The Biggest Risk To Economic Growth. Should You Still Buy The Dip?

In fact, the all-time record for new highs in one year is 77, set in 1995. Trend watchers note that 2021 is only the 11th time since 1928 that the S&P 500 has rallied +20% or more during the first 8 months of the year. In all but the two big market crash years of 1929 and 1987, the S&P 500 managed to hold a solid double-digit gain into year-end, according to Bank of America research.

Bears vs bulls

Bears, however, are quick to point out that the S&P 500 hasn’t had a pullback of at least -5% or more during the entire climb higher this year, something that generally happens about three times a year. Typically, corrections of -5% to -10% are considered healthy. Bears of course believe stocks are wildly overvalued due in large part to the Federal Reserve’s monetary supports and “easy money”. Once the Fed starts reducing its asset purchases and lifting interest rates, bears believe investors will take a more “risk off” attitude and the bull rally in stock markets will correct to some degree.

Overall, bulls seem comfortable with the Fed beginning its asset purchase “taper” later this year and that is partially due to Fed Chair Jerome Powell’s insistence that the economy “still has much ground to cover” before rate hikes are on the table. Bulls are also anticipating a second shot at a “reopening boom” after the current wave of coronavirus has passed. Remember, this wave cut short the Covid-free summer spending surge that everyone had been anticipating so bulls believe this pent-up demand is going to be spent in the quarters ahead.

What to watch?

The biggest risk to economic growth right now is not on the demand side but rather on the supply side as shortages for everything across the board are limiting the amount of goods and services available. Demand amid the summer Covid surge has cooled a bit, which may be a good thing in the long run as it’s given some manufacturers a minute to catch up. And again, bulls believe this is creating just another layer of pent up demand that consumers will satisfy down the road.

Turning to next week, remember that U.S. stock, bond, and commodity markets are closed on Monday, September 6 for the Labor Day holiday. The short week will also be light on data with just the Fed’s Beige Book and July Consumer Credit on Wednesday, and the Producer Price Index on Friday. Next week’s earnings will include Casey’s General Store, Lululemon, GameStop, Oracle, Z-Scaler, Academy Sports, and Kroger to name a few.

SP500 analysis

Sp500 rallied despite weak NFP. There is only one reason for such reaction – the Federal Reserve still cannot move to tighten monetary policy. However, the Cycles forecast the best buying dip opportunity in October if other conditions will be there. We certainly can’t judge now if it is going to be conformed by other tools.

sp500 cycles september 2021

We have bearish ADL divergence on a daily chart and potentially it will play well and create a buying opportunity in October. However, I have to say there is still good accumulation in this market. So, I believe if this market gives a sell signal in September, traders should cash out their positions quite quickly. We are in a strong bull trend and so far all fundamentals still support the stock market.

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SP500 Traders Should Get Ready For Bumpy Trading In Coming Weeks

The fundamentals driving market sentiment continue to revolve around the pandemic, inflation, consumer spending/confidence, and the Federal Reserve.

If you boil it down a little further, coronavirus is largely still directing the whole show as the continued fallout is believed to be driving inflation which in turn has broad implications for the Fed’s policy direction.

An increasing number of insiders believe that the resurgence in coronavirus outbreaks is holding back the global economic recovery to some degree. However, bulls view this as a short-term threat. Meaning that some of the anticipated post-pandemic demand may be delayed temporarily but isn’t seen having a significant impact on the longer-term growth outlook.

Warning signals

There is evidence that institutional investors may be taking a more “risk off” stance with money shifting into traditionally defensive plays like Gold. At the same time, money has retreated from things like oil and copper.

In particular, the recent weakness in copper prices is viewed by some as an early warning sign of slowing economic growth and overall weakness in commodities. There has been a definite slowdown in China’s industrial production which has helped fuel the pullback in copper prices. However, global growth is being led by U.S. consumers so bulls aren’t fully convinced by this traditional “warning signal” that the global recovery is at risk.

It’s worth keeping in mind that markets are also battling seasonal trends that generally see trading volume plummet in the latter half of August heading into the Labor Day weekend holiday. Lower trading volume typically translates to higher volatility which has made a definite comeback this week.

Federal Reserve

There is also some consolidation happening ahead of key data and events that many investors consider critical to determining market direction in the months ahead.

One of the most highly anticipated is the Federal Reserve’s annual Jackson Hole Economic Policy Symposium next week on August 26-28 (Thur, Fri, Sat), where Jerome Powell is widely expected to announce plans to start reducing the central bank’s monthly asset purchases.

The following week on September 3 brings the August Employment Report, which Wall Street insiders widely expect will show another month of +800,000 or more jobs added, a level that would put even more pressure on the Fed to further rein in its supports.

The Fed’s next policy meeting is September 21-22.

In conclusion

Bottom line, it could be a bumpy few weeks as the central bank’s next policy moves continue to be heavily debated.

Earnings next week slow considerably with the bulk of companies having already reported. Key results will include Best Buy Intuit, Medtronic, Nordstrom, Toll Brothers, and Urban Outfitters on Tuesday; Salesforce and Snowflake on Wednesday; and Dell, Dollar General, Dollar Tree, The Gap, HP, and Peloton on Thursday. Economic data next week includes Existing Home Sales on Monday; New Home Sales on Tuesday; Durable Goods Orders on Wednesday; the second estimate of second-quarter GDP on Thursday; and the PCE Price Index and Consumer Sentiment on Friday. The PCE Index is one the Fed’s favorite inflation gauges so that one could have a particularly big impact on markets.

