E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Tech Up as Investors Buy Semiconductors

June E-mini NASDAQ-100 Index futures are trading higher shortly before the cash market close on Friday after President Trump’s China actions kept the trade deal intact.

During his news conference late in the session, Trump said he would take action to eliminate special treatment towards Hong Kong, however, he did not indicate the U.S. would pull out of the phase one trade agreement reached with China earlier this year. The news greenlit the late session rally as it eased trader concerns for the time being.

Technology sector investors celebrated the news by buying up semiconductor stocks. The iShares PHLX Semiconductor ETF (SOXX) jumped to its session high following the news conference, trading more than 2% higher.

Nvidia and Micron Technology shares advanced more than 2% each. However, among the biggest gainers in the ETF were Marvell Technologies and Lam Research, rising 6.7% and 2.9%, respectively.

At 19:46 GMT, June E-mini NASDAQ-100 Index futures are at 9537.00, up 76.75 or +0.81%.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through 9604.00 will signal a resumption of the uptrend. The main trend will change to down on a move through the last main bottom at 8847.00.

The minor trend is down. This is controlling the short-term momentum. A trade through 9604.00 will change momentum to the upside, while a trade through 9172.50 will reaffirm the downtrend.

The first minor range is 9604.00 to 9172.50. Its 50% level at 9388.25 is support.

The second minor range is 8847.00 to 9604.00. Its 50% level at 9225.50 is additional support.

The short-term range is 8556.25 to 9604.00. Its retracement zone at 9080.00 to 8956.50 is a support zone.

Daily Swing Chart Technical Forecast

Into the close on Friday the key level that must hold is the first minor pivot at 9388.25.

A close near 9604.00 will put the index in a position to continue the rally early next week. If there is enough buying behind the move then look for the rally to possibly extend into the February 20 main top at 9780.50.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Trading Near Highs after ‘Trump Bump’

June E-mini Dow Jones Industrial Average futures are trading nearly flat during the last hour of cash market trading after clawing back earlier losses. Blue chips stocks fell earlier in the session ahead of a U.S. response to China’s national security law on Hong Kong that threatens to take the shine off another month of strong gains for the stock market.

At 19:09 GMT, June E-mini Dow Jones Industrial Average futures are trading 25418, down 39 or -0.15%. This is up from a low of 24991.

Traders breathed a sigh of relief after President Donald Trump’s much-awaited news conference on China Friday afternoon. During the news conference, Trump said he would take action to eliminate special treatment towards Hong Kong. However, he did not indicate the U.S. would pull out of the phase one trade agreement reached with China earlier this year, easing trader concerns for the time being. Investors celebrated this news with a late session rally.

In other news, the iShares PHLX Semiconductor ETF (SOXX) jumped to its session high following the news conference, trading more than 2% higher. Marvell Technologies and Lam Research were among the biggest gainers in the ETF, rising 6.7% and 2.9%, respectively. Nvidia and Micron Technology also advanced more than 2% each.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside on Thursday with the formation of a closing price reversal top and its subsequent confirmation on Friday.

A trade through 25794 will negate the closing price reversal top and signal a resumption of the uptrend. A move through the last main bottom at 22704 will change the main trend to down.

The minor trend is also up. A trade through 24076 will change the minor trend to down. This will also confirm the shift in momentum.

The main range is 29506 to 18086. Its retracement zone at 25144 to 23796 is controlling the longer-term direction of the major average. Its Fibonacci level at 25144 is major support.

The minor range is 24076 to 25794. Its 50% level at 24935 is controlling the longer-term direction of the Dow.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the June E-mini Dow Jones Industrial Average futures contract into the close on Friday is likely to be determined by trader reaction to the major Fib level at 25144 and the minor 50% level at 24935.

Bullish Scenario

A sustained move over 25144 will indicate the presence of buyers. If they can create enough upside momentum then look for the Dow to make a run at 25794.

Bearish Scenario

A sustained move under 24935 will signal the presence of sellers. This is a potential trigger point for an acceleration to the downside with the next major target a price cluster at 24076, 23796 and 23571.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Pivot into Close is 2984.50; Seeing Trump Bounce

June E-mini S&P 500 Index futures are edging lower late in the session on Friday, but clawing back earlier losses as traders braced for an upcoming news conference on U.S.-China relations from President Donald Trump.

The benchmark index began to cut its losses after a Bloomberg News report said Trump was not pulling the U.S. from the phase one trade deal with China. A reporter from PBS NewsHour also said the announcement would not include additional tariffs or changes to the existing trade agreement.

At 18:41 GMT, June E-mini S&P 500 Index futures are trading 3023.00, down 15.00 or -0.49%.

In other news, Bank of America and Wells Fargo led bank stocks lower, falling more than 1.6% each. Citigroup and JPMorgan Chase also dipped 1.9% and 1.7% respectively.

Daily June E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through yesterday’s high at 3065.50 will signal a resumption of the uptrend. A move through 2903.75 will change the main trend to down.

The minor trend is also up. Today’s price action turned 3065.50 into a new minor top.

The main range is 3397.75 to 2174.00. Its retracement zone at 2930.25 to 2785.75 is controlling the longer-term direction of the index. Holding above this zone will continue to give the market a solid upside bias. The nearest support is the main Fibonacci level at 2930.25.

Daily Swing Chart Technical Forecast

The new minor range is 2903.75 to 3065.50. Its 50% level at 2984.50 is controlling the direction of the index on Friday.

Bullish Scenario

A sustained move over 2984.50 will indicate the presence of buyers. If this creates enough upside momentum then look for a retest of yesterday’s high at 3065.50. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 2984.50 will signal the presence of sellers. This could trigger an acceleration to the downside with 2930.25 to 2903.75 the best downside target.

The main bottom at 2903.75 is a potential trigger point for an even stronger break with 2785.75 to 2765.50 the next target zone.

S&P 500 Weekly Price Forecast – Stock Markets Reach Towards 3000

The S&P 500 has rallied significantly during the week, breaking well above the 3000 level but you can see it did give back quite a bit of the gains as Thursday and Friday were a bit rough. At this point in time, it is likely that the market would continue to see a lot of noise so keep in mind that the market is likely to cause a lot of headaches more than anything else.

