U.S. Equity Markets closed higher despite a late-day swoon as optimism that more economies are moving toward easing their Coronavirus lockdowns outweighed cautionary comments from Federal Reserve officials. Oil surged. The S&P 500 rose for a second day, led by gains in health care, utilities and information technology companies. The benchmark Index’s gain of almost 2% was cut in half in the last hour of trading after Fed Vice Chairman Richard Clarida warned the economy will need more government support. St. Louis Fed President James Bullard said the central bank’s efforts are “very much an experiment.” President Donald Trump continued to blame China for the global pandemic, stoking fears the trade war will reignite. Oil posted its longest run of daily gains in more than nine months as production cuts start to whittle down a supply glut. Futures in New York rose for a fifth day, gaining more than 20%. European stocks gained. The Euro fell as investors scrutinised a verdict from Germany’s top judges over the legality of European Central Bank stimulus. They ruled that some actions taken by the country’s Bundesbank to participate in the Asset Purchase Programme were unconstitutional. Markets were closed in Japan, China and South Korea.
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The S&P 500 Index rose 0.9% to close at 2868.
The Dow Jones Industrial Average increased 0.6% to 23,883.
The Nasdaq Composite Index rose 1.1% to close at 8,809.
The U.K.’s FTSE 100 Index rose 0.7%.
The MSCI All-Country World Index rose 1.1%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index declined 0.1%.
The Euro dipped 0.6% to $1.0842.
The British Pound was little changed at $1.2438.
The Japanese Yen strengthened 0.2% to 106.51 per dollar.
The yield on 10-year Treasuries gained two basis points to 0.65%.
Germany’s 10-Year Yield declined two basis points to -0.55%.
Britain’s 10-year yield declined three basis points to 0.20%.
West Texas Intermediate crude climbed 20.52% to $24.58 a barrel.
Gold rose 0.2% to $1,708.10 an ounce.
This morning on the Economic Front we already had the release of German Factory Orders which fell an incredible 15.6% versus -10% expected. Next, we have German, Euro-Zone and UK Markit Services PMI at 8.55 am, 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Retail Sales and at 12.00 pm by U.S MBA Mortgage Applications. Finally, at 1.15 pm we have the ADP Employment Change which will be closely watched ahead of Friday’s Non-Farm Payrolls.
June S&P 500
It is a new world, and consumers clearly recognise certain perils of the new reality. The Conference Board’s Consumer Confidence Index dropped to 86.9 in April from a historically high level of 118.8 in March. It was the biggest Monthly decline on record. As far as their investments go, however, consumers are almost as complacent as ever. The result of the April Survey by the University of Michigan showed consumers when asked about the likely change in their financial situation five years from now, 57% said they expect to be better off, not far from the all-time high of 60% in April 2019. In some areas in fact, investors are moving aggressively into, rather than away from, the riskier assets. The time to buy the market was back in late March and not now after a 30% rise in the S&P. I know it is extremely difficult to fight the Fed but in my opinion unless a vaccine is found soon then we are in a socially distance society for the foreseeable future, and all the negative consequences that this entails. Given the sell-off from last Thursday I expected that Phase 3 of my road map had started but given the level of Fed intervention as outlined at length in yesterday’s commentary, we may still test the 200 Day Moving Average at 3003 before we see a more sustained sell-off. Yesterday my S&P plan worked well with the market trading higher to my 2884 sell level before the late swoon saw the market hit my 2870 T/P level with an overnight low at 2844. This morning this sell-off has reversed and we are trading higher at 2878. The S&P has resistance from 2902/2922 where I will be a seller with a 2935 stop. I will now raise my buy level to 2828/2848 with a 2814 stop.
The Euro fell as investors scrutinised a verdict from Germany’s top judges over the legality of European Central Bank stimulus. As a result, the Euro hit my second buy level at 1.0855 for a now 1.0880 average long position. Ahead of this announcement the Euro just missed my 1.0935 T/P level with a high of 1.0925. I will now lower my stop on this position to 1.0795. I will also lower my exit level for a small loss at 1.0865. If any of the above levels are hit I will be back with a new update for my Platinum Members.
June Dollar Index
No Change as I am still short from yesterday at 99.60 with the same 100.05 stop. I will now raise my T/P level on this position to 99.50.
I am still flat and today I will lower my sell level slightly to 10830/10950 with a lower 11035 stop. I am not going to chase the DAX higher and I will leave my 10350/10480 buy level unchanged with the same 10265 stop.
I am still flat the FTSE where the market traded in a narrow range yesterday. I will leave my 5890/5970 sell level unchanged with the same 6035 stop. I still do not want to be long the FTSE at this time.
Dow Rolling Contract
Overnight the Dow hit a low of 23746, just missing my 23720 buy level before rallying 300 points and I am still flat. Today I will move my buy level higher to 23550/23800 with a 23425 stop. I will also raise my sell level slightly to 24320/24550 with a higher 24675 stop.
I am still flat the NASDAQ which has strong support from 8790/8870 where I will be a buyer with a wider 8695 stop. Meanwhile I will continue to be an aggressive seller from 9100/9250 with the same 9325 tight stop.
After the BUND traded higher to my 174.35 sell level I emailed my Platinum Members to exit any short position at 174.10 and I am now flat. This morning the Bund is trading at the same 174.10 price. We have short-term resistance from 174.55/174.95 where I will be a seller with a 175.35 stop.
Gold Rolling Contract
The boring sideways action in Gold continues and I am still flat. Today I will raise my buy level to 16.60/1672 with a 1649 stop.
Silver Rolling Contract
I am still flat and I will now raise my buy level to 14.40/14.80 with a higher 13.95 stop.