U.S. stocks rebounded as President Donald Trump moved to reassure markets that he will clinch a trade deal with China. The US Dollar rose and Treasuries fell. The S&P 500 rose for the second time in three sessions after Trump said he is talking with China. The benchmark is still down around 4% since the president escalated the trade war on May 5, and Tuesday’s rally faded into the close. Battered tech shares led the advance as Apple Inc. and Nvidia Corp. bounced back from their biggest one-day declines since January. Heavyweight exporters Caterpillar Inc. and Boeing Co. also reversed a portion of Monday’s losses. The US Dollar advanced for a second day against major peers, including havens such as the Japanese Yen and the Swiss Franc. The offshore yuan — a key risk indicator due to concern China will use it to retaliate against U.S. tariffs — stabilized after a six-day decline. Ten-year Treasury yields edged higher to 2.41%. Commodities targeted by Chinese tariffs — including soybean and cotton futures — also rebounded. West Texas crude rose above $61 a barrel.
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Signs emerged yesterday that President Trump had pressed the trade battle far enough. The president sprinkled his criticisms of China over the last 48 hours with enough signals that negotiations haven’t completely broken down that traders rushed back into the beaten down market to find bargains. But the rally remains tenuous as the White House announced it was prepping tariffs on the remaining $300 billion of Chinese imports, and economists warned the new penalties will eventually weigh heavily on the American economy. The S&P 500 Index closed 0.8% higher with the VIX falling 10% to close below the key 20 level at 18.26. Meanwhile the Nasdaq Composite Index advanced 1.3%, while the Dow Jones Industrial Average added 0.9%. In Europe, the Stoxx Europe 600 Index gained 1%. However it was not all good news with the MSCI Emerging Market Index and the MSCI Asia Pacific Index closing 0.2% and 0.8% lower respectively.
The Bloomberg Dollar Spot Index gained 0.2% to the highest in more than a week. This move higher in the Dollar saw the Euro fall 0.1% to $1.1214. This morning we are opening unchanged. The worsening political situation in the UK saw the British Pound dip 0.2% to $1.2927.
After the large fall in US Treasury Yields on Monday, yesterday was a rather tame trading session with the yield on 10-year Treasuries rising one basis point to 2.41%. In Europe both the German Bund and UK Gilt were unchanged at -0.07% and 1.105% respectively.
In Commodities, West Texas Intermediate crude climbed 1.1% to $61.70 a barrel while Gold fell 0.3% to $1,297.70 an ounce. After rising for 11 consecutive trading sessions Bitcoin fell 3% yesterday to close at $7800. However overnight Bitcoin has resumed its rally and is currently trading at $8100 as I go to press.
This morning on the Economic Front we already had the release of QI German GDP which came in as expected with a rise of 0.4%. At 10.00 am we have Euro-Zone GDP and Employment Change. This is followed at 12.00 pm by US MBA Mortgage Applications. Next we have Retail Sales and the New York Empire State Manufacturing Index at 1.30 pm. At 2.15 pm we have Industrial Production and Capacity Utilisation. Finally at 3.00 pm we have Business Inventories and the NAHB Housing Market Index.
The Fed’s Quarles and ECB’s Coeure and Praet are all speaking this afternoon at 2.30 pm, 3.15 pm and 5.30 pm respectively.
June S&P 500
The S&P rallied over 30 Handles from where I marked prices 24 hours ago before a late fade took some of the shine off the market which eventually closed 0.8% higher. My S&P plan worked well with the market trading higher to my 2854 sell level before falling to my 2847 T/P level and I am now flat. The S&P is still 110 Handles lower than its recent May 1 high of 2955. The S&P has strong resistance from 2853/2865 and today I will again be a seller on any rally to this area with a 2874 stop. I will now move my buy level higher to 2812/2822 with a 2803 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2763/2775 with the same 2749 wider stop.
The boring sideways action in the Euro continues and I am still flat. Today I will leave my 1.1120/1.1160 buy level unchanged with the same 1.1090 stop. I will now lower my sell level slightly to 1.1260/1.1300 with a lower 1.1335 stop.
June Dollar Index
I am still flat the Dollar and today I will again leave my 97.70/98.10 sell level unchanged with a 98.45 stop.
The DAX continues to trade well albeit at lower prices. As long as the market cam hold the key 11760/11830 support area then the DAX will be a buy on dips. Today I will move my buy level slightly higher to 11800/11870 with a 11745 stop.
The weaker Pound is helping the FTSE to hold in with the market having a nice rebound off the 7080 low from late Monday. I am still flat and today I will now raise my buy level to 7125/7165 with a 7085 stop. Just like the DAX above I have no interest in being short the FTSE at this time.
Dow Rolling Contract
Yet again anyone shorting the Dow on the close of its 200 Day Moving Average was quickly offside as the market rallied nearly 500 points from yesterday’s early morning low. I am still flat and nervous as one of these breaks in the market is not coming back. The Dow has strong resistance from 25780/25950 and I will be a seller on any rally to this area with a 26070 stop which is just above the 50 Day Moving Average which comes in at 26060 this morning. I will also be a small buyer on any dip lower to 25300/25450 with a 25195 stop.
Trading can be a frustrating game as we saw yesterday with 65% of Monday’s losses being reversed across the three main US Indices. Having being stopped out at a price of 7315 on the NASDAQ late Monday the market rallied to my 7440 sell level yesterday before having a small sell-off to my revised 7410 T/P level and I am now flat. The NASDAQ has strong resistance from 7480/7525 and I will be a small seller in this area with a 7565 stop.
No Change as I am still a seller on any rally higher to 166.90/167.20 with a 167.65 stop.
Gold Rolling Contract
Gold continues to outperform Silver and I am still flat. Today I will again raise my buy level to 1276/1285 with a 1269 higher stop.
Silver Rolling Contract
No Change as I am still long at 14.80 with the same 14.45 stop and 15.05 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.