S&P 500 Video 01.06.20

I do think that the market is overvalued and quite frankly there is absolutely no reason for the stock market to be this high. However, most of what we are seeing is due to liquidity flows, meaning that the Federal Reserve pumping the markets full of cheap money is the most important thing to pay attention to. This has nothing to do with the economy, nor does it have anything to do with earnings.

Those things went by the wayside in 2008 as the Federal Reserve has continued to flood the markets with liquidity. That being said, there are a lot of concerns about the US/China trade war heating back up, so that might be the main problem with trying to short this market. That being said though, I think at the very least we need to pullback in order to build up the necessary momentum to continue going higher. Ultimately, we are at a major decision point so if we break above the top of the weekly candlestick, it is likely that we could go all the way back to the all-time highs.

For a look at all of today’s economic events, check out our economic calendar.

Metals Nearing Critical Momentum for New Parabolic Rally

While the US stock market has rallied over the past 5+ weeks, Gold has stalled near $1730 to $1740.  We issued a research post suggesting the GREEN Fibonacci Price Amplitude Arc was acting as major resistance and once that level is breached, we expect a big upside move in Gold.  Currently, Gold has reached just above the Green Price Amplitude Arc and this week may be a critical moment for both Gold and Silver in terms of a momentum base.

GOLD FUTURES WEEKLY CHART

Gold has continued to move high in a series of waves – moving higher, then stalling/basing, then attempting another move higher.  This recent base near $1740, after the deeper price rotation in February/March, confirms our 2018/2019 predictive modeling research suggesting that $1750 would be a key level in the near future.  Part of that research suggested once $1750 is breached, then a bigger upside move would take place targeting levels above $2400 – eventually targeting $3750.

April 25, 2020: Fibonacci Price Amplitude Arcs Predict Big Gold Breakout

This consolidation after the COVID-19 event near $1750 is a very real confirmation for our researchers that the upside breakout move is about to happen.  How soon?  It could begin to break out next week of the following week?  How high could it go?  Our upside target is $2000 to $2100 initially – but Gold could rally to levels near $2400 on this next breakout move.

SILVER FUTURES WEEKLY CHART

While Gold has been consolidating near $1740, Silver has exhibited an incredible upside price move after a very clear Flag/Pennant formation (highlighted in YELLOW on the chart below).  The current upside price rally in Silver appears as though it may breach the MAGENTA downward sloping trend-line and this breakout move may prompt a rally to levels near or above $21 over the next few weeks.

Eric Sprott is very excited about silver and miners. Also, he talks about the demand for physical delivery which is way out of whack and how something could finally give which would be metals go parabolic.

We’ve been suggesting that metals will transition into a moderate parabolic upside price trend as the global markets deal with concerns related to economic activity, debt, solvency, and continued operational issues.  For skilled technical traders, this setup in Metals may be a very good opportunity for skilled technical traders to establish hedging positions in ETFs or physical metals before the breakout really solidifies.

Concluding Thoughts:

Longer-term, we believe metals could continue to rally for quite a while, yet we understand skilled technical traders want to time entries to limit risks.  We believe skilled technical traders should consider hedging their portfolio with a moderate position in Metals/Miners at this time – allowing traders to trade the remaining portion of their portfolio in other sectors/stocks.

If the US/Global markets continue to struggle to move higher over the next 60 to 90+ days, metals/miners should continue to push higher – possibly entering a new parabolic upside price move.  The deep washout low in Silver was an incredible opportunity for skilled traders to jump into Silver miners and Silver ETFs at extremely low price levels.  Now, with Silver at $18.40, it’s time to start thinking about $21+ Silver and $2100+ Gold.

Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Trader Ltd.

 

S&P 500 Price Forecast – Stock Markets Continue to See Resistance in Current Area

The S&P 500 has fallen a bit during the trading session on Friday, testing the 3000 level for support. Ultimately, this is a market that is overdone, so I think a little bit of a pullback would make quite a bit of sense. There is significant resistance between the 3000 level and the 3100 level, so to think that we will simply shoot through the top is probably asking quite a bit. Furthermore, we continue to get extremely poor economic figures so one would have to think sooner, or later Wall Street will realize that the customer does not have a job.

S&P 500 Video 01.06.20

In the meantime, it looks as if it is a “buy on the dips” type of situation, and therefore it is not until we break down below the 200 day EMA that you can change your overall attitude. If we do get that, then it is time to start reevaluating the entire situation. If we break above the top of the shooting star from the Thursday candlestick, then we could go looking towards the 3100 level but that is not going to be easy to do due to the fact that there is so much noise between here and there.

That being said, it is likely that we will pull back a bit in the meantime, thereby offering opportunities for both sides of the equation. Quite frankly, I would not risk too much in this market right now because it is doing a lot of “whistling past the graveyard.”

For a look at all of today’s economic events, check out our economic calendar.

Two Steps Forward, One Step Backward in the S&P 500, Right?

Stocks defended the opening bullish gap, and scored further gains intraday before the sellers took over in the session’s final 45 minutes. Have we seen a turning point?

In short, that’s unlikely, and let me tell you why exactly I think so.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The day looked like the bulls were firmly holding the reins, but another daily setback struck as we approached the closing bell. I say daily, because the volume didn’t really overcome its recent highs, and stock prices haven’t suffered a profound setback either. All that the bears were able to achieve, was pretty much reminiscent of the stock behavior during the unfolding breakout above the 61.8% Fibonacci retracement.

In other words, yesterday’s setback isn’t really a fly in the ointment for the bulls. The daily indicators keep supporting the bulls, with no imminent sell signals. The sky still remains clear for the buyers for now.

Yesterday’s intraday Stock Trading Alert captures the key reason why:

(…) Against the backdrop of strengthening high yield corporate bonds (HYG ETF), the S&P 500 upswing has been progressing nicely throughout the day, and a local top in either seems to be very far away indeed.

While the sellers might try to close the week and month on a bearish note, the above words ring true also today because we haven’t seen junk corporate bonds falling through the floor. Let’s see precisely what I mean by that.

The Credit Markets’ Point of View

High yield corporate bonds (HYG ETF) gave up all their gains since the market open, but the relatively low volume of the daily upswing rejection continues to favor the bulls. While it wouldn’t come as a surprise to see a sharper consolidation of recent sharp gains, a running consolidation with higher highs and higher lows is all we’ve been getting so far. And that’s a very bullish type of consolidation, boding well for the credit markets.