Why Do Investors Worry About the Federal Reserve’s Next Move?

On Friday, data showed that job gains in July accelerated to +943,000, bringing the overall unemployment rated down to 5.4% from 5.9% the previous month. The “leisure and hospitality” sector by far led the hiring blitz, accounting for around +380,000 new jobs, followed by “government” with a gain of +240,000. Other positives included a jump in the labor force participation rate and an accelerating decline in the number of “underemployed” people, meaning those working part-time because they can’t find full-time work.

Economists note that these and other improvements indicate the labor market has likely avoided the type of long-term “scarring” that many economists say resulted from the Great Recession.

At the current rate of job growth, the labor market would be back to pre-pandemic levels by February 2022. Even if the pace were to slow to half the current rate, economists say the job market will be mostly recovered by the end of next year. For the sake of comparison, it took nearly a decade for the labor market to recover from the Great Recession. The all-around positive July report also marks another step toward the Fed’s goal of “substantial further progress” in the labor market and supports the popular view on Wall Street that the central bank will begin reducing asset purchases later this year.

Federal Reserve

Investors suspect the Fed will lay out details on when and by how much it will begin tapering its bond purchases at the annual Jackson Hole conference on August 26-28, or possibly its next policy meeting on September 21-22.

The timing for the Fed to start lifting its benchmark interest rate is a little less certain. Most are still looking at sometime in 2023 but a growing number of analysts believe a rate hike in 2022 could be in the cards if economic growth really takes off.

Most in the bear camp think the current level of inflation already justifies a rate hike, though bulls argue that higher prices mostly stem from lingering pandemic-induced supply chain dislocations that can’t be fixed by Federal Reserve policy. The Federal Reserve of course believes inflation is “transitory” and expects prices to come down as supply chain dislocations and labor shortages ease.

Data to watch

Investors this week are anxious to see the latest reads on inflation with the Consumer Price Index on Wednesday and the Producer Price Index on Thursday. While insiders expect both indexes rose further in July, they expect the pace slowed substantially from previous months, which would be a welcome indication that inflationary pressures may be easing.

Today’s key data is the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), which will provide some deeper insights into the state of the labor market.

Turning to earnings, things start to slow down this week with nearly 90% of S&P 500 companies having reported, with 87% of them topping earnings estimates. The big beats have now lifted the Q2 earnings growth rate to nearly +89%. Today’s highlights include AMC, Barrick Gold, BioNTech, Dish Network, Elanco, Nutrien, Planet Fitness, and Tyson Foods.

Delta variant

Investors also continue to monitor the headline risk associated with the Delta variant. The situation in Asia, in particular, is being nervously watched as new outbreaks of just a handful of people can result in lockdowns of entire cities in China, South Korea, Vietnam, and other major Asian manufacturers. I think some of the foreign governments have a very itchy trigger finger when it comes to shutting down as they try to avoid another major Covid outbreak. Some of the worst supply chain snags in the U.S. are still the result of port congestion stemming from equipment and labor shortages.

Experts are worried the problems are only going to compound as we head into the holiday shipping season, which is starting earlier this year as a lot of importers pulled forward their holiday deliveries in anticipation of continued delays. Bottom line, most shipping experts think it will be 2022 before supply chains are able to fully recover.

Technical analysis

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2

SP500 broke above the resistance level. And, there is a lot of similarities with price action before the COVID sell-off. The price has also broken above very strong resistance and stuck in a tight range, while Insider Accumulation formed bearish divergence. So, there is a chance for interesting price action in August.

Overall the markets have not shown any weakness yet and may continue to push higher after consolidation. However, traders and investors should be somewhat concerned that any breakdown in price may prompt at least -13% to -18% pullback. The natural cycles are a bit mixed now, but they forecast a potential middle-term rally at the end of September or at the beginning of October.

Insider accumulation and natural cycles gave great insight before COVID happened. Let us see how it plays now.

sp500

A Post-Covid Hangover – Should You Worry About Your Portfolio?

Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

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I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

SP500 – Real or False Breakout?

Bulls still want to focus on booming growth expectations for the second half of the year as the pandemic recedes and economic activity accelerates.

Fundamental analysis

However, the inflation story is growing harder to look past and there are widespread expectations that analysts will begin to trim some of their lofty second quarter earnings forecasts as a result. Earnings for S&P 500 companies are currently expected to increase +60% in Q2. Lingering impacts from the pandemic that have roiled supply chains and disrupted the flow of goods don’t appear to be clearing as quickly as most had hoped, which is going to inevitably have an impact on many companies’ bottom lines.

In fact, “inflation” was mentioned by 197 of S&P 500 companies during first quarter earnings calls, the highest number in at least a decade, according to FactSet. Over the course of the past decade, U.S. inflation averaged just +1.8%, versus the Fed’s +2% target rate. Not surprisingly, Bank of England last week left its monetary policy unchanged and brushed aside fears that inflation was running out of control.

