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Major European indices in the session with mixed results

Spain’s Ibex and Italy’s FTSE MIB lower

The European stock indices are closed and are ending with mixed results. The closes are showing:

  • German DAX, +0.54%
  • France’s CAC, +0.88%
  • UK’s FTSE 100, +0.17%
  • Spain’s Ibex, -0.22%
  • Italy’s FTSE MIB, -0.2%
  • Portugal’s PSI 20, +0.41%
Spain's Ibex and Italy's FTSE MIB lower_
In the European debt market, the benchmark 10 year yields are mostly higher with the exception of the UK yield which is down -1.8 basis points. Below are the high, low yields in the closing levels.
The 10 year yield

So much for the breaks

Markets are misbehaving…

The markets are misbehaving.  The market broke after Texas reported a surge in hospitalizations, but the pattern being developed that it will take more than a region to bother the markets. Moreover, the hope regarding coronavirus now in the US is just plow through it. If you are vulnerable, take care of yourself.  Pres. Trump will be rallying up Oklahoma and Arizona in the next week.  Let er rip and see where the cards fall.
For the markets:
  • Stocks are off the lows still led by the Nasdaq. The S&P is trading above and below 0.0 after trading down about 14 points. The Dow is down -18 points after being down about -154 points. The Nasdaq moved to unchange but is now back up by 55 points.
  • EURUSD fell to the lowest level since June 4 and below the lows from this week and last week between 1.1212 and 1.1225. The price squeezed back to 1.1237 and trades at 1.1225 now.
  • GBPUSD fell below the 100 day MA at 1.2522 to a low at 1.2510 but is back above the 100 day MA at 1.2539 currently.
  • USDJPY fell below its 100 hour MA at 107.244 on way to a low at 107.12. It has traded back above that MA line and trades at the MA level as I type.
  • USDCAD spiked above its 100 hour MA at 1.35804 but is trading back below the MA level at 1.3556 after peaking at 1.35936.

Markets are just not acting right. They are misbehaving… It is time to take a little break and take a breathe

OPEC sticks to demand-drop forecast

The latest numbers from the monthly OPEC report

  • Left 2020 demand forecast at -9.1 mbpd
  • Says Q2 demand was down 17.3 mbpd
  • OPEC output fell 6.3mbpd in May based on secondary sources
OPEC’s Joint Ministerial Monitoring Committee meets this week to assess supply-demand balances. So far they haven’t adopted the reopening optimism but noted that higher prices are “suggesting that the supply-demand fundamentals are gradually improving.”
WTI crude was volatile yesterday and has ticked lower today, down 55-cents to $37.84.

The latest numbers from the monthly OPEC report

Germany’s Scholz: Don’t expect a massive lockdown even if second virus wave comes

Comments by German finance minister, Olaf Scholz

  • We still have fiscal room to do more in case of second virus wave

I’ve made mention to this a few times already. For all countries around the world, the threshold to reinforce such strict lockdown measures back in March to April may only happen if the secondary outbreak threatens to be much, much worse than the initial one.

Otherwise, it is going to be the case of putting the fire out whenever there is one because the economic and social damage is just too heavy a burden to bear for governments.
The issue with the initial lockdown measures is that once they committed to it, they have to stick it all the way through if not it would have been for naught. Not to mention that there was a case in point when looking at China and the political pressures were overbearing.
Going out to four to five years from now, you can expect the next set of lawmakers to deem all these lockdown measures as being a big mistake in their political campaigning.

TRADING PLAN FOR BREAKOUTS

Identify the Universe

Rank all potential markets by a smoothed rate of change
Smoothed ROC = Average of [ ROC(Close, 2-day), ROC(Close, 5-day), ROC(Close, 7-day) ]
For stocks
Use the IBD50 and rank the stocks within this group by the smoothed ROC.
Also look at 52-week new highs and new lows, and all-time new highs and new lows
Look to buy the strongest markets and sell the weakest markets, with the hope that they will continue to trend.
Look for a Trend Breakout

Breakout long
Buy the X day high and sell the Y day low (e.g. for the turtles, X = 20, Y = 10)
MACD (not the histogram) must be above zero and increasing.
Breakout short
Short the X day low and cover the Y day high.
MACD must be below zero and decreasing.
Risk Management Rules

Risk per trade
Risk no more than 0.75% to 1.25% of your core equity in one trade (equity of all closed positions and cash positions, excluding open trade equity)
Risk per sector
No more than 5% of total account size in any sector.
Open trade risk
The more open trade risk, the more potential for increased drawdowns. Your biggest drawdowns will probably be after one of your biggest run ups.
Total open trade equity / Core equity <= 20%
Margin to equity
Higher the margin to equity, the more positions and more risk
Margin / equity <= 15%
Dollar risk per contract
No more than $2,500 risk per contract regardless of account size
Markets in each direction
No more than 10 markets on the long side; and
No more than 10 markets on the short side
For stocks
Don’t short a stock below $20
Don’t buy a stock under $10
Look to go long S&P 500 when it is above 200-day EMA
Look to go short S&P 500 when it is below 200-day EMA
Apply Stops

Initial stop
Long: Y-period low
Short: Y-period high
Trailing stop
39-period ATR trailing stop