In short, the credit market uptrend is well established, and serves as a tailwind for stocks.

The chart of the high yield corporate bonds to short-term Treasuries ratio (HYG:SHY) with the overlaid S&P 500 prices (black line), also supports the view we haven’t seen a game-changer yesterday.

Key S&P 500 Sectors and Ratios in Focus

While technology (XLK ETF) gave up its intraday gains, the swing structure of higher highs and higher lows, remains intact. And that’s the definition of what an uptrend is. The sector simply appears to be trading sideways, consolidating recent sharp gains. Yesterday’s lower volume versus the preceding higher one, sends a bullish message as buyers appear in droves when prices get lower.

Just as the tech sector, healthcare (XLV ETF) also supports the prospect of more gains to come. It’s been knocking on the door of April and May highs, and an upside breakout of the recent trading range is only a matter of time in my opinion.

The price action in the financials (XLF ETF) also follows a bullish path. We’ve seen volume rise during last three sessions, and yesterday’s session gives an impression of verification of the breakout above the April highs as the sector is consolidating recent gains.

The volume differential that favors the bulls is even more pronounced in the consumer discretionaries (XLY ETF). Real estate (XLRE ETF) for example, just extended its recent gains yesterday, disregarding the move lower in the index.

It has been only the leading ratios that suffered pronounced setbacks yesterday, as consumer discretionaries to staples (XLY:XLP) challenged their Wednesday’s intraday lows, and financials to utilities (XLF:XLU) moved below them already. But we haven’t seen what mathematicians would call an inflection point yet. In other words, it’s likely we’ll see both ratios stabilize and support the move higher in stocks next.

As for the stealth bull market trio, materials (XLB ETF) outperformed both energy (XLE ETF) and industrials (XLI ETF) as the latter two closed down – but again, on lower volume than during the preceding up days. Overall, this bull market trio still favors the stock upswing to continue.

Summary

Summing up, yesterday’s late-day reversal didn’t likely mark a call to start selling lock, stock and barrel everything in sight. Conversely, it appears to be a part of the ongoing consolidation that keeps resulting in higher highs and higher lows. As today is the last trading day of the week and month, the closing prices are of key importance for the timing of the anticipated challenge of the early March highs. While the credit market and sectoral analysis favor the stock upswing to continue, yesterday’s weak performance of the Russell 2000 (IWM ETF) is a short-term watchout. The balance of risks is skewed to the upside over the coming weeks though.

I expect stocks to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer – but we’re nowhere near the start thereof. Right now, the breakout above the three key resistances (the 61.8% Fibonacci retracement, the upper border of the early March gap, and the 200-day moving average) is still unfolding with the bears running for cover and FOMO (fear of missing out) back in vogue. In short, the ball remains in the bulls’ court to show us what they’re made of. Will the weekly and monthly closing prices later today still lean in the bulls’ favor on higher timeframes? I would cautiously say so.

Last but not least, we’ll hear Powell speak later today, and Trump will focus on China. When the latter has been announced, it marked the start of the heavy S&P 500 selling 45 minutes before the closing bell yesterday. As tensions have been rising, the short-term direction in stocks very much depends on the overall balance of President’s announcement as regards Hong Kong, the Uyghur bill, coronavirus, the China-India border and foremost the trade deal. We’ll monitor and act accordingly on the unfolding developments.

We encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Monica Kingsley and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Monica Kingsley and her associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Ms. Kingsley is not a Registered Securities Advisor. By reading Monica Kingsley’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Monica Kingsley, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

U.S. Stocks Mixed Ahead Of Trump’s News Conference On China

All Eyes On Trump’s News Conference

U.S. – China relations will be in the spotlight today as the U.S. President Donald Trump is set to unveil the country’s response to the new Hong Kong security law.

The worst-case scenario for the market is a decision to revoke Hong Kong’s special status. China has already warned that it will take any necessary measures if U.S. proceeds with its plans to put more pressure on China.

In turn, Hong Kong stated that the loss of its special status could pose problems for the U.S. economy.

It remains to be seen which measures will be chosen by the U.S. as it has to carefully weigh the impact of any additional pressure on China at a time when the world economy starts to recover from the unprecedented coronavirus crisis.

Personal Income Is Up 10.5% In April

U.S. has just released another portion of economic data.

Personal Income was up 10.5% in April compared to analyst consensus which called for a decline of 6.6%. Most likely, the huge government stimulus is the reason for this development.

Personal Spending was down 13.6% compared to analyst consensus which projected a decline of 12.6%. Not surprisingly, Personal Spending was hit by virus containment measures as consumers had to stay at home.

S&P 500 are flat following the release of new economic reports. Most likely, the market will focus on the above-mentioned press conference and the potential U.S. moves against China as they could have a material long-term impact on the world economy.

Oil Rally Takes A Pause

EIA Weekly Petroleum Status Report confirmed the data published in the API Crude Oil Stock Change report. According to EIA, oil inventories increased by 7.9 million barrels per day.

This means that the pace of the oil demand recovery is not as robust as previously hoped. This data has a direct impact on the oil market and oil-related stocks, but it also provides a chance to evaluate the pace of economic recovery since energy demand and economic activity are closely linked.

For a look at all of today’s economic events, check out our economic calendar.

 

Fibonacci Queen and Elliott Wave King Market Proclamation

For those that do not know, Carolyn Boroden (The Fibonacci Queen) has joined the analyst team at Elliottwavetrader. So, she and I are endeavoring to present our combined perspectives to outline our general expectations over the coming weeks, as we begin this series of articles.

There are times when the market provides us with clear indications. And, as proceeded through March, Carolyn and my work were focused upon the region just below 2200SPX for a potential bottoming in the S&P500. Specifically, Carolyn had key price parameters in the 2165-2193SPX region, and the bottom of my support region was pointing towards 2187SPX, with my next lower support below that in the 2160SPX region. My expectation at the time was that the market was going to hold the 2187SPX support and rally towards the 2650-2725SPX region from there.

Moreover, Carolyn identified a confluence of multiple Fibonacci time cycles that came due between 3/24-26 and calendar day projections that came due on 3/22-23.