The rate-setting committee echoed statements similar to the U.S. Fed, saying they expected inflation would be “transitory” and that scaling back support too soon runs the risk of disrupting the economic recovery.

Data to watch

Next week will flip the calendar from June to July on Thursday, which also marks the end of Q2 2021. The June Employment Situation is next week’s key economic report with around +500,000 to +600,000 jobs expected to be added. The May gain of +559,000 was lower than anticipated, though March and April gains were revised upward.

Other data next week includes the S&P Case-Shiller Home Price Index and Consumer Confidence on Tuesday; ADP’s Employment Change, Chicago PMI, and Pending Home Sales on Wednesday; the ISM Manufacturing Index and Construction Spending on Thursday; and the Trade Balance and Factory Orders on Friday.

SP500 technical analysis

SP500 closed the week above the upper range of resistance. The major economic indicators are still bullish. What worries me now is Advanced Decline Line. It showed weakness last week and formed bearish divergence. Moreover, the yield curve is flattering. It is not a warning sign yet. But still, traders have to pay attention to it.

In general, if price sustains at current highs, we can see a run towards 4400. The cycles forecast a rally at the beginning of July. So, let’s see how it plays. The important supports are still MA50 on a daily chart, 4000 and 3800.

Post-Fed Markets. What To Expect Next?

Fundamental analysis

At the same time, the central bank lifted its growth expectations for 2021 to +7%, an outlook far above the anemic GDP growth rates experienced pre-pandemic. Bulls largely want to stay focused on the economic “boom” ahead, believing it will more than offset any near-term inflation headwinds that companies may face in the second half of the year. And there is evidence money may be shifting back into some of the mega-cap growth stocks.

I just worry that the move might be temporary in nature or perhaps just a knee-jerk and a place to park some money until they figure out their next move. The Fed’s more hawkish shift also seems to be providing a further boost to the U.S. dollar, which shot up nearly a full percentage point against a basket of six other major currencies in the ICE U.S. Dollar Index.

Keep in mind, many big-money players have been forecasting a somewhat softer dollar based on the Fed’s extended supports. Obviously, a stronger dollar is a headwind for commodities and that was on display last week with a sea of red across everything from grains to metals and oil.

Oil markets are also feeling some additional downward pressure from the coronavirus surge happening in the UK, which some worry could ripple across the EU and further delay other re-openings.

Data to watch

Housing is in the spotlight in the first half of the week with Existing Home Sales Tuesday and New Home Sales on Wednesday. The housing market has been sending some mixed signals lately as home prices continue to soar, inventories remain at historic lows, and builders struggle with skyrocketing input prices and labor shortages.

Other data includes Durable Goods Orders and the final estimate of third-quarter GDP on Thursday; and Personal Income & Outlays, and Consumer Sentiment on Friday.

SP500 technical analysis

sp500 analysis fed 20 june 2021

While last week SP500 posted a fresh record top at 4258.5 (4267.5 on Jun), bears have returned to the market, aggressively selling futures on Friday and for sentiment to end a sequence of higher weekly lows with losses of 118 Pts from the top. This is negative and with cycles pointing lower, we can see further decline. 4179.0 is an important level to watch if tested and rejected. The supports 4100.5, the May 20th open, 4046.0, the 5-week base, and 4020.0, May’s low trade.

Keep in mind that this could be just a jerk-reaction after the Fed. Also, cycles forecast a potential rally in 2 weeks.

Precious Metals – Real or Fake Breakout? Sector Overview

The rush of consumer demand mirrors what the manufacturing sector is experiencing and adds to the story that the economy is rapidly heating up. All 18 services industries reported growth in May, led by retailers, wholesalers, construction firms, and entertainment and recreation providers.

Also similar to the manufacturing sector, services businesses are experiencing higher input costs and a backlog of orders, with the latter climbing to a new record.

The employment measure, meanwhile, slipped more than three points, with ISM noting that the labor pool for the services sector is currently even tighter than it is for manufacturing. ISM also predicts that demand for services could continue to outstrip the sectors capacity for the next four-to-six months, citing pent-up consumer demand as people start re-engaging.

Gold analysis

A few weeks ago we had a look into Gold cycles, Intermarket forecasts, and COT. At that moment gold was flagging. As you know it usually follows this pattern very well. But it doesn’t mean always. The current breakout wasn’t qualified as we didn’t have a downclose candle prior to the breakout candle. Moreover, in 2012 we had a similar situation and it was a false breakout. So, I want to see more price action to figure out what is happening.

In case, this breakout turns to be real, the market will target 2600 in 1 – 3 years. With all that in mind, let’s have a closer look into smaller time frames. Last week the price tested the 1856 level. It was previously a strong resistance. So, no surprise price found support there. The 4h MA200 is at 1837. Technically it should be enough to build a base and start a new wave to the upside with targets 1932 and 1960. This pattern is valid till the price holds above 1800. If this level fails, the bears could take control of this market.

Silver forecast

We have a bit different situation in Silver. The flagging formations on the monthly chart failed more compared to Gold. In fact, in 2012 there was a clear depreciation in this market – flagging formation that broke to the downside; tight consolidation followed by the final breakdown. Certainly, it is too early to jump into this market, but in the case, we see a breakup in this market, bulls could target the 38 – 40 range.

