Both European and U.S Indices closed lower in a quiet trading session as traders wait for the outcome of this evening’s FOMC Statement, followed by the virtual press conference from Fed Chairman Powell at 7.30 pm. Yesterday morning the ECB extended its recommendation that banks suspend dividends and share buybacks until January 2021 in order to navigate the Coronavirus crisis. The WHO warned the COVID-19 pandemic is one big wave and not a seasonal event like the flu. On the vaccine front, Pfizer and BioNTech announced they are launching a phase two/three vaccine trial, in hopes of seeking regulatory review as soon as October. U.S. Economic data was mixed. The Conference Board’s Consumer Confidence Index fell to 92.6 in July, down from 98 in June, indicating that worries are growing about the economy in the near-term. But the Richmond Fed Manufacturing Index rose and topped expectations, on strength of New Orders and Shipments. The Dow was weak after McDonalds, 3M and Harley Davidson slumped after earnings misses. Elsewhere, Oil declined on reports that OPEC warned demand could take more than two years to recover while Gold closed 1.1% higher as Consumer Sentiment fell on COVID-19 worries after a volatile trading session for the Precious Metals.
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The S&P 500 decreased 0.6% to close at a price of 3218.
The Dow Jones closed 205 points lower for a 0.77% loss to close at 26,379.
The NASDAQ 100 closed 1.33% lower at 10,532.
The Stoxx Europe 600 Index added 0.4%.
The MSCI Asia Pacific Index advanced 0.4%.
This morning the Nikkei closed 1.15% lower at 22,397.
Here is a Summary of the Main Changes in F.X. Markets:
The U.S. Dollar Index rose 0.1%.
The Euro declined 0.3% to $1.1716.
The Japanese Yen appreciated 0.3% to 105.08 per dollar.
The yield on 10-year Treasuries declined four basis points to 0.58%.
Germany’s 10-year yield fell two basis points to -0.51%.
Britain’s 10-year yield was unchanged at 0.109%.
The Bloomberg Commodity Index was little changed.
West Texas Intermediate crude decreased 1.6% to $40.92 a barrel.
Gold strengthened 0.9% to $1,959.72 an ounce.
This morning on the Economic Front we already had the release of German Import Price Index which came in higher than the +0.5% expected with a +0.6% print. At 9.30 am we have UK Mortgage Approvals, Money Supply and Consumer Credit. This is followed by U.S MBA Mortgage Approvals at 12.00 pm and by Wholesale Inventories and The Trade Balance at 1.30 pm. Next, we have Pending Home Sales at 3.00 pm. Finally, we have the FOMC Statement at 7.00 pm, followed by the Powell Press Conference at 7.30 pm.
September S&P 500
My S&P plan worked well with the market trading lower to my 3221 buy level before rallying back above 3235 in afternoon trading. This move higher enabled me to cover this position at my revised 3227 T/P level. Subsequently I emailed my Platinum Members to buy the S&P again at 3205 before exiting this trade at 3210 and I am now flat. Even though the VIX closed 3% higher at 25.44 last night, volatility has fallen dramatically over the past three weeks. The VIX needs to break and close over both its 50 Day Moving Average (29.18) and 200 Day MA (28.86) to see a more sustained sell-off in the market. I just can’t see this happening ahead of the fifth stimulus package that will be agreed by Congress ahead of next week’s recess. This break higher in the VIX would probably coincide with the S&P breaking its near-term support at 3150 and as long as this support holds, I will continue to be a buyer on dips. The S&P should stay range bound until we get the FOMC Statement at 7.00 pm followed by the Powell press conference where I would expect volatility to increase depending on what he says. Today I will be a buyer from 3189/3204 with a 3179 stop. If I am taken long and subsequently stopped out of this position I will be an aggressive buyer from 3149/3165 with a 3139 stop. Meanwhile I will leave my 3260/3275 sell level unchanged with the same 3289 stop.
No Change as I am still an aggressive buyer from 1.1535/11575 with the same 1.1490 stop. Ahead of the FOMC, I will now raise my sell level to 1.1795/1.1845 with a higher 1.1886 stop.
September Dollar Index
No Change as I am still a small buyer from 92.90/93.40 with a lower 92.55 stop.
After the DAX traded lower to my 12800 buy level I had too many open positions on board and I emailed my Platinum Members to exit any long position at my revised 12820 T/P level and I am still flat. The strong Euro is affecting the DAX. However as long as the DAX does not close below 12400, I will continue to be a buyer on dips. Today my buy level will be from 12540/12670 with a 12485 tight stop.
After the FTSE traded lower to my 6065 buy level I covered this position at my revised 6088 T/P level and I am now flat. The FTSE has support from 6000/6050 where I will again look to buy the market with a 5965 tight stop. Given how oversold the FTSE is trading, I still do not want to be short the market at this time.
Dow Rolling Contract
The volatility in the Dow has collapsed with the market having narrow daily ranges. So far, the 200 Day Moving Average (26235) is holding but not with much conviction. Yesterday after the Dow traded lower to my initial 26440 buy level I covered this position at my revised 26510 T/P level and I am still flat. Just like the S&P above, I would expect this range bound activity to continue until hopefully the Fed’s actions this evening generate some more volatility. Today I will continue to buy the dip and my buy level will be from 26130/26280 with a 25985 tight stop. I will now lower my sell level to 27050/27300 with a 27450 stop.
My NASDAQ plan worked well with the market trading lower to my 10600 buy level before rallying to my revised 10645 T/P level. I bought the market again at 10565 before exiting this trade for a small gain at 10591 and I am now flat. Today I will again look to buy the market on any dip lower to 10390/10490 with a 10295 stop. Ahead of the FOMC, I will not chase the market lower and I will leave my 10790/10890 sell level unchanged with the same 10965 stop.
The Central Banks need easy money given the level of extra debt that they collectively have taken on since March. The Bund is now trading at -0.52% as the Futures price rallied by 70 points since I posted yesterday morning. I am now short at 177.10 and I will add to this position at 177.60 with a now higher 178.05 stop. I will also raise my T/P level to 176.90 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold had a volatile trading session yesterday, trading to a low of 1903 before rallying back to sit at 1957 this morning. Given the fact that we are so close to 2000, it is only a matter of time before this level is tested. I will now raise my sell level to 2002/2015 with a 2023 tight stop. The old 2011 previous all-time high is at 1911 and this should act as strong support on any test. As a result, I will be a buyer from 1907/1919 with a 1899 stop.
Silver Rolling Contract
No Change as I am still a small seller from 25.40/26.00 with the same 26.55 stop.