U.S. Equity Markets bounced around to start the week, finishing the day mixed as the Dow tested all-time highs to close with a gain of 0.60% while the Small Cap Russell 2000 closed 2.83% lower. Markets declined in the early morning before recovering throughout the day. There was some uncertainty around the U.S.’s relationship with China, after U.S. Trade Representative Katherine Tai said the White House is open to trade negotiations with China, but it won’t be removing tariffs in the near future. There were also worries about a leveraged trade unwind, as Credit Suisse and Nomura both warned of large losses related to hedge funds liquidating certain positions. But vaccine news was positive after the Biden administration said it will have administered 240 million COVID-19 vaccinations by the end of this month. That is enough to inoculate roughly half of the eligible population. Now, eyes turn to Biden’s infrastructure and jobs announcement later this week, which could come in as large as $4 trillion, according to a report from the Washington Post. While this will be hard to push through Congress, any infrastructure bill would help boost economic output. European Markets closed higher, led by the German DAX. European Central Bank Chief Economist Philip Lane said it must remain committed to ensuring favorable financing conditions to support economic growth. German Chancellor Angela Merkel called on the heads of the country’s 16 states to introduce strict social-distancing measures to bring a recent rise in coronavirus infections under control. Italy’s government lowered its growth outlook for 2021, citing the recent lockdowns. But it also boosted its growth forecast for 2022. European Union coronavirus vaccinations rose to 67.7 million yesterday, with a daily average of 1.5 million doses administered over the last week. Elsewhere, Bitcoin surged 7.71% after Visa announced that it would soon settle some transactions in cryptocurrency, while Gold fell 1.33% on Dollar strength.
The S&P 500 closed 0.09% lower at a price of 3971.
The Dow Jones Industrial Average closed 98 points higher for a 0.30% gain at a price of 33,171.
The NASDAQ 100 closed 0.10% higher at a price of 12,965.
The Stoxx Europe 600 Index closed 0.8% higher.
The MSCI Asia Pacific Index rose 0.1%.
This morning the Nikkei closed 0.10% higher at a price of 29,413.
The Bloomberg Dollar Spot Index closed 0.2% higher.
The Euro closed 0.3% lower at $1.1760.
The British Pound closed 0.2% lower at $1.3762.
The Japanese Yen closed 0.2% lower at 109.82 per dollar.
Germany’s 10-year yield closed three basis points higher at -0.31%.
Britain’s 10-year yield closed two basis points higher at 0.78%.
US 10 Year Treasury closed five basis points higher at 1.71%.
West Texas Intermediate crude closed 0.95% higher at $61.05 a barrel.
Gold closed 1.33% lower at $1,710.80 an ounce.
This morning on the Economic Front we already had the release of the German Import Price Index which printed +1.7% versus +1.3% expected. At 10.00 am we have Euro-Zone Consumer Confidence and the Economic Sentiment Indicator. This is followed by German CPI at 1.00 pm and the U.S Housing Price Index at 2.00 pm. Finally, we have Consumer Confidence at 3.00 pm and a speech from Fed Member Williams at 7.30 pm.
June S&P 500
Shortly after I posted yesterday morning the S&P traded lower to my 3935 buy level before rallying to my 3948 T/P level and I am still flat. Total stock market volume contracted notably yesterday from the previous four trading sessions with just over 11 billion shares traded. Markets are extremely fractured and this was reflected in the VIX which closed higher yesterday by 10%. The week started with a 16% fall in Nomura shares after the brokerage firm warned of a $2bn loss related to a U.S. client Details are thin, but the obvious conclusion is the loss linked to leveraged U.S family office Archegos Capital Management, after a clutch of Prime Brokers pulled the plug on Friday and launched a firesale of some $20bn in assets. This suggests that Friday’s deleveraging may not be a one-off, but part of a developing pattern as we have already witness in technology over the past six weeks. With U.S Margin Debt rising 28% over the past 12 months, traders are nervous, reflecting the surge in the VIX yesterday. I will now raise my S&P sell level to 3982/3998 with a high 4011 ‘’Closing Stop’’. The S&P has support from 3927/3942 where I will again be a buyer with a 3915 ‘’Closing Stop’’. If I am taken short I will have a T/P level at 3971. If I am taken long I will have a T/P level at 3954.
The Euro has traded in a narrow range over the past 24 hours and I am still flat. Today, I will lower my buy level slightly to 1.1690/1.1730 with a lower 1.1645 stop. If I am taken long I will have a T/P level at 1.1765.
June Dollar Index
No Change. I am still short at 92.55 with the same 93.05 tight stop. I will leave my T/P level unchanged at 92.45 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
No matter what the news the DAX keeps rallying as one short position after another gets slammed. This morning the DAX is opening higher at 14870 and I am still flat. I will now raise my buy level to 14670/14740 with a 14595 stop. I still do not want to be short the DAX at this time. If I am taken long I will have a T/P level at 14785.
Frustratingly, the FTSE just missed my 6650 buy level by five points before trading higher to sit at 6715 as I go to press. I am reluctant to chase this market higher and I will leave my 6600/6650 buy level unchanged with the same 6565 stop. If I am taken long I will have a T/P level at 6685.
Dow Rolling Contract
Yesterday’s Dow rally to a new all-time high was attended by a negative NYSE Advance/Decline ratio of 0.48 with more down volume than up volume. Incredibly the McClellan Oscillator weakened to -70, generating a second confirmed Hindenburg Omen in the past three weeks. The relatively weak measures of Breadth and Volume are perfectly compatible with an imminent top in the market. Yesterday’s new Dow high was not confirmed by either the S&P, NASDAQ or the Small Cap Indexes. After the Dow hit my initial 33180 sell level we sold off to my revised 33120 T/P level and I am now flat. The Dow has further resistance from 33340/33500 where I will again be a seller with a 33625 ‘’Closing Stop’’. The Dow just missed my 32850 buy level and I will now raise this level to 32730/32910 with a 32595 ‘’Closing Stop’’. If I am taken short I will have a T/P level at 33220. If I am taken long I will have a T/P level at 33060.
I am still flat and reluctant to chase the market higher. As a result, I will leave my 12690/12790 buy level unchanged with the same 12595 ‘’Closing Stop’’. The NASDAQ needs to break and close over 13120 for me to move my buy range higher. If I am taken long I will have a T/P level at 12850.
The Bund traded lower to my 171.70 buy level. I will add to this trade at 171.10 while leaving my stop unchanged at a tight 170.88. I will now lower my T/P level to 171.95 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
After Gold traded lower to my 1707 buy level, we had a small rally, enabling me to cover this position at my revised 1713 T/P level and I am still flat. Gold has key support from 1668/1682 which must hold or we could see a further acceleration to the downside. I will be a small buyer in this area with a 1657 stop. If I am taken long I will have a T/P level at 1690.
Silver Rolling Contract
My Silver plan worked well with the market trading lower to my 24.50 buy level before rallying to my 24.75 revised T/P level and I am now flat. Silver has support from 23.50/24.10 where I will again be a buyer with a 22.95 stop. If I am taken long I will have a T/P level at 24.45.
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