Overall a lot depends on the dynamic of key economic indicators. It’s worth noting that inflation is growing quite rapidly in China’s manufacturing sector, which many economists warn could translate to higher costs for a wide range of goods across the globe. If inflation worries spread on major markets, the precious metals sector will shine and deliver amazing returns for qualified traders.

SP500 – Aggressive Breakout on Its Way

It formed a flagging formation in recent weeks. It is not a secret that such long consolidation in a tight range ends with massive breakout.

Moreover, if such consolidation happens near Gann resistance on a daily or weekly chart, the next we see a very aggressive move. In fact, the longer such consolidation takes, the stronger move is. The key question is will it break out to the upside or to the downside?

SP500 analysis

I am not a fan of guessing, especially when tools, like Cycles, Advance-Decline Line, Insider Accumulation, Interest Rates Forecast, Intermarket Forecast are giving different signals. The market needs a fundamental trigger to establish a new trend or more time to build the setup. The FOMC meeting in June could become such a trigger. In case they pull back their purchasing program, we can see massive profit booking in the stock market. But still, it is what might happen.

I believe it is good now to stick more to price action. Based on a daily chart a clear break above Gann resistance 4250, is a bullish breakout with the next target near 4400 – 4500.

The cycles predict establishing a new trend in the coming weeks. So, traders have to get ready for coming opportunities whatever side it breaks. For bearish breakout, use channel up on a daily chart. Based on the historical studies, the best price action identification of reversal on SP500 is channel breakdown + sustaining below MA50 on a daily chart. Additionally, traders can use Insider Accumulation. It will decrease the number of trades but increase winning rates. Consider it an additional filter for breakout trades.

Even if the stock market breaks to the downside, it should be just a pullback. Until the dynamic of major economic indicators stays positive, there is no real reason to talk about the crisis and new recession. Certainly, the situation can change, but it is not going to happen in one day.

Interesting historical data

With the proper investment strategy, the stock market is a game where the odds are massively in your favor.

On average, 9 out of every 10 years shows an increase in returns for the top 500 companies. From 1929 to today, for every year of losses, the market spent nine years gaining, with a long-term average return of 8% a year. The worst crash happened in 1929. The market lost 83% of its value.

The second worst crash happened in 2009. (We were all alive for that. We’re part of history!) In 2009, the market lost 50% of its value. But even so, from 2009 to today, the market has grown by 400%.

ACB Stock, EUR and Crude Oil Forecast

Canada and New Zealand officials also have indicated that their first interest rate hikes could happen in early 2022. Iceland has already hiked rates, while the Bank of England has already slowed its bond buying and aims to end that support altogether later this year.

This more “hawkish” shift is happening across most central bank’s in the West, including the U.S. Federal Reserve with several FOMC members recently indicating their willingness to start “taper” talks. Even as some officials talk about easing supports, they have also been pushing back against the idea that inflation is starting to run out of control, even as consumer demand continues to outstrip the supply of goods and services in several areas of the economy.

But as I was saying last week, this initial spike in demand may not prove to be overly sticky. Perhaps consumers tick a few things off their bucket-lists of places to go and things to see but then might settle back into a new slower-normal.

There is no doubt an ongoing transformation of consumer trends is taking place and it could take a few months for them to find the new baseline. Data yesterday showed Weekly Jobless Claims dipped for a fourth straight week to hit a new pandemic low of 406,000, which is still very high and about double what it was averaging pre-pandemic. All of these things that are still shaking out in the economy explains some of the Fed’s willingness to let inflation run “hot” above its target rate for a while as supply and demand dynamics stabilize, especially with the labor market still weak. So, let’s overview a few markets.

EUR futures

EUR futures found support near 4h MA100. I believe the volatility will come to this market tomorrow after a long weekend. The price is building a new channel up on the 4h chart. With that in mind, we have a trading range of 1.2105 – 1.2290. So, it makes sense to scalp till support or resistance breaks. In general, we are still in a bull trend.

So, if resistance breaks, we can see the wave up to 1.23100 – 1.23500. The most important event this week is NFP on Friday. It can set the trend for the next 2 weeks.

eur futures 31 may 2021

ACB stock forecast

Last year we booked over 200% in ACB trade. This year I was stopped out in a new trade, but bought again later. I am not a big fan of growth stocks like ACB. But a small position makes sense when there is a good setup. Democrats are working hard to push marihuana legalization across the USA. And I believe they will succeed in it.

Also, there are signs of Wyckoff accumulation on the 4h chart. Besides, it closed above MA100 for the first time since the massive sell-off. So, I wouldn’t be surprised to see more upside in the coming 3 – 7 weeks. The neutral magnets for stock are 11.30, 13.50, 19, and 23 in extension. Note, replacing stop loss to be is a must for growth stocks.

acb forecast 31 may 2021

Not much has changed in CL setup since my last overview. However, on the 4h chart, we might get a trade this week. It seems like resistance is broken, but this consolidation looks dangerous. So, a swing failure to break above 67.60 should give a pull-back to 4h MA100 and possibly even lower.

