U.S. Equity Markets hovered near record highs Tuesday before closing mostly lower as investors digested the latest earnings and economic data while awaiting more news about trade talks between America and China. Ten-year Treasury yields hit their highest since September, Oil rose for a third day, and Gold slipped below $1,500 an ounce. The S&P 500 Index declined from Monday’s record, with financial and energy shares leading gainers, while health-care and real estate firms lagged. The Dow Jones Industrial Average rose to a fresh record. News that U.S. service industries expanded more than forecast in October triggered a brief equity rally but dimmed hopes for a December rate cut from the Federal Reserve. The Stoxx Europe 600 Index nudged higher. Investors have been in a more bullish mood lately amid signs of progress in the trade war, which is alleviating one of the biggest headaches for markets as they approach year-end. Add in solid earnings and rebounding growth expectations, and a risk-on rotation has been taking hold. In the latest trade news, China is reviewing locations in the U.S. where President Xi Jinping would be willing to meet with President Donald Trump to sign a pact, people familiar with the plans said.
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Meanwhile, markets got further support after China’s Central Bank reduced the cost of one-year funds to banks for the first time since 2016, easing concerns about tightening liquidity. And Bank of Japan Governor Haruhiko Kuroda suggested his nation could issue more super-long- term bonds, reflecting a desire for a steeper yield curve. Japanese shares led gains as Tokyo traders caught up after a long weekend, with more modest advances in Shanghai, Hong Kong and Seoul. Australia’s Dollar rose after its Central Bank left interest rates unchanged and said past easing steps are offering support.
The S&P 500 Index fell 0.1% to close at 3075.
The Dow Jones Industrial Average climbed 0.1% closing at 27,492 which is the highest close on record.
The Stoxx Europe 600 Index jumped 0.2% to 405, which is the highest close in more than four years.
Germany’s DAX Index advanced 0.1% to 13,148 to a 17-month high.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index increased 0.2% the highest in almost three weeks.
The Euro fell 0.4% to $1.1070.
The British Pound was flat at $1.2884.
The Japanese Yen weakened 0.4% to 109.17 per dollar.
The yield on 10-year Treasuries rose eight basis points to 1.85%, which is the highest in seven weeks.
The two-year rate added four basis points to 1.62%, the highest in a week on the biggest gain in more than two weeks.
Germany’s 10-year yield rose four basis points to -0.31%, the highest in almost sixteen weeks.
West Texas Intermediate crude increased 1.1% to $57.20 a barrel.
Gold weakened 1.7% to $1,485 an ounce, the weakest in more than two weeks on the largest drop in almost six weeks.
This morning on the Economic Front we have German Factory Orders at 7.00 am. This is followed by German and Euro-Zone Markit Services PMI at 8.55 am and 9.00 am respectively. At 10.00 am we have Euro-Zone Retail Sales, followed by U.S. MBA Mortgage Applications at 12.00 pm. Next, we have a speech by Fed Member Evans at 1.00 pm and Non-Farm Productivity and Labour Costs at 1.30 pm. Finally, at 3.00 pm we have Canadian Purchasing Managers Index.
December S&P 500
I am still flat the S&P as the market never got near my buy or sell levels yesterday on what turned out to be one of the quietest trading sessions in many weeks. The 2% rally in the VIX which closed at 13.10 last night has me on the look-out for a reversal in the market. On Monday I discussed the net-short position in VIX Futures as traders bet on a further advance in the market. Today I will lower my sell level to 3093/3103 with a 3111 stop. I am not going to chase the market higher and my only interest in buying the S&P is on a dip lower to 3045/3055 with a 3037 tight stop.
The Euro fell yesterday on the back of the stronger US Dollar with the Euro trading lower to my second buy level at 1.1085 for a now average long position of 1.1105. I will leave my stop unchanged at 1.1059 while now lowering my T/P level to 1.1115. If any of the above levels are hit I will be back with a new update for my Platinum Members.
December Dollar Index
I am still flat the Dollar and today I will again raise my sell level to 98.10/98.50 with a higher 98.85 stop.
No Change as my only interest in buying the market is on a dip lower to 7240/7280 with the same 7195 stop.
Dow Rolling Contract
The Dow closed at a new all-time high yesterday at a price of 27492. Given how overbought the market is trading I will continue to be an aggressive seller on any further rally to 27640/27790 with the same 27865 tight stop. I still do not want to be long the Dow at this time.
My latest 8240 short position finally paid off with the NASDAQ trading lower to my 8220 T/P level as outlined in yesterday’s Daily Commentary. Today I will again look to sell the market on any further rally to 8280/8340 with a 8385 stop.
The BUND sold off again yesterday with the market trading lower to my 170.50 buy level. The Bund is oversold and I will add to this position at 170.00 with a 169.71 lower stop. I will now lower my T/P level to 170.75 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 got hit hard yesterday as the market eyes the 1459 key support low from September. After the market hit my initial 1491 buy level I emailed my Platinum Members to exit any long position at 1494 and I am now flat. As I am back long Silver my only interest in buying Gold is on a further drop to 1458/1468 with a 1459 stop.
Silver Rolling Contract
I am glad I lowered my Silver buy level yesterday to 17.60 which was filled after Gold dipped. I am still long and I will add to this position at 17.20 with the same 16.85 stop. I will now lower my T/P level on this position to 16.75.