 pm by the Housing Price Index. Next, at 3.00 pm we have New Home Sales and Consumer Confidence. Finally, at 3.00 pm we have the Dallas Fed Manufacturing Business Index.
Meanwhile the ECB’S lane and Fed’s Kashkari are speaking at 1.45 pm and 6.00 pm respectively.
June S&P 500
The S&P has now rallied an incredible 100 Handles since 8.30 am last Friday as yet again the Central Banks are preventing anyone from shorting the markets. Thankfully we have had no sell levels in any of my Index calls apart from the DAX. Two things I am watching here. Firstly in 1929 we saw the Dow Jones fall 48% then bounce 48% in a V-Shaped fashion before falling again. The S&P fell 35.4% in Feb/March this year before subsequently bouncing 36% in a V-Shaped fashion. This was a smaller percentage but quicker moves. So, any further meaningful rally from here as we are seeing this morning would make the overall set up look different. In addition, when we look all the way back over the last 35 years at an interesting dynamic. Every time we have seen a sharp fall that goes below the 55-Week Moving Average and extends close to or below the 200-Week Moving Average. When that happens and the 55-Week MA is regained decisively on a Weekly close basis the Bear Market is essentially over and further gains have been sustained. On the other hand, rallies in that set up that fail to sustain a decisive clove above the 55-Week MA has faltered and turned materially lower again. The 55-week MA for the S&P is at 2986 this morning. We are over this area so it will interesting to see what the US Traders do with such a massive 60 Handle Gap from last Friday’s Chicago close. Finally, there is a very strong resistance range between 3020 and 3030 that contained the rally between July and October 2019. Once that range was broken momentum accelerated and took us to new all-time highs in February at 3393. A Weekly break above this range would clearly present a more constructive picture. These are effectively the pivot points which I am watching. If they hold then history continues to rhyme. If they give way, then then it is difficult to argue that these historical overlays are intact any longer. Today I will be a seller from 3017/3035 with a 3049 stop. The S&P has strong support at last Friday’s close and I will be an aggressive buyer from 2945/2960 with a 2933 stop.
My 1.0875 latest long Euro position worked well with the market trading higher to my 1.0900 T/P level and I am now flat. This morning the Euro is trading higher at 1.0925. We have strong support from 1.0850/1.0890 where I will be a buyer with a 1.0812 stop. I still do not want to be short the Euro at this time.
June Dollar Index
This morning the Dollar has sold off to my 99.50 buy level. I am still long and I will now lower my T/P level to 99.75. I will also raise my stop on this position to 99.15.
My DAX plan did not work well. The DAX has rallied over 700 points since last Friday morning. Yesterday I went short at an average rate of 11300 before getting stopped out this morning at 11455 and I am now flat. The DAX is now severely overbought, trading above its Daily Bollinger Band and at the top of the Williams Index. The DAX has further resistance from 11600/11750 where I will be a small seller with a 11825 stop.
The FTSE has rallied hard from last Friday’s close and is approaching strong resistance from 6170/6230 where I will be a seller with a 6295 stop. Given how severely overbought the FTSE is trading I do not want to be long the market at this time.
Dow Rolling Contract
The Dow is trading over 500 points higher from last Friday’s close. I just cannot see such a massive Gap left unfilled. This move higher finally sees the Dow break its April 30 high to join the breakout in both the NASDAQ and S&P. The Dow has strong resistance from 25100/25350 where I will be a seller with a 25475 stop. My only interest in buying the Dow is on a dip lower to last Friday’s close from 24400/24600 with a 24275 stop.
This morning’s 9600 high in the NASDAQ is just 150 points below its February all-time high. An incredible move off the 6700 March low. I will be an aggressive seller in the NASDAQ from 9620/9770 with a tight 9855 stop.
The BUND opened lower and in yesterday’s buy range. I have gone long here at 172.40. I will leave my stop unchanged at 171.95 whole lowering my T/P level on this position to 172.75.
Gold Rolling Contract
No Change as my only interest in buying Gold is from 1698/1708 with the same 1687 stop.
Silver Rolling Contract
I am still flat and today I will raise my buy level to 16.30/16.70 with a higher 15.95 stop. With the DSI at 91% bulls be careful with any meaningful long position.