As we now know, the bottom for the market was struck at 2191.86 on 3/23.

At the time, neither of us were certain that the bottom struck on that day would be the lasting bottom, but we both recognized there was strong potential for that to be the case. My expectation was that the market would rally from the 2200 region up towards the 2650-2725SPX region. And, once we were able to exceed that 2725SPX resistance, that opened the door to the market having struck a major bottom.

While the smaller degree structure is a bit questionable at this time, both Carolyn and I see potential for the SPX to exceed the 4000 mark. In the near term, as long as the market holds over the 2760/2788SPX support region, there is strong potential for us to continue higher towards the 3234SPX region next.

However, Carolyn’s next time cycles are due between 5/26-5/29, which suggests that we could see some form of near-term topping within the 3065-85SPX region, to be followed by a test of the cited support region noted above.

Overall, both our work suggests that the market has struck an important bottom back in March. And, as long as pullbacks continue to hold support, our combined analysis seems to be pointing towards the 4000SPX region, and potentially even higher than that in the coming years.

For a look at all of today’s economic events, check out our economic calendar.

See charts illustrating Avi’s wave counts and Carolyn’s Fibonacci targets on the S&P 500.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.

 

European Equities: U.S – China Tensions ahead of Trump’s News Conference to Test the Rally

Economic Calendar:

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was a 5th consecutive day in the green for the DAX30, as the European majors continued to eat into the current year losses.

The CAC40 led the way once more rallying by 1.76%, with the DAX30 and EuroStoxx600 rising by 1.06% and 1.64% respectively.

Economic data from the Eurozone had a muted impact on the majors as the markets continued to respond to the EU recovery plan as lockdown measures ease.

From the U.S, the markets found solace in the U.S weekly jobless claims in spite of another 2m jump in initial jobless claims. While coming in at 2.123m for the week ending 22nd May, it was lower than in recent weeks.

Ultimately, however, the upbeat reaction to the recovery plan muted market jitters over rising tensions between the U.S and China.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. Key stats included May’s prelim inflation figures for Germany and Spain.

For Spain, consumer prices fell by 1.0%, year-on-year, following a 0.7% decline in April. The Harmonised Consumer Price Index fell by 0.9%, year-on-year, also following a 0.7% fall in April.

Things were not much better out of Germany, with consumer prices falling by 0.1%, month-on-month. In April, consumer prices had risen by 0.4%.

From the U.S, it was a busy day on the economic calendar.

According to 2nd estimate GDP figures, the economy contracted by 5.0% in the 1st quarter, revised down from a 1st estimate 4.8%.

Core durables goods orders slid by 7.4%, with durable goods orders tumbling by 17.2%. While dire, both sets of figures came in ahead of forecasts.

Pending home sales figures were also disappointing. In the month of April, sales tumbled by 21.8% versus a forecasted 15% slide. In March, pending home sales had slumped by 20.8%. Since late April, however, housing sector activity has rebounded, limiting the impact of the numbers.

The markets have moved on from the 1st quarter and April figures, considered to have been the economic bottom.

For the markets, the weekly jobless claims figures garnered greater interest on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen and Daimler slid by 3.72% and by 3.19% respectively to lead the way down. BMW and Continental saw more modest losses of 2.29% and 1.17% respectively.

It was a mixed day for the banks, however. Deutsche Bank declined by 2.13%, while Commerzbank closed out the day with a 0.70% gain.

Deutsche Lufthansa continued to find support from the easing of lockdown measures and bailout. Following on from a 1.74% gain on Wednesday, a 2.86% rally delivered a 4th consecutive day in the green for the week.

From the CAC, it was also a mixed day for the banking sector on Thursday. BNP Paribas and Soc Gen fell by 0.12% and by 2.71% respectively, while Credit Agricole eked out a 0.03% gain.

The auto sector returned to the red, however, with Peugeot and Renault falling by 1.10% and by 2.67% respectively.

Air France-KLM rose by a further 0.61% following Wednesday’s 2.81% gain, while Airbus SE fell by a further 1.65%.

On the VIX Index

It was a 1st day in the green from 4 on Thursday. Reversing a 1.39% fall from Wednesday, the VIX rose by 3.51% to end the day at 28.6.

The upside on the day came in response to the rising tensions between the U.S and China. On Thursday, the U.S President announced that he would unveil measures against China at Friday’s news conference.

This announcement came in the wake of China approving the security bill for Hong Kong. On Wednesday, Secretary of State Pompeo had stated that HK was no longer autonomous with China.

The U.S majors had been in positive territory before Trump’s announcement that led to a pullback late in the session.

VIX 29/05/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include April retail sales figures from France and Germany and May’s prelim inflation figures for the Eurozone.

2nd estimate GDP numbers are also due out of France along with May’s prelim inflation figures from France, Italy, and Spain.

With the markets looking beyond the 1st quarter and April, the stats should have a muted impact on the majors today.

From the U.S, it’s also a relatively busy day ahead on the economic calendar. Once again, the lion’s share of the stats is for April that should have a limited impact later in the day.

Any downward revisions to finalized consumer sentiment figures could draw some attention.

FED Chair Powell will also have some influence late in the session. Expect the Trump news conference to be the main event of the day…

Ahead of the European open, the majors were under pressure in anticipation of sanctions and more on China…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 151.5 points, with the Dow down by 111 points.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Key Level into Close is 25534

June E-mini Dow Jones Industrial Average futures are trading higher at the mid-session on Thursday, boosted by gains in healthcare and technology stocks, as investors hoped for a swift economic recovery from a coronavirus-driven economic slump.

Boeing Co. climbed 3.3%, the most among the 30 blue-chip Dow components, as the planemaker said it had resumed production of its 737 MAX passenger jet at its Washington plant, although at a “low rate”.

At 16:42 GMT, June E-mini Dow Jones Industrial Average futures are trading 25684, up 150 or +0.59%.

Although the Dow is testing levels not reached since March 6, the buying has been tentative on Thursday. Worsening ties between Washington and Beijing over the handling of the coronavirus outbreak and a new national security law in Hong Kong pose a major threat to the stock market’s strong recovery from the crash earlier this year.

President Donald Trump has promised action over Hong Kong by the end of the week.

