U.S. Equity Markets reversed early afternoon losses before ripping higher into the close, led by the Dow which ended the day with a gain of 0.62%, having rallied over 550 points of its 32070 low print. Markets fell in the morning before recovering throughout the rest of the day. The vaccine news from AstraZeneca drove the initial sell-off. The news of lower efficacy data calls into question whether AstraZeneca’s releases can be trusted, likely extending the time before an emergency use authorisation (EUA) will be approved. Economic data were positive, however. Initial Jobless Claims fell more than expected. And Continuing Claims, which represent those that have filed for unemployment for at least two weeks, were 3.87 million versus the expectation for 4 million and 4.13 million in the week prior. Both of these data points signal strength in the labour market’s recovery. Federal Reserve Chair Jerome Powell also continued his packed speaking schedule. In an interview with NPR, Powell said that any changes to policy will come gradually and with advance notice from the central bank. On inflation, Fed Vice Chair Richard Clarida said that inflation could run above 2% in both 2022 and 2023. These comments likely spurred some rotation into value, leading to tech’s underperformance. European Markets closed lower. European Central Bank Governing Council Member Francois Villeroy de Galhau said there’s little risk of inflation overheating and that financing conditions will remain favorable. Belgium’s government announced new coronavirus related social-distancing restrictions, closing schools, non-essential businesses, and hair salons for the next four weeks. AstraZeneca lowered the efficacy of its vaccine from 79% to 76% in U.S. trials after scrutiny from American health officials. There were also concerns surrounding the ship blocking the Suez Canal, which reportedly could take weeks to move. Given how much trade goes through the canal (about 10% of global trade), this could be a short-term economic headwind. Elsewhere, Oil fell 4.38% after yesterday’s large move higher, while Bitcoin closed 4.41% lower as billionaire investor Ray Dalio said there was a good possibility that the U.S. government outlaws bitcoin.
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The S&P 500 closed 0.52% higher at a price of 3909.
The Dow Jones Industrial Average closed 199 points higher for a 0.62% gain at a price of 32,619.
The NASDAQ 100 closed 0.14% lower at a price of 12,780.
The Stoxx Europe 600 Index closed 0.5% lower.
The MSCI Asia Pacific Index rose 0.6%.
This morning the Nikkei closed 1.56% higher at a price of 29,176.
The Bloomberg Dollar Spot Index closed 0.3% higher.
The Euro closed 0.5% lower at $1.1765.
The British Pound closed 0.3% higher at $1.3731.
The Japanese Yen closed 0.3% lower at 109.22 per dollar.
Germany’s 10-year yield closed one basis points lower at -0.37%.
Britain’s 10-year yield closed one basis points lower at 0.73%.
US 10 Year Treasury closed one basis points higher at 1.62%.
West Texas Intermediate crude closed 4.41% lower at $58.19 a barrel.
Gold closed 0.1% lower at $1,721.80 an ounce.
This morning on the Economic Front we already had the release of UK Retail Sales which came in as expected with a rise of 2.1%. At 9.00 am we have the German IFO Survey and this is followed at 12.30 pm by U.S PCE Deflator, Trade Balance, Personal Spending and Wholesale Inventories. Finally, at 2.00 pm we have the University of Michigan Consumer Sentiment Index.
June S&P 500
As mentioned in yesterday’s commentary any initial test of the 50 Day Moving Average will attract large buying. This turned out to be more than correct as the S&P surged after hitting an afternoon low at 3843, to sit at 3916 as I go to press this morning. In my opinion, this huge reversal smells of intervention from the Fed as they know that a break and close below the key 3850 support level will see a further acceleration to the downside. We now find ourselves in an even worst bubble than in February 2020 with asset prices even further disconnected from the economy. Furthermore, these markets are incapable of sustaining themselves without ongoing intervention and stimulus. I am not calling for a ‘’Crash’’ but I am looking for a meaningful sell-off over the coming months especially as both the Dow and S&P are so far away from their respective 200 Day Moving Averages. Yesterday the S&P traded lower to my 3860 buy level before rallying to my 3870 revised T/P level. Just before the close the S&P rallied to my 3908 initial sell level before trading lower to my 3901 T/P level and I am now flat. If the S&P can break and close over 3920 this evening it will be a short-term buy signal for next week. The S&P has support from 3888/3903 where I will be a small buyer with a 3876 stop. Ahead of the weekend I do not want to be short the market. If I am taken long I will have a T/P level at 3914.
My latest 1.1850 long position did not work well as I was stopped out of this position at 1.1785 and I am now flat. The Euro has strong support from 1.1710/1.1750 which must hold as a break and close below here signals a potential move to 1.1520. If I am taken long I will have a T/P level at 1.1785 while my stop will be at 1.1675.
June Dollar Index
The Dollar traded higher to my second sell level at 92.80 for a now 92.55 average short position. I will leave my stop unchanged at 93.05 while raising my T/P level to 92.35.
My DAX plan worked well with the market trading lower to my 14450 buy level before rallying to my revised 14500 T/P level and I am now flat. For those of you who stayed long the DAX is trading at 14700 this morning as thankfully we had no sell level in this market yesterday. The DAX has support from 14500/14580 where I will be a buyer with a 14425 stop which is just below yesterday’s low print. If I am taken long I will have a T/P level at 14630.
After the FTSE traded lower to my 6580 buy level, I covered this position too early at 6605 and I am still flat. The FTSE has support from 6580/6625 where I will again be a buyer with a 6535 stop. I still do not want to be short the FTSE at this time. If I am taken long I will have a T/P level at 6655.
Dow Rolling Contract
Just when it looked like the Dow was finally starting a meaningful correction we turned on a dime and rallied 550 points off the 32070 low print into the New York close. It is so difficult to be short as traders are prepared to buy every dip knowing that they have the Fed at their back. Yesterday my Dow plan worked really well as the market traded lower to my 32090 buy level. Unfortunately, I covered this position too early at 32205 and I am still flat. This morning the Dow is trading higher at 32735. If the Dow breaks and closes over 32800 this evening then we have a short-term buy signal ahead of the Easter Holidays. The Dow has support from 32480/32630 where I will be a small buyer with a 32325 ‘’Closing Stop’’. Just like the S&P above I do not want to be short the Dow ahead of the weekend. If I am taken long I will have a T/P level at 32750.
The NASDAQ continues to underperform both the S&P and Dow and I am still flat. For me to turn bullish the NASDAQ we need to break and close over 13120. The NASDAQ has short-term support from 12630/12730 where I will be a buyer with a 12545 ‘’Closing Stop’’. If I am taken long I will have a T/P level at 17795.
The ECB continues to control the yield curve (YCC) This means that the ECB is prepared to buy unlimited quantities of these bonds at a certain level of interest rates. This is insane with the Bund trading at – 37 basis points. Of course, this will end in tears and massive losses for bond holders but not yet. I am still flat the Bund which is trading 50 points higher from where I marked prices 24 hours ago. I am not going to chase the Bund higher and I will leave my 171.25/171.75 buy level unchanged with the same 170.88 stop. If I am taken long I will have a T/P level at 172.05.
Gold Rolling Contract
No Change as I am still a small buyer on any dip lower to 1699/1712 with the same 1689 stop. If I am taken long I will have a T/P level at 1719.
Silver Rolling Contract
Unfortunately, I was stopped out of my 25.10 long Silver position near the low of the day at 24.59 and I am still flat. Silver has support from 24.00/24.60 where I will again be a buyer with a 23.55 stop. If I am taken long I will have a T/P level at 24.95.
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