US Equities finished lower after a seesaw session as investors digested the most recent twists in the tumultuous trade talks between the U.S. and China. Treasuries rose, while the US Dollar was little changed. The S&P 500 fell yesterday after Chinese officials questioned statements by President Donald Trump about trade discussions between the two countries. Banks led losers as the 10-year Treasury yield fell below 1.50%. Philip Morris International Inc. slid after confirming it was in merger talks with Altria Group Inc. The Greenback was steady against major currencies. The Euro fell following data showing Germany was on the brink of a recession, while the Pound gained as opposition politicians stepped up efforts to prevent a no-deal Brexit. West Texas crude rose to almost $55 a barrel. Elsewhere, Hong Kong Chief Executive Carrie Lam said her government can handle unrest without assistance from Chinese forces, and still wants to hold talks with protesters despite a flare-up in violence.
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Trump’s apparent de-escalation of trade tensions at the G-7 meetings had helped ease investor nerves before Beijing questioned some of those comments. Adding to the uncertainty, Germany offered up fresh evidence that protectionism is weighing on global growth. Volatility remains relatively high as traders reflect on previous periods of calm in the trade war that were quickly ended by surprises. From Friday to now has been just head-spinning on the trade issue. It looks like the trade war needs to get worse before it gets better and there will be a lot of saber-rattling. I think we’re still in the midst of that. I do not think the president’s recent comments marked the beginning of a solid or consistent trajectory to a resolution here.
The S&P 500 Index fell 0.3% to close at 2869 while the Dow fell 100 points closing at 25796 which is just below its 200 Day Moving Average which comes in at 25861 this morning.
In Europe the Stoxx Europe 600 Index increased 0.6%.
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index was little changed.
The Euro fell 0.1% at $1.109.
The British Pound gained 0.6% to $1.2288, the strongest in over a month.
The Japanese Yen increased 0.4% to 105.74 per dollar.
Recession worries increased with the yield on 10-year Treasuries falling six basis points to 1.47%, a three-year low. Meanwhile the yield on two-year Treasuries fell two basis points to 1.52%.
In Europe Germany’s 10-year yield decreased three basis points to -0.69% while on the back of the stronger Pound Britain’s 10-year yield gained two basis points to 0.50%.
Nervousness in Equity Markets saw Gold advance 1% to $1,543.08 an ounce.
West Texas Intermediate crude climbed 2.4% to $54.95 a barrel.
This morning on the Economic Front we already had the release of German Import Prices which fell 0.2% versus +0.1% expected. Also released was the German GFK Consumer Confidence which surprisingly came in higher than the 9.6 expected with a 9.7 print. At 9.00 am we have the Euro-Zone M3 Money Supply and this is followed at 10.40 am by the results of the German 10-Year Bund Auction. Next we have the US MBA Mortgage Applications. Finally, we have a speech from the Fed’s Barkin at 5.20 pm.
September S&P 500
My S&P plan worked very well yesterday as the market spiked higher to my 2897 sell level with a high of 2899.50 before falling 40 Handles. Unfortunately I covered this short position way too early at my revised 2893 T/P level and I am still flat. While the Dow has tested it’s 200 Day Moving Average on three occasions in the past month so far the S&P is holding well above this key technical level which comes in at 2804 this morning. However for the Bulls to regain the momentum it needs to break and close over 2900. Short-Term the S&P has support from 2845/2855 and I will be a buyer on any dip to this area with a 2838 stop. I will also be a small seller on any further rally to 2898/2908 with a 2915 tight stop.
No Change as I am still a buyer on any dip lower to 1.1010/1.1050 with the same 1.0970 stop.
September Dollar Index
The Dollar traded sideways for most of yesterday and I am still flat. My only interest in selling this market is still on a rally higher to 98.40/98.80 with the same 99.05 tight stop.
I am still flat the DAX as the market tests overhead resistance from 11800/12000. Today I will again raise my buy level to 11470/11550 with a 11415 tight stop. I still do not want to be short the DAX at this time.
My FTSE plan worked well as shortly after I posted yesterday morning the market dipped lower to my 7040 buy level before rallying to my 7070 T/P level and I am now flat. Today I will again look to buy the FTSE from 6990/7030 with the same 6965 tight stop if executed.
Dow Rolling Contract
Frustratingly the Dow just fell short of both my buy and sell levels in what turned out to be a volatile trading session. Despite the weakness of the past week the McClellan Oscillator only fell 40 points yesterday to close at -69. I am watching this key signal for any clue as to when we may see a more meaningful bottom in the market as we approach what is normally a seasonally strong time of the year namely the US Labour Day Weekend. Today I will leave my 25530/25670 buy level unchanged with the same 25450 stop. I will now lower my sell level slightly to 26080/26200 with a lower 26305 stop.
I am still flat the NASDAQ and this morning I will now raise my buy level slightly to 7470/7520 with a higher 7425 stop. I still do not want to be short the NASDAQ at this time.
This morning the Bund has traded higher to my 179.05 sell level. My record in shorting the Bund over the past few weeks has been poor and as a result I will lower my stop on this position to 179.35. I will also raise my T/P level to 178.80.
Gold Rolling Contract
No Change as my only interest in selling Gold is on a rally higher to 1580/1590 with the same 1599 stop.
Silver Rolling Contract
My latest 17.65 long position in Silver worked well with the market trading higher to my 17.95 T/P level and I am now flat. Silver has really outperformed Gold trading to an overnight high of 18.45. Today I will again look to buy the market from 17.80/18.20 with a 17.45 tight stop.