European Indices rebounded from yesterday’s sell-off to surge following better than expected PMI data from Germany, the Euro-Zone and the UK. Consumer Confidence also rebounded from a nine-year low in May. Meanwhile, the UK Auto-Industry was said to have asked for a bailout package to protect jobs and kickstart a recovery as Prime Minister Johnson announced the re-opening of pubs and a reduction in the Social Distancing 2 metre rule. The DAX led the European markets higher with a gain of 2.13%. US Indices rose on optimism surrounding a trade deal with China. However, despite the S&P closing 0.4% higher its was near the lows of the day. So far, the rare Island Reversal is holding both the Dow and S&P while the NASDAQ rose for the eight- straight session. Markets fell from intra-day highs after the U.S Infectious Disease Doctor warned that the Coronavirus was not taking a summer break and was hopeful we will have a vaccine by early 2021. Elsewhere Treasuries closed flat while the US Dollar again weakened. Gold closed at its highest level since 2012 while Crude fell 1.2%. Bitcoin rose 0.78%, following on from Monday’s reports that PayPal would soon allow the buying and selling of Cryptocurrencies.
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The S&P 500 closed 0.40% higher at a closing price of 3131.
The Dow Jones Industrial Average rose 131 points for a 0.5% gain to close at 26,156.
The NASDAQ 100 closed 0.80% higher at a new all-time closing high at 10209, but 100 points below its intra-day high of 10306.
Stoxx Europe 600 Index closed with a gain of 1.0%.
The FTSE 100 closed 1.13% higher.
This morning the Nikkei closed by 0.07% higher at 22,534.
Here is a summary of the main Changes in F.X. Markets:
The Euro increased 0.4% to $1.1304.
The Japanese Yen closed 0.4% higher at 106.54.
The British Pound rose 0.5% to 1.2520 per Dollar.
The yield on 10-year Treasuries rose one basis point to 0.71%.
Germany’s 10-year yield climbed three basis points to -0.42%.
Britain’s 10-year yield rose two basis points to 0.22%.
West Texas Intermediate crude fell 1.2% to $40.24 a barrel.
Gold closed 1.1% higher at $1770.
This morning on the Economic Front we have the German IFO Survey at 9.00 am and this is followed at 12.00 pm by the latest U.S MBA Mortgage Applications. Next, we have the Housing Price Index at 3.00 pm, Finally, we have speeches from Fed Members Evans and Bullard at 5.30 pm and 8.00 pm respectively.
September S&P 500
It is no wonder that the US Indices have surged over the past 10 days as the latest Commitment of Traders Report shows Futures positioning is increasingly against a stock move higher, while the American Association of Individual Investors Weekly Survey shows bearish sentiment is above average. It is likely that these contrarian signals would point to a continued rally. This Commitment of Traders Report showed that the net short position for the S&P Futures Contract rose by 75,000 to 303,000. This is the largest short position by contract since 2011. Similarly, the NASDAQ Futures also has its largest short position since 2011. There is every chance that if the markets keep rising then these short positions will have to cover and buy them back, thus sending the market even higher. Yesterday my S&P plan worked well with the market trading higher to my 3143 sell level before a late sell-off saw the S&P trade to an overnight low at 3107. Unfortunately, I covered this position too early at my revised 3136 T/P level and I am still flat. Today I will leave my 3080/3095 buy level unchanged with the same 3067 stop. My only interest in selling the S&P is still on a rally higher to 3148/3162 with a 3171 stop. Remember to negate the rare Island Reversal from two weeks ago, the S&P needs to break and close of 3200.
The Euro rallied yesterday to my 1.1340 sell level. As I wanted to be flat overnight I covered this position at my revised 1.1329 T/P level. Given the latest CFTC Report which showed that Euro long positions at their highest level in two years I will continue to be a seller on rallies. Today, my sell level will be from 1.1365/1.1405 with a 1.1445 stop. Meanwhile, I will leave my 1.1165/1.1215 buy level unchanged with the same 1.1119 stop.
September Dollar Index
I am still flat and I will now lower my sell level to 97.05/97.45 with a lower 97.85 stop. I still do not want to be long the Dollar at this time.
Better than expected PMI data saw the DAX surge, as the market reversed most of its losses from last week. Thankfully, we had no sell levels in the market yesterday. I will now raise my buy level to 10230/10330 with a 10145 stop.
I am still flat and today I will lower my buy level slightly to 6140/6190 with a lower 6095 stop. I still do not want to be short the market at this time.
Dow Rolling Contract
Internally the stock market is weak with the McClellan Oscillator again closing negative with a -53 print. This is probably the most hated equity rally in history as every day we have some prominent expert saying how overvalued the market is. As Keynes famously said ‘’Markets can remain irrational longer than you can stay solvent’’. Yesterday my Dow plan worked well with the market trading higher to my 26400 sell level before trading lower to my 26280 T/P level and I am still flat. Today I will raise my buy level slightly to 25750/25975 with a 25575 stop. The Dow has strong resistance from 26500/26700 where I will a small seller with a tight 26835 stop.
The NASDAQ closed higher for the eighth consecutive trading session but 100 points off its 10300 intra-day high. This market is severely overbought and due a correction. However, the market does not feel like obliging as every move lower sees strong buying. The NASDAQ has now risen nearly 55% off its March 23 low. The NASDAQ is trading at the top of both is Daily Bollinger Band and William Index with resistance from 10280/10400 where I will again be a seller with a 10480 stop. My only interest in buying the market is from 9950/10050 with a 9875 stop.
The BUND is weak this morning, trading at 175.28 as I go to press. I am still flat and I will now lower my buy level to 174.30/174.80 with a 173.95 tight stop.
Gold Rolling Contract
Having traded sideways for most of the past 10 weeks, Gold broke out of this range in the last two sessions to close at 1770, which is its highest level since 2012. I still do not trust this market as everyone I talk to is bullish Gold. Today I will raise my buy level slightly to 1730/1740 with a higher 1721 tight stop.
Silver Rolling Contract
Silver continues to underperform Gold and I am still flat. I will leave my 17.10/17.50 buy level unchanged with the same 16.75 stop.