Both European and U.S Indices reversed most of Friday’s losses to start the week on a positive note. Seasonally this is a strong week for the U.S Markets which are closed from 1.00 pm on Thursday until Monday morning for the July 4 Holiday Weekend. Markets gained comfort from comments from the St Louis Fed Governor James Bullard who believes the second-half rebound in the US Economy could be the sharpest we have ever seen. That is significant as he and his economic team at the St Louis Fed are possibly the sharpest in the Central Bank system. Remember they were initially calling for softness which other Members did not see coming. Boeing led the Dow higher with a gain of 10% as the market reacted well to testing its 50 Day MA at 24925. Daily Coronavirus cases eased for the second consecutive day in Arizona, Florida and Texas which is encouraging but fears of a second wave still remain. Pending Home Sales surged 44% in May while the Dallas Fed Manufacturing Index rebounded well above expectations in June. The Dow ended the day with a gain of 2.32%. Markets now turn their attention to Treasury Secretary Steven Mnuchin’s Testimony before the House Financial Services Committee this afternoon. Elsewhere, the US Dollar rose 0.3%, Treasuries were flat while Gold and Crude rose 0.5% and 3% respectively.
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The S&P 500 closed 1.47% higher at a price of 3053.
The Dow Jones Industrial Average rose 580 points for a 2.32% gain to close at 25,595.
The NASDAQ 100 closed 1.14% higher at 9961.
Stoxx Europe 600 Index closed with a gain of 1.2%.
The FTSE 100 closed 0.40% higher.
This morning the Nikkei closed 1.33% higher at 22,288.
Here is a summary of the main Changes in F.X. Markets:
The Euro increased 0.2% to $1.1238.
The Japanese Yen closed 0.3% lower at $107.59.
The British Pound closed 0.3% lower at 1.2293 per Dollar.
The yield on 10-year Treasuries closed unchanged at 0.64%.
Germany’s 10-year yield rose one basis point to -0.47%.
Britain’s 10-year yield rose two basis points to 0.15%.
West Texas Intermediate crude rose 3% to $39.63 a barrel.
Gold closed 0.5% higher at $1778.
This morning on the Economic Front we already had the release of UK Q1 Final GDP which came in at -2.2% versus -2.0% expected. At 10.00 am we have Euro-Zone CPI and this is followed at 11.00 am by a speech from Bank of England Member Haldane. This is followed at 2.45 pm by the Chicago Purchasing Managers’ Index and Euro-Zone Consumer Confidence at 3.00 pm. Finally, Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testify before the House Financial Services Committee stating at 3.00 pm.
September S&P 500
I have said many times that trying to fight the Fed is a waste of time. You may loose a few battles as I did last Friday but ultimately they will win the war especially as Central Banks are now the biggest Hedge Fund Mangers’ in the world. I know valuations are stretched especially for the recession that we are now in but the weight of money from the various stimuli will eventually lead to higher prices. Late yesterday and overnight the S&P traded the whole of my sell range for a 3049 average short position before selling off to trade at 3040 as I go to press. I covered this position at my revised 3044 T/P level and I am now flat. Frustratingly the S&P missed my 2988 buy level with an afternoon low of 2988.50 before spending the rest of the session trading higher. The S&P managed to regain its 200 Day Moving Average. Clearly the 50 Day MA at 2980 and the 200 Day MA at 3020 for the Cash S&P offer strong support and it will take a break and close below 2970 for the market to turn short-term bearish. Today I will raise my buy level to 3008/3025 with a 2997 stop. The S&P has resistance from 3090/3105 where I will be a seller with a 3115 stop.
My Euro plan worked well with the market trading lower to my 1.1220 buy level before rallying to an overnight high at 1.1251. As I want to be flat I covered this position at my revised 1.1231 T/P level. This morning the Euro is trading lower at 1.1205. We have support from 1.1140/1.1180 where I will again look to buy the market with a 1.1095 stop. I am not going to chase the Euro lower and I will leave my 1.1340/1.1380 sell level unchanged with the same 1.1435 stop.
September Dollar Index
It took a couple of days buy finally the Dollar traded lower to my 97.10 T/P level on my 97.20 short position and I am still flat. This morning the Dollar is trading higher at 97.70. We have strong resistance from 98.00/98.40 where I will be a seller with a 98.75 tight stop.
Very frustrating to have been stopped yesterday morning at 11975 especially with the DAX rallying above 12300 yesterday. The unprecedented Euro 130 billion stimulus package from the German Government makes it almost impossible to be short equities. The DAX has strong support from 11800/12000. Today I will move my buy level higher to 12050/12130 with a 11965 stop.
It took a while but finally the FTSE rallied to my 6140 T/P level on yesterday’s 6080 long position and I am now flat. With Sterling weak and EUR/GBP now trading above 0.9130, there is limited downside to the FTSE at this time. Today I will be a small buyer from 6070/6130 with a 6015 stop. I still do not want to be short the FTSE.
Dow Rolling Contract
Just when all the Bears were getting excited after second 700+ point decline in the Dow in three days, buyers returned in force yesterday with the market closing 580 points higher at 25600. If the Dow can build value above 25500 then we should see the Dow trade back to last week’s high at 26500. The 200 DAY MA comes in at 26274 and the market needs to break and close above here for a test of 28000. Today I will raise my buy level to 25150/25380 with a 24995 tight stop. I still do not want to be short the Dow at this time. Remember this is a shortened trading week and seasonally one of the strongest weeks of the year.
Frustratingly the NASDAQ just missed my 9720 second buy level with a 9729 low print before rallying after the close to my 9980 T/P level on Friday’s 9945 average long position and I am now flat. The NASDAQ is now trading less than 3.5% from all-time highs. We have support from 9800/9900 where I will be a buyer with a 9695 stop. I will also look to sell the market on any further rally to 10100/10220 with a 10315 stop.
The Bund again traded sideways in a narrow range and I am still flat. I will continue to be a seller from 176.95/177.45 with the same 177.85 stop.
Gold Rolling Contract
No Change as I am still a buyer from 1725/1735 with the same 1716 stop.
Silver Rolling Contract
Silver just missed my 17.60 initial buy level with a 17.61 low print and I am still flat. Silver continues to underperform Gold and today I will lower my buy level slightly to 17.05/17.45 with a lower 16.65 stop. If I am taken long I will have a T/P level at 17.70.