However, the daily chart is still bullish and likely pullbacks will be bought again. So, when price finds support, we may see a rally to $69 – 70 a barrel. Conservative traders should stay on the sidelines till the OPEC meeting as there is a risk of oil output increasing.

crude oil forecast 31 may 2021

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

EUR at Key 4h Level Ahead of GDP Report

Fundamental analysis

With 50% of the U.S. adult population now fully vaccinated and most states close to fully reopened, it seems reasonable to say we are entering the early stages of the post-pandemic era. One of the key themes that has driven bullish momentum in EUR during the pandemic is that we were headed toward a post-pandemic economic boom fueled by cheap and easy money, cheap energy costs, and a lot of available (aka cheap) labor that weakened USD.

In reality, energy is kind of cheap-ish, but labor is not so readily available or cheap, and the “cheap and easy” money provided by the Federal Reserve may not last as long as some expected. In fact, money could get more expensive if inflation starts running even hotter and the Fed is forced to raise interest rates. The landscape is of course still evolving so the “trifecta” of cheap and easy energy, labor and money could still happen but investors are definitely reassessing, which is partially reflected in this long consolidation period that stock market has recently been stuck in.

The labor market has been one of the biggest puzzlers and investors hope the May jobs report next Friday will provide more clarity. Many economists are dialing back their expectations for the labor market, including some Federal Reserve officials. St. Louis Fed president James Bullard said this week that +500,000 jobs a month is a realistic expectation versus the +1 million some had been hoping for.

Dallas’s Robert Kaplan warned that a rate closer to last months gain of +266,000 could be repeated in May. Typically, a weak labor market would mean an accommodative Federal Reserve. Instead, that weakness along with numerous supply chain issues and materials shortages has been contributing to inflation pressures that some fear could be long-lasting.

It’s hard to overstate the extreme level of uncertainty this has created for investors.

Technical analysis

The 4h MA50 is the consolidation zone now. If the current range holds, the bulls will target new higher highs between 1.231 and 1.235. A lot depends on today’s data. I will not be surprised to see increased volatility. And if current support fails, bears will target 4h MA200. Ahead of the GDP report it makes perfect sense to reduce your exposure and trade after the market digests the news.

Stocks Continue To Chop Around Just Below All-time Highs

Big money players still seem a bit uncertain in regard to betting more money on the reopening and stronger demand or taking some bets off the table fearing higher inflation, companies struggling to find good help, and supply chain shortages that could make meeting stronger demand next to impossible.

Fundamental analysis

Earnings season is nearly wrapped up with over 95% of S&P 500 companies having reported. Key releases today include American Eagle, Dick’s Sporting Goods, Nvidia, Snowflake, and Williams Sonoma. Average S&P 500 earnings growth for Q1 is now over +51%. Average earnings growth estimates for Q2 are around +50%. This means there’s not much room for error at current valuations.

As I mentioned above, some believe those lofty expectations could face headwinds from labor shortages, higher inflation, supply chain dislocations and/or reduced support from the Fed.

Federal Reserve Vice Chair Richard Clarida was among several other Fed officials yesterday that pushed back against worries of runaway inflation. Clarida did admit that the latest CPI read was “a very unpleasant surprise” but he mostly echoed the Fed’s official stance that current inflationary trends will be “transitory.” He also acknowledges the “risk case” that inflationary pressures could end up being more persistent than expected but said the Fed has the tools necessary to “offset” that if necessary.

Most Fed officials have publicly echoed similar sentiments, although Philadelphia Fed President Patrick Harker and Dallas Fed President Robert Kaplan have both indicated they think it is appropriate to begin talking about “scaling back” the Fed’s asset purchases. With so much uncertainty surrounding the central bank’s next move, bulls may be unwilling to add more risk ahead of the Fed’s upcoming meeting on June 15-16. In the meantime, investors will continue mining Fed comments and economic data for clues.

There was quite a bit of data to unpack yesterday but the overall theme was “higher prices” with housing data dominating. Home prices continued to accelerate in April with the median price for a new home sold climbing more than +11% to $372,400, while the average sale price hit a new record high of $435,400, up +8.7% from March.

At the same time, New Home Sales fell nearly -6% in April with the familiar culprits being blamed – surging material costs and low inventories. Builders unfortunately are struggling to increase new home supplies because of the exact same reasons, with shortages and higher costs extending to everything from lumber to new appliances.

It’s also worth noting that Consumer Confidence pulled back a bit in May, the first decline in six months with worries growing around inflation and future job prospects.

There is no significant economic data today but investors will hear from Federal Reserve Vice Chair of Supervision Randal Quarles. During a Senate Banking Committee hearing yesterday, Quarles said the Fed along with the FDIC is in “a sprint” to research and develop a regulatory framework for cryptocurrencies and digital assets pertaining to banks, noting they are still in the early stages.

Technical analysis

ES 26 may 2021 forecast

In the absence of a swing signal in SP500 futures, it makes sense to stick to day trading. Advanced Decline Line is bullish, while Insider accumulation is weak. At the same time, the Interest rate Forecast and Fed Funds Forecast are neutral. In other words, SP500 is a mixed bag in terms of swing trading.

For today, the neutral zone is 4155.75 – 4220.50. Middle-strength level within this range – 4188; weak levels – 4172 and 4204.25. If the price holds above 4220.50, look for 4236.75 (weak level) and 4253 in extension (middle-strength level). If 4155.75 breaks, the magnets are 4139.75 and 4124 accordingly. Note, mentioned levels should turn into support/resistance before taking a trade.