In other news, the number of Americans filing for unemployment benefits held above 2 million for a 10th straight week, while a separate report showed GDP contracted at a bigger-than-expected 5% annualized rate in the first quarter, the deepest drop in output since the 2007-09 Great Recession.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out yesterday’s high. The next objective is the March 3 main top at 26962. A trade through 22704 will change the main trend to down.

The minor trend is also up. A move through 24076 will change the minor trend to down. This will shift momentum to the downside.

The main range is 29506 to 18086. Its retracement zone at 25144 to 23796 is controlling the longer-term direction of the Dow. The nearest support is the main Fibonacci level at 25144.

Daily Swing Chart Technical Forecast

Look for the upside bias to continue as long as the June E-mini Dow Jones Industrial Average remains above 25144. If this is able to generate enough upside momentum then look for the rally to possibly extend into 26962.

A failure to hold 25144 should result in the loss of upside momentum. This could trigger a near-term correction into a minor pivot at 24935. Since the main trend is up, buyers are likely to come in on a test of this level. If it fails then look for the selling to possibly extend into a cluster of potential support levels at 24076, 23796 and 23571.

S&P 500 Price Forecast – Stock Markets Continue to Defy Gravity

The S&P 500 continues to be off the chain, as the markets continue to see a celebration of a potential opening of the economy despite the fact that the economies are still going to be sluggish to say the least. At this point, I believe that the market will continue to try to grind higher, but there is a massive amount of resistance between here and the 3100 level, so it is not going to be easy. The question now is whether or not the market can continue the narrative of “everything’s getting better”, or will they pay attention to economic figures such as the Pending Home Sales drop of 35% year-over-year during the early part of the session?

S&P 500 Video 29.05.20

We are in a bear market and have seen a massive bounce. That being said, the 3000 level is going to continue to be crucial so if we were to break back down below it certainly would be somewhat of a negative headwind. However, if we can break above the 3100 level then there is almost nothing to keep this market from going to the all-time highs it is difficult to say right now, but clearly the buyers are pressing the issue. If the sellers do not get involved rather soon, we will eventually see that explosive break out and potential “blow off top” before the market starts the price and the reality of 40 million jobs lost, which would certainly have an effect on an economy that is driven by the 70% consumption. If the consumer does not have a job, it is not consuming.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Needs to Hold 3035.50 to Sustain Upside Momentum

June E-mini S&P 500 Index futures are nudging higher for a third session shortly after the cash market opening on Thursday. The early buying is also coming across as tentative for a second session. Yesterday, the benchmark index spent most of the session lower before screaming to the upside into the close.

At 14:09 GMT, June E-mini S&P 500 Index futures are trading 3041.75, up 6.25 or +0.24%.

The index is up about 2.7% during this holiday shortened week with most of the gains driven by optimism about the reopening of the U.S. economy and positive steps toward the development of a vaccine to halt the spread of coronavirus.

Gains are being held in check, however, after China’s National People’s Congress approved a national security bill for Hong Kong. President Trump said he would announce the U.S. response to the move before the end of the week.

In economic news, the Labor Department said Thursday another 2.1 million Americans filed for unemployment benefits last week. That was higher than the 2.05 million forecast. Continuing claims, which is a better indication of the unemployment picture, plunged by nearly 4 million.

With the economy reopening at a steady pace, buyers are looking at bank stocks such as JPMorgan Chase, Citigroup and Wells Fargo to outperform. Meanwhile shares of companies that rose during the worse of the pandemic like Zoom Video, Shopify and Amazon are feeling some pressure.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through yesterday’s high signaled a resumption of the uptrend. A trade through 2903.75 will change the main trend to down.

The main range is 3397.75 to 2174.00. Its retracement zone at 2930.25 to 2785.75 is controlling the longer-term direction of the index. Its Fibonacci level at 2930.25 is the nearest support.

Daily Swing Chart Technical Forecast

The direction of the June E-mini S&P 500 Index the rest of the session on Thursday is likely to be determined by trader reaction to yesterday’s close at 3035.50.

Bullish Scenario

A sustained move over 3035.50 will indicate the presence of buyers. If this continues to generate enough upside momentum then the index will remain on pace to challenge its next objective at 3131.00.

Bearish Scenario

A sustained move under 3035.50 will signal the presence of sellers. This will put the index in a position to form a potentially bearish closing price reversal top. If confirmed, this could lead to 2-3 day counter-trend selling with 2930.25 the first objective.

As Said, the S&P 500 Grind Higher Goes On

Yesterday’s sizable bullish gap immediately came under attack by the sellers – no panicking though as I kept riding the bull to the glorious close and beyond. In such moments, it’s key to focus on what has changed, and what has not. The obvious conclusion has been that we have seen nothing really new under the sun.

So, will the sizable open profits keep growing further? In my humble opinion, it’s virtually guaranteed.

S&P 500 in the Short-Run

Let’s start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The bears went on the offensive right after the bullish open, but the bulls responded as anticipated, and the high daily volume reveals the extent of the buying pressure. Yes, the initiative appears to be firmly with the bulls, but why exactly have I said that the buyers responded as anticipated?

Yesterday’s intraday Stock Trading Alert provides the answer:

(…) However unpleasant it might be to see the bullish opening gap closed, the key point to highlight is that the high yield corporate bonds (HYG ETF) hasn’t really declined below yesterday’s closing prices.

Such a move has been rejected, and the ETF now trades at $82 – and I expect stocks to at least timidly follow up higher later today, and more vigorously over the coming sessions.

What we have seen right after the open, was probably a US-China tensions driven onset of selling pressure – an event of fleeting nature as the ensuing price action showed.

And stocks caught up still yesterday, reversing powerfully higher. To illustrate the extent of the bullish turn, let’s check the market breadth indicators.

It hasn’t been only the advance-decline volume that just flipped profoundly bullish. The advance-decline line has been showing where the odds in the battle to overcome the 61.8% Fibonacci retracement and other resistances lie – with the bulls. The bullish percent index is also solidly back supporting the buyers these days.

Let’s check yesterday’s action in the credit markets next.

