As expected, both European and U.S Indices continued their rally as the Second Quarter came to a close. As I mentioned in yesterday’s commentary that seasonally this is one of the strongest week’s of the year in this abbreviated shortened trading week due to the July 4th American Independence Day Holiday. European Indices got a boost after German Chancellor said she supported the European Union’s proposed Euro 750 billion recovery funds. Germany’s IFO Institute noted that furloughed workers have begun returning to full-time work thus pointing to an economic rebound. Meanwhile the Bank of England Chief Economist Andrew Haldane said the Central Bank is ready to act quickly to support the economy, adding that it will continue to help households and businesses. The German DAX ended the day with a gain of 0.9% while the Eurostoxx 600 Index closed 0.7% higher. Technology led the US Indices higher with the NASDAQ closing above 10,150 for a 2.0% gain. This was the best Quarter for the US Indices since 1998. Federal Reserve Chairman Jerome Powell said in his prepared Testimony that the central bank still has plenty of room to support the economy. New York President John Williams noted that the economy has likely passed its low point as businesses reopen, but warned that full recovery may take years. The Conference Board’s Consumer Confidence Index rose to 98.1 in June as people became more optimistic about current business and labour conditions. The S&P ended Q2 with a gain of 20% while the Nasdaq Composite surged 31%. Elsewhere, both Treasuries and the US Dollar fell while Gold closed with a gain of 1% to close at 7-Year highs near $1800.
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The S&P 500 ended the day 1.54% higher to close at a price of 3100.
The Dow Jones Industrial Average rose 218 points for a 0.85% gain to close at 25,812.
The NASDAQ 100 closed 2.0% higher at 10,156.
Stoxx Europe 600 Index closed with a gain of 0.7%.
The FTSE 100 closed 0.3% lower at 6160.
This morning the Nikkei closed 0.75% lower at 22,121.
Here is a summary of the main Changes in F.X. Markets:
The Euro fell 0.1% to $1.1232.
The Japanese Yen closed 0.3% lower at $107.95.
The British Pound closed 0.8% higher at 1.2390 per Dollar.
The yield on 10-year Treasuries closed two basis points higher at 0.66%.
Germany’s 10-year yield rose two basis points to -0.45%.
Britain’s 10-year yield increased one basis point to 0.16%.
West Texas Intermediate crude dipped 0.9% to $39.35 a barrel.
Gold closed 1.0% higher at $1798.
This morning on the Economic Front we already had the release of UK Nationwide House Prices for June which fell 1.4% versus -0.6% expected. German Retail Sales for May were also released coming in at a huge +13.9% versus +3.5% expected. Next, we have German Unemployment and Markit PMI at 8.55 am. This is followed by Euro-Zone and UK Markit PMI at 9.00 am and 9.30 am respectively. At 1.15 pm we have the U.S. ADP Employment Change and this number will be closely watched ahead of tomorrow’s NFP data. At 2.45 pm we have U.S. Markit PMI, followed at 3.00 pm by ISM Manufacturing and Construction Output, Finally, at 7.00 pm we have the latest FOMC Minutes.
September S&P 500
I have said all-week that seasonally this is one of the strongest weeks of the year and this is certainly proving to be correct with the S&P rallying to a spike high before the close at 3100. This is 105 Handles off its Monday afternoon low at 2995. Even though the S&P 500 trades for 21.3 times its current earnings estimates, the S&P still yields 1.9% versus the 10-year U.S Treasury yield at just 0.64%. Many Mutual Fund Managers and investors seek income and this is a big selling-point for owning stocks. This move higher has almost filled the ‘’open Gap’’ from last week at 3115. With the S&P yielding 1.9% you can see why Money Managers’ continue to buy the dips. You also have the Fed in the background and they will not be going away anytime soon. Yesterday my S&P plan worked well with the market trading higher to my 3093 sell level before selling-off overnight to trade at 3073 this morning. I covered this position just before the close at my revised 3082 T/P level and I am still flat. The fact that the S&P closed over both 3045 and 3070 is constructive, while a break and close over 3105 is bullish for 3120, 3135/3155, 3175/3195 and higher. This view will hold as long as we do not close below 3025. Today I will move my buy level higher to 3040/3060 with a wider 3022 stop. I will be a small seller from 3110/3125 with a 3133 tight stop.
The Euro traded in a narrow range yesterday and I am still flat. I will continue to be a buyer on any dip lower to 1.1145/1.1185 with a higher 1.1105 stop. I still do not want to chase the Euro lower and I will again leave my 1.1340/1.1380 sell level unchanged with the same 1.1435 stop.
September Dollar Index
I am still flat and I will now lower my sell level to 97.80/98.25 with a lower 98.65 stop. I still do not want to be long the Dollar at this time.
The DAX fell shy of my 12130 initial buy level with a 12169 low print and I am still flat as the DAX is now trading higher at 12300 this morning. I would have expected the DAX to have been higher given the huge Retail Sales released at 7.00 am. For this reason I am not going to chase the market higher and I will leave my 12050/12130 buy level unchanged with the same 11965 stop.
My FTSE plan worked well with the market trading lower to my 6130 buy level before rallying to my 6160 T/P level and I am still flat. However, despite the huge rally in the US Indices yesterday, the FTSE closed lower. This is a surprise given the continued weakness in Sterling. The FTSE has support from 6045/6095 where I will be a buyer with a 5985 stop.
Dow Rolling Contract
Frustratingly the Dow just missed my initial 25380 buy level by a few points before surging to close at 25812 and I am still flat. The fact that the Dow closed over 25500 is bullish while a break and close over 26250 could be the launchpad for move back to 28000 over the coming weeks. Today, I will move my buy level higher to 25400/25600 with a 25255 tight stop. I still do not want to be short the Dow at this time.
My NASDAQ plan worked well with the market trading higher to my 10100 initial sell level before selling off to my 10045 T/P level. Subsequently I emailed my Platinum Members to go short again at 10140. I am still short and I will now raise my T/P level on this position to 10115. The NASDAQ has strong support from 9975/10075 where I will be a buyer with a 9895 stop.
Unfortunately, the Bund just missed my 176.95 sell level with a 176.84 high print before selling off to trade at 176.10 this morning. I will now lower my sell level to 176.55/176.95 with a lower 177.35 stop.
Gold Rolling Contract
Gold closed at a seven-year high last night just below the key $1800 resistance area. I am still flat and today I will raise my buy level to 1755/1765 with a 1734 stop.
Silver Rolling Contract
Silver had a strong day yesterday closing 3% higher and I am still flat. The break and close over 18.00 is bullish. Today I will raise my buy level to 17.45/17.85 with a 16.95 wider stop.