Insider accumulation warns Tesla, Apple and Dollar investors

Tesla stock forecast

The price action looks very interesting. TSLA stock shows signs of depreciation. But as you know I like to trade a mix of fundamental and technical analysis to have a higher chance of winning trade. The Insider Accumulation is just screaming on a weekly chart. It shows what smart money is doing. No matter what they say, the fact is they don’t buy Tesla. The Insider Accumulation is very low.

At the same time, Sentiment Index and Cycle Forecast show potential consolidation. It makes perfect sense – the price has broken below the trendline of the bearish flag. So, if we see a successful retest of that trendline, consider hedging your $TSLA investments (if you have one) with options or futures. The natural magnet in that case is 400 at least.

TSLA forecast 23 may 2021

Apple stock forecast

AAPL is flagging as well. However, unlike Tesla, it didn’t break down. But Insider Accumulation and Cycle Forecast are very bearish. On the other hand, the Seasonal Forecast is bullish, while the Sentiment Index indicates a coming bounce up. With all that in mind, I want to add Apple to my watchlist as a short candidate if the trendline breaks to the downside. If that happens, bears will target $80 at least.

Moreover, we have clear signs of Wyckoff distribution on the weekly chart. However, we need more price action to confirm all events and phases before considering shorts.

AAPL forecast 23 may 2021

DX (dollar index) forecast

Dollar bears are not done yet. Cycle Forecast and Seasonal indicate potential breakdown below weekly support. However, the commitment of the trader report is neutral. It disturbs a bit. So, we better stick to price action. In case of a breakdown below last week’s low bears will target 88.50. If that support fails as well, we have all the chances to see a free fall to 84.5. It is not going to happen very fast.

But in the middle-term, it seems the most realistic scenario based on the indicators mentioned above. As I mentioned last week in one of the posts, the FOMC meeting next month can shake markets and create amazing opportunities for swing traders. So, keep an eye on it.

DX forecast 23 may 2021

EUR at Key Resistance – What is Next?

Fundamental analysis

Some of the recent pressure on EUR stems from the possibility of slower growth ahead as the U.S. economy enters the new post-pandemic normal.

The Federal Reserve and its policies play strongly into those growth worries, too, as the central bank’s easy money spigots are eventually going to get dialed back as the economy improves.

While the Federal Reserve has said it won’t reign in its supports until the labor market returns to full employment, bears argue the central bank may have to act sooner rather than later to head off runaway inflation.

Dollar bears and most Federal Reserve officials remain largely unconcerned about “sustained” inflation as they expect the issues and dislocations causing higher prices will resolve themselves in the second half of the year.

Atlanta Fed President Raphael Bostic and Dallas Fed President Robert Kaplan are both scheduled to speak today so we should learn a bit more. Don’t forget, tomorrow we get the Fed minutes from the most recent FOMC meeting.

Economic data includes E-Commerce Sales and Housing Starts and Permits.

Technical analysis

The EUR futures are close to the 1.2240 resistance which has been bulls swing target. The market is far from being overbought. In other words, if price breaches resistance, we can see 1.2310 in extension. Today we have important data ahead. So, its advised to reduce exposure. Rejection from mentioned resistance, can bring the price down to ma50 and ma100 on the 4h chart.

SP500 Traders are Trying to Shift Through a Lot of “Noise”

The coronavirus situation in the U.S. is a clear bright spot with several health experts believing the country is close to reaching so-called “herd immunity” and expect to soon see a dramatic drop in new coronavirus cases.

Fundamental analysis

The good news is most people are getting back to normalcy and the economic activity is looking robust. That’s despite many businesses having a difficult time hiring help. As companies are having to offer higher and higher wages there is increasing worry about rising inflation. There is also more talk about the possible implications of looming tax hikes that are expected to pay for some of President Biden’s ambitious economic plans.

An investor note from Goldman Sachs warned that the planned corporate tax hike to 28% could decrease earnings for some of the mega-cap technology companies as much as -9% next year, while S&P 500 earnings overall could take an -8% hit.

The analysts also warned that the “FAAMG” stock complex (Facebook, Apple, Amazon, Microsoft and Google) could be at risk of a year-end selloff if the President’s capital gains tax hike is implemented.

These stocks account for nearly 30% of the S&P 500’s market cap gains over the last five years, meaning investors have earned close to $5 trillion over that time.

Investors may look to take some of those gains in 2021 to lock in the lower tax rate.

Some of the big money players and large funds have shifted to value and more traditional inflationary type plays. While the younger Robinhood and Wall Streets Bets crowd that was once pumping the high-flying tech sector are now looking at buying airline and concert tickets.

As always, you have to pay attention to money-flow and ask yourself who will provide the next round of big buying?