The Credit Markets’ Point of View

High yield corporate bonds (HYG ETF) stood the ground and refused to move below yesterday’s closing prices. The uptrend in junk corporate bonds goes on, supporting higher stock prices. While a consolidation of recent sharp gains wouldn’t come as a surprise, we could have seen one yesterday already. And even if not, this leading metric of credit market health is still primed to go higher and serve as a tailwind for stocks over the coming days and weeks.

The above chart shows that both key credit market ratios, the high yield corporate bonds to short-term Treasuries (HYG:SHY) and the investment grade corporate bonds to longer-dated Treasuries (LQD:IEI), confirm each other’s upswings. Such a lockstep move doesn’t reveal any cracks in the stock market bull run.

Key S&P 500 Sectors and Ratios in Focus

Technology (XLK ETF) reversed all intraday losses, and rose on high volume yesterday. The sizable lower shadow underscores the buying interest, boding well for higher prices of the sectoral ETF. And as tech leads the stock market itself, the bullish takeaway is valid also for the S&P 500.

The intraday bullish reversal was mirrored in healthcare (XLV ETF) as well, supporting prospects of more gains to come. And the same goes for financials (XLF ETF) and consumer discretionaries (XLY ETF) too. The key sectors are aligned for more gains ahead, and quite likely shortly.

Among the leading ratios, financials to utilities (XLF:XLU) has indeed broken above the declining resistance line formed by its April highs (and also above those highs themselves) – just as I expected it to. The bullish picture is made complete by the consumer discretionaries to staples ratio (XLY:XLP) that has refused to turn south, and continues to trade within spitting distance of its recent highs.

As for the stealth bull market trio, all three – energy (XLE ETF), materials (XLB ETF) and industrials (XLI ETF) – refused to decline yesterday. That’s a uniformly bullish sign, with the materials and industrials having led the move higher on the day.

Summary

Summing up, yesterday’s selling didn’t stick, and the buyers predictably took over the reins. Less and less in terms of resistances is standing in the bulls’ way and the challenge of the early March highs is slowly but surely drawing nearer. Both the credit market and sectoral analysis favor this bullish takeaway. So does the Russell 2000 upswing as the smallcaps have reversed higher just as powerfully as the S&P 500 did.

I expect stocks to slowly grind higher overall despite the high likelihood of sideways-to-slightly-down trading over the summer – but we’re nowhere near the start thereof. Right now, the breakout above the three key resistances (the 61.8% Fibonacci retracement, the upper border of the early March gap, and the 200-day moving average) is still unfolding with the bears running for cover and FOMO (fear of missing out) back in vogue. In short, the ball remains in the bulls’ court.

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For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Monica Kingsley and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Monica Kingsley and her associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Ms. Kingsley is not a Registered Securities Advisor. By reading Monica Kingsley’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Monica Kingsley, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

U.S. Stocks Mixed After Encouraging Continuing Jobless Claims Report

U.S. Continuing Jobless Claims Report Is Better Than Expected

S&P 500 futures are swinging between gains and losses as traders digest a flurry of economic reports.

U.S. Initial Jobless Claims report showed that 2.1 million Americans filed for unemployment benefits in a week, in line with analyst estimates.

Continuing Jobless Claims were much lower than expected at 21 million. This means that many people who have previously filed for unemployment benefits have found new jobs.

First-quarter GDP Growth Rate  was -5% compared to analyst consensus of -4.8%. Obviously, second-quarter numbers will look much worse as the economy was hit by virus containment measures.

Durable Goods Orders declined by 17.2% month-over-month in April compared to analyst consensus which called for a decline of 19%.

China Approves Hong Kong Security Law

U.S. – China relations are once again in focus as China’s parliament has approved a new security law for the city.

U.S. has already stated that Hong Kong no longer qualified for special treatment under the U.S. law after this move. This creates significant uncertainty for the city’s future as an international financial center.

Currently, there are two main unknown catalysts – the potential U.S. sanctions on China and China’s response in case such sanctions are implemented.

U.S. – China tensions have steadily increased over the last few weeks but the stock market was able to ingore them. It remains to be seen whether any U.S. sanctions on China could hurt the current upside trend in the U.S. stock market.

Oil Inventories Increase Again

Oil is set for a volatile trading session as the API Crude Oil Stock Change report showed that oil inventories increased by 8.7 million barrels per day.

The oil market will be waiting for confirmation of this data in the EIA Weekly Petroleum Status report which is scheduled to be released today after the market open.

The recent oil rally was a material contributor to the upside of S&P 500 so additional downside on the oil price front could hurt the momentum of the U.S. stock market.

For a look at all of today’s economic events, check out our economic calendar.

All Eyes on the HUI Breakout Invalidation!

The key technical development of this week in the precious metals market is HUI’s invalidation of the breakout above the 2016 highs. It will be particularly interesting to see where it closes the week, as an invalidation in weekly closing terms will be a crystal-clear bearish confirmation.

Gold miners reversed before the end of yesterday’s session, but they didn’t manage to take HUI back above the highest weekly close of 2016 – the 278.61 level. The HUI closed at 271.06.

On the daily chart, we see that a short-term breakdown is currently being confirmed.

The GDX ETF moved below the rising support line based on the previous April and May lows and it closed there for two consecutive trading days. If the GDX closes below the rising dashed line once again today, the breakdown will be confirmed.

And based on gold’s 4-hour gold chart, it could be the case that the very short-term upswing that started yesterday, is already over.

Gold approached its short-term declining resistance line, and it’s currently testing it. This line already held less than a week ago, so it favors lower prices at this time.

Of course, by the time you read this analysis, gold might already be after a breakout. In this case, we wouldn’t be surprised to see gold futures at about $1,740 or even $1,760 before the next decline takes place. Again, that is IF the breakout takes place, but the entire point of creating resistance lines for gold is to detect gold’s tops – places that are likely NOT to be broken. Or that are going to be broken, but then an invalidation will follow, leading to further declines.

The GLD ETF bounced from the rising support line yesterday, and it then moved to the above-mentioned resistance line – that’s a relatively normal course of action. Based on HUI’s invalidation of the breakout above the 2016 high, it seems that the top is already in for gold and gold stocks, and the price action yesterday and today in gold doesn’t invalidate it.

And what can one forecast for silver?