Today’s key economic data will be the Labor Department’s JOLTS report, which could provide a deeper look at what’s going on in the job market. Federal Reserve officials are also making the rounds today with at least five central bankers scheduled to speak, including Federal Reserve Governor Lael Brainard. Earnings on tap include Electronic Arts, Honda, Palantir, Toyota, and Vodafone

Continued Talk of Commodity Supercycle

The price of iron ore hit a record high on Monday in the latest sign of booming commodity markets, which have gone into overdrive in recent weeks as large economies recover from the pandemic. The steelmaking ingredient, an important source of income for the mining industry, rose 8.5 per cent to a record high of almost $230 a ton fueled by strong demand from China where mills have cranked up production. Other commodities also rose sharply, including copper. Keep in mind, in the past 12-months, corn and crude oil prices are up +95%, soybean oil up +125%, silver up +75%, lean hogs up +54%, cotton up +47%, sugar up +57%, lumber up +350%, stock market up +43%, Bitcoin up +215%.

Technical analysis

Yesterday’s levels played very well. SP500 is trading in a bearish zone now. The upper range is 4156. Middle-strength levels within this zone – 4124, 4092 and 4060. Weal levels – 4140, 4108 and 4076. Neutral zone 4156 – 4221. Middle strength level – 4188.5. Weak levels – 4172.25 and 4204.75. Keep in mind SP500 is close to first daily support around 4100. In order to place a trade, always watch price action at mentioned levels. Once level turns into support/resistance, consider going long/short.

Why is “Bad News” is “Good News” for SP500?

Investors start this week still digesting the April Employment Report which delivered a big miss on Friday, showing a gain of just +266,000 jobs versus expectations for close to +1 million. The unemployment rate ticked up slightly to +6.1% while average wages and workweek saw unexpected increases.

Again, this was a moment on Wall Street when “bad news” was digested as “good news” as it keeps the Fed from raising rates.

Fundamental analysis

There is a lot of debate as to why the April jobs data was so sluggish with many blaming enhanced unemployment benefits. The report also showed leisure and hospitality added some +331,000 jobs while manufacturing payrolls actually fell, led by a decline in autoworkers. Economists believe those declines are probably related to the global chip shortage. ISM data last week indicated that some losses in April are related to other various supply chain constraints that are curbing manufacturing output and has forced companies to cut both hours and workers.

Employers also continue pointing to a skills mismatch, a problem many faced well before the pandemic. Bottom line, there are about -8 million fewer Americans in the workforce now versus February 2020. There seem to be a lot fewer women coming back and a lot fewer over the age of 55. Over the last five months total employment is only up by +1.5 million workers. So the Fed seems somewhat correct in their statement and forecast that it’s going to take time to get the U.S. workforce back to pre-pandemic levels and a big reason they are not going to rush to raise rates.

Despite the weaker than expected employment numbers, bears still believe inflationary price pressures are a mounting threat to the recovery, and signs of rising wages, particularly for low-skilled jobs, continue to fan the flames on inflation worries.

That will put a spotlight on inflation gauges due this week, with the Consumer Price Index on Wednesday followed by the Producer Price Index on Thursday. There is no major economic data today.

The height of earnings season is behind us with 88% and 86% topping estimates by an average of more than +22%.

The leading sectors have been Consumer Discretionary, Financials, Materials, and Communication Services, while Utilities and Industrials are the only two sectors reporting year-over-year declines.

Earnings this week include Tyson (TYSN) Roblox (RBLX), Palantir (PLTR), Electronic Arts (EA), Disney (DIS), Airbnb (ABNB). Other earnings results today are due from Affirm, Duke Energy, Marriott International, Novavax, Occidental Petroleum, Simon Properties, and Virgin Galactic. Other big names this week will include Compass, Sonos, Tencent, and Wendy’s on Wednesday; Alibaba, Applied Materials, Coinbase, DoorDash, Luminar, and Yeti on Thursday; and Siemens on Friday. Another area of increasing interest this week will be in the crypto space… Bitcoin, Ethereum, Doge, and Maker are all in my daily mix of things I track and trade. What a crazy ride!

Technical analysis

SP500 is close to weekly resistance at 4250. We talked about this number for a few weeks. On an intraday basis, the neutral zone is 4200 – 4265. Middle-strength level within this range – 4232.50, weak levels – 4248.75 and 4216.25.

Break up above 4265, will bring the price to 4281, 4298. If price sustains below 4200, look for 4184 and 4168. Note, mentioned levels should offer support/resistance before you consider entering the trade.

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

Wall Street Worries About Interest Rates – What Does It Mean for SP500?

Fundamental Analysis

Treasury Secretary Janet Yellen taking a somewhat opposing stance to Fed Chair Jerome Powell. In case you missed the headline, Yellen is saying we might need a modest rise in interest rates to blunt some of the government spendings we are seeing hit the street.

Later in the day, Dallas Fed President Robert Kaplan reiterated the need for the Fed to begin a conversation about scaling back its bond-buying in an interview with MarketWatch. Kaplan says that’s largely because he has greater confidence in the economy than he had a few months ago, but noted a “fog” around labor market participation rates that will take a while to clear.

Kaplan also noted that the Fed could remain “highly accommodative” without keeping rates pegged at zero. According to his assessment of the economy, Kaplan anticipates the Fed raising rates sometime in 2022, which is ahead of the timeline forecast by most Fed officials who don’t see the benchmark being lifted until 2023.

The moral of the story, talk that the economy could “overheat” and push interest rates higher seems to be a bit more worrisome now on Wall Street. I don’t think this anything most of us didn’t see coming, but the question of how the Fed reduces liquidity and tapers is still the big question?