The white metal is still showing strength on a very short-term basis, which further confirms the toppy nature of the most recent price moves. Silver tends to outperform at the very end of a given upswing, so we could even see more of that phenomenon – especially if the stock market moves even higher from here.

Silver is known (at least it should be known) for its fakeouts. Silver often breaks above certain resistance levels, only to invalidate these breakouts shortly thereafter. If silver’s “breakout” is not accompanied by an analogous move in gold or miners, the odds are that it’s a fakeout. The odds increase further if this action was preceded by a rally.

Therefore, if silver moves higher from here, and even breaks to new May highs, it might not be a bullish development at all. It could be a fakeout that only takes the white metal to about $18.50 or so – the declining resistance line based on the previous highs – and then starts the next huge downleg. Please keep in mind that silver already launched one huge slide from almost $19 this year, so another big move lower from these levels could definitely take place.

All in all, it seems that we’re going to see one more sizable move lower in the precious metals market before they move much higher, and the odds are that the downswing has already begun or it’s going to start shortly.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Is the Worst Behind Us and Gold Has to Plunge Now?

A lot happened over the last few days. Let’s start with the analysis of fresh economic data. First, the initial jobless claims came in at 2.4 million in the week from May 9 to May 16, as the chart below shows. While the number of Americans who applied for the unemployment benefit have declined for seven straight weeks following the peak of 6.9 million in late March, it is still a mammoth figure, much higher than before the pandemic (when about 200,000 people used to apply for the unemployment benefit each week).

It means that the devastation in the US labor market has been unprecedented. As the chart below shows, almost 39 million of people claimed benefits since the beginning of the epidemic, which implies that the unemployment rate is comparable now to the rate seen during the Great Depression, or even higher! Importantly, the trend of total claims since March 21, 2020, is still rising strongly, which means that the recovery is so far weak, despite the partial reopening of the economy.

Second, the Chicago Fed’s national activity index, which measures whether the economy expands above or below the average growth, declined from a negative 4.97 in March to a negative 16.74 in April. The number is the worst in the data series history which begins in 1967, easily surpassing the disaster of the Great Recession, as the chart below shows.

However, situation has improved somewhat in May, at least according to regional manufacturing surveys. For example, the Philadelphia Fed Manufacturing Index rose from -56.6 in April to -43.1 this month. The reading is still terrible, but less so than one month ago. Similarly, the New York Empire State Index rebounded from -78.2 in April to -48.5 in May.

The latest PMI data from the IHS Markit also show some improvement. The flash manufacturing purchasing managers index rose from 36.1 in April to 39.8 in May, while the flash services purchasing managers index increased from 26.7 to 36.9. It means that the worst is probably behind us.

Implications for Gold

What does the recent bunch of data imply for the US economy and the gold market? Well, it seems that the rate of economic collapse has peaked in April. This is probably why the stock market rallied this week, with S&P 500 reaching the psychologically important level of 3,000. People become more optimistic with the number of infections of the coronavirus under control and relaxed containment measures. And a further planned easing will help the economy further, but demand could remain weak with some restrictions and social distancing remaining in place. In other words, the US economy should rebound later this year, but is not out of the woods yet – so the pace of recovery may be slower than the most optimistic investors hope for.

In other words, the stock market may be priced for an economic recovery that the data so far does not support. The initial crash was an overreaction, so now investors look for sparkles of hope everywhere. For sure, there are many reasons for being optimistic, but the war with coronavirus is not over. So, there might be some correction in price as investors could go into risky assets, but gold still seem to be a rational addition to the portfolio. Given that second-order effects (think about the consequences of high debt, geopolitical repercussions, or the possibility of corporate bankruptcies, etc.) have not been probably fully priced in yet, and that it’s very difficult to predict them, the significant portion of the safe-haven demand for gold should remain in place.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

European Equities: Futures Point to another Surge Driven by Economic Optimism

Economic Calendar:

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was yet another bullish day for the European majors on Wednesday, with the CAC40 rising by 1.79% to lead the way.

The DAX30 and EuroStoxx600 saw more modest gains of 1.33% and 0.24% respectively.

While there were no material stats to provide direction on the day, it was the EU’s COVID-19 recovery plan the spurred a 4th consecutive day in the green for the DAX30.

The EU Commission announced plans to roll out a larger than anticipated €750bn to support the EU economic revival.

Unsurprisingly Italy and Spain are to get the largest slices of the pie, which will be in the form of grants and loans.

U.S – China tensions did pin back the majors late in the day, though the COVID-19 economic recovery plan was of far greater influence.

The Stats

It was a quiet quiet day on the Eurozone economic calendar on Wednesday. There were no material stats for the markets to focus on mid-week.

Outside of the numbers, the ECB was in action, however. ECB President Lagarde spoke before the release of the ECB’s Financial Stability Review.

In spite of the Buoyant mood across the European majors, Lagarde delivered a somber appraisal of the Eurozone economy and outlook.

Lagarde stated that the economic contraction is likely to be between the ECB’s base case and worst-case scenarios, while also acknowledging that it is hard to forecast just how badly the economy has been affected.

The ECB’s Financial Stability Review also delivered some concerns for the markets to brush aside.

According to the May review, key vulnerabilities include:

  • Tightening of financial conditions.
  • Significant increase in debt burdens.
  • Weaker bank intermediation capacity and profitability.
  • Liquidity concerns among vulnerable non-banks.

Please follow the link to access the Financial Stability Review.

From the U.S, there were no material stats to influence the European majors later in the day.

The Market Movers

For the DAX: It was another particularly bullish day for the auto sector on Tuesday. Daimler surged by 10.68% to lead the way, with BMW and Continental rallying by 6.94% and by 6.43% respectively. Volkswagen saw a more modest 3.93% gain on the day.

It was another bullish day for the banks. Deutsche Bank and Commerzbank rallied by 5.28% and by 6.62% respectively.

Deutsche Lufthansa saw a relatively modest 1.74% gain after 6.51% and 7.92% gains on Monday and Tuesday.

From the CAC, it was a bullish day for the banking sector on Wednesday, following on from Tuesday’s gains. BNP Paribas rallied by 8.82% to lead the way, with Credit Agricole and Soc Gen gaining by 5.30% and 6.56% respectively.

The auto sector also found strong support. Peugeot rose by 4.91%, while Renault surged by 17.47. Added support for Renault came from an announcement by Nissan to rebuild its relationship with Renault.

Air France-KLM gained a further 2.81% following Tuesday’s 10.64% breakout, while Airbus SE fell by 2.67%.

On the VIX Index

It was a 3rd consecutive day in the red on Wednesday. Following on from a 0.53% decline on Tuesday, the VIX fell by 1.39% to end the day at 27.6.

The downside on the day came in spite of rising tensions between the U.S and China and a gloomy economic environment.

Support for the U.S majors on the day continued to come from the easing of lockdown measures and hopes of a continued economic recovery.

From a market perspective, both fiscal and monetary policy support will likely continue until the employment conditions recover.

On Wednesday, the S&P500 rose by 1.48%, with the Dow and NASDAQ gaining 2.21% and 0.77% respectively.

VIX 28/05/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Prelim May inflation figures are due out of Spain and Germany later today.

We don’t expect the numbers to have a material impact on the majors, however, with the markets anticipating inflation to remain under pressure.

From the U.S, April’s durable goods and core durable goods orders and 2nd estimate GDP figures are due out, along with jobless claims numbers.

Barring deviation from 1st estimates, expect the jobless claims to have the greatest impact on risk appetite and the Dollar. Can the markets stomach another 2m jump in claims?

Away from the economic calendar, the markets will be looking towards Capitol Hill for the U.S government’s reaction to China’s new HK securities law.

While the rise in tensions between the U.S and China remains negative for risk sentiment, COVID-19 news and updates should provide further support. Expect any further progress towards a COVID-19 vaccination to deliver further support.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 110,221 to 5,788,503. On Tuesday, the number of new cases had risen by 95,878. The daily increase was higher than both Tuesday’s rise and 89,941 new cases from the previous Wednesday.

France, Germany, Italy, and Spain reported 1,892 new cases on Wednesday, which was up from 1,535 new cases on Tuesday. On the previous Wednesday, 3,225 new cases had been reported.

From the U.S, the total number of cases rose by 20,392 to 1,745,803 on Wednesday. On Tuesday, the total number of cases had risen by 19,185. On Wednesday 20th May, a total of 21,774 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 142.5 points, with the Dow up by 185 points.

For a look at all of today’s economic events, check out our economic calendar.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trend Up, But Momentum Shifted to Downside

June E-mini NASDAQ-100 Index futures are trading lower late in the session on Wednesday after traders hit the technology sector amid caution about simmering tensions between the United States and China at a time when governments are attempting to revive the economies in the midst of a coronavirus-driven recession.

Amazon.com, Microsoft Corp. and Facebook, Inc., which have led a recent rally, weighed on the tech-heavy NASDAQ, while healthcare and technology stocks – which outperformed in the coronavirus-led market slump – were among the S&P 500 sector indexes in the red.

At 18:42 GMT, June E-mini NASDAQ-100 Index futures are trading 9287.50, down 119.00 or -1.27%.

On a positive note, travel-related stocks beaten up by the government shutdowns, including airlines, cruise companies and hotel operators jumped between 2.4% and 4.5% after taking a beating earlier this year due to a virtual halt in global travel.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside on Wednesday. A trade through 9604.00 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 8847.00.

The minor trend is down. It turned down on Wednesday when sellers took out 9241.50. This move also shifted momentum to the downside.

The minor range is 8847.00 to 9604.00. Its 50% level at 9225.50 is controlling the price action on Wednesday.

The short-term range is 8556.25 to 9604.00. Its retracement zone at 9080.00 to 8956.50 is potential support. Since the main trend is up, buyers could come in on a test of this zone.

The main range is 9780.50 to 6628.75. Its retracement zone at 8576.50 to 8204.50 is controlling the longer-term direction of the index.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 9287.50, the direction of the June E-mini NASDAQ-100 Index into the close on Wednesday is likely to be determined by trader reaction to 9225.50.

Bullish Scenario

A sustained move over 9225.50 late in the session will indicate the presence of buyers. This is followed by 9388.25 then 9604.00.

Bearish Scenario

A sustained move under 9225.00 will signal the presence of sellers. This could trigger a further break into the short-term retracement zone at 9080.00 to 8956.50.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Setting Up for Reversal Top

June E-mini Dow Jones Industrial Average futures are trading higher shortly after the cash market opening, but has given up most of its earlier gains. The benchmark S&P 500 Index and the technology-based NASDAQ Composite have given back all of their earlier gains and are now trading lower for the session. Traders said a huge drop in tech shares is responsible for the reversal to the downside.

At 14:47 GMT, June E-mini Dow Jones Industrial Average futures are trading 25024, up 14 or +0.06%.

Based on the intraday downside momentum, it may be just a matter of time before the Dow cash and futures turn negative for the session. Weakness in Dow components Apple, Microsoft and IBM are weighing on the blue chip index.

Bank stocks were broadly higher earlier in the session as investors reacted to the prospects of the economy reopening. Gains were led by Citigroup which was up 4.9%, followed by JPMorgan Chase which posted an earlier gain of 3.6%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers took out yesterday’s high. The main trend will change to down if sellers can take out the last main bottom at 22704.

The minor trend is also up. A trade through 24076 will change the minor trend to down. This will also shift momentum to the downside.

The main range is 29506 to 18086. Its retracement zone at 23796 to 25144 is controlling the longer-term direction of the Dow. The major average is currently testing this zone.

The strongest support may be the price cluster at 23796 to 23571.

Daily Swing Chart Technical Forecast

Given the prolonged rally in terms of price and time, the direction of the June E-mini Dow Jones Industrial Average the rest of the session on Wednesday is likely to be determined by trader reaction to yesterday’s close at 25002.

Bullish Scenario

A sustained move over 25002 will indicate the presence of buyers. Overtaking the major Fibonacci level at 25144 will signal that the buying is getting stronger. If this is able to generate enough upside momentum over the near-term then look for a possible extension of the rally into 26962.

Bearish Scenario

A sustained move under 25002 will signal the presence of sellers. This will also put the Dow in a position to form a potentially bearish closing price reversal top. If confirmed, this could lead to a 2 to 3 day correction.

The first downside target is the minor bottom at 24076. This is followed by the support cluster at 23796 to 23571.