If the Fed can nail the dismount then no harm no foul, but if you believe the market is currently “priced to perfection” then there is absolutely no room for Fed error.

Some of the bigger and more experienced investors won’t even like the thought of being this high up if the Fed is going to start unwinding.

A growing number of Wall Street traders expect the Fed’s June 15-16 policy meeting could begin outlining plans for such moves.

Economic data

Investors today are anxious to see ADP’s Employment Report for April which is expected to show around +850,000 jobs added. ADP’s numbers can vary widely from the official Labor Department numbers, which are due out on Friday and expected to show close to +1 million jobs were added during April.

The ISM Services Index for April is also due today. The gauge hit a new pandemic high as well as an all-time record high in March.

Wall Street will be paying particular attention to the employment and price components, which rose to pandemic highs last month as well.

Services activity accounts for about 75% of U.S. GDP so what’s happening in the sector has broad implications for the overall economy. Earnings will likely be the main focus today with several big names reporting, including Allstate, Barrick Gold, Cerner, Etsy, General Motors, GoDaddy, Hilton Worldwide, HubSpot, MetLife, Paypal, Redfin, Rocket Companies, Scotts MiracleGro, Twilio, Uber, Volkswagen. And Wynn Resorts.

SP500 technical analysis

Yesterday’s breakout levels played very well. For today, the neutral zone is 4131 – 4195.5. Middle-strength level within this zone – 4163.25, weak levels – 4179.25, 4147.

In case of a bullish breakout above 4195.5, look for weak level 4211.5 and middle-strength level – 4228. A bearish breakout below 4131 will target for 4115 – weak level and in extension 4098 – middle-strength level. Based on the intraday cycles, there are more chances for trading within the neutral zone today.

Important Note! For qualified breakout entry breakout level should turn into support/resistance. Don’t enter the trades without this price action confirmation.

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

SP500 at Key Daily Support – Break It or Make It

Fundamental analysis

The U.S. is actually moving pretty close to having most Covid restrictions lifted across the country on businesses like restaurants, amusement parks, theaters, museums, music venues, etc.

There are social gathering capacity limits in some states and cities still, but those are mostly scheduled to phase out by this summer, assuming no major setbacks in getting and keeping the virus under control.

Data yesterday showed the ISM Manufacturing Index unexpectedly slid in April though the gauge remained in expansion territory for the 11th month in a row. The read of 60.7% is considered very healthy but the slowdown reveals underlying struggles to meet demand.

The supply-demand imbalance pushed the backlog of orders component to a record-high while customer inventories plunged to an all-time low. The Prices component jumped to its highest level since 2008 with all 18 industries reporting they paid higher prices for raw materials for the fourth straight month. This reflects two main competing narratives on Wall Street right now.

Bullish vs bearish expectations

Bulls believe pent-up consumer demand, underpinned by generous fiscal and monetary supports, will usher in an economic boom not experienced in a generation, which will pull corporate profits up along with it.

Bears, on the other hand, believe higher prices will continue building and eventually put a dent in the rosy expectations for growth. Federal Reserve officials continue to make the case that the current inflation trends are transitory and will ease as supply chain kinks get ironed out.

Many Wall street bears argue that higher prices will be more sticky than anticipated, particularly those that are already being passed on to consumers. Today brings both the Trade Balance Report and Factory Orders for March.

First quarter earnings also continue to flow with Pfizer among today’s highlights. Pfizer’s vaccine, developed with BioNTech, is one of the three authorized for use in the U.S. Along with Moderna,

Pfizer stands apart from rival vaccine makers Johnson & Johnson and AstraZeneca because they are selling their Covid-19 vaccines for profit. Pfizer reports before markets open. Today I am closely watching Zillow, Activision Blizzard, Corteva, CVS, Ferrari, Marathon, and Virgin Galactic.

Technical analysis

I have mentioned swing setup in my weekly outlook. So, today I want to focus on intraday levels. SP500 is approaching key Gann level at 4160. If price sustains below, expect to see a sell-off. On the other hand, 4225 is a bullish breakout level. It seems not easy to get there.

Neutral zone 4225 – 41160. Middle-strength level within this area – 4129.5, weak levels – 4209 and 4176.5. In case of bearish breakout, look for 4128, 4096 (middle-strength levels) and 4144, 4112, 4180 (weak levels).

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

Will Earnings Season Bring Volatility To The Stock Market?

The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.

This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.

Fundamental analysis

That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.

employment

If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.

The earnings calendar is packed again next week with big names including Activision Blizzard, Adidas, AllState, Cerner, Cigna, CVS, Dominion Energy, Enbridge, Etsy, Hilton Worldwide, Moderna, Monster Beverage, Nintendo, PayPal, Peloton, Pfizer, Rocket Companies, Square, TMobile, Wayfair, and Zoetis.

COVID-19

Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.

Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.

SP500 technical analysis

SP500 earnings season

Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.

But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.

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

What Does Biden’s Tax Hike Proposal Mean for SP500?

The proposal has not been officially announced but details reported by Bloomberg include raising the top marginal tax rate to 39.6% from 37% while lifting the capital gains rate from 20% currently to 39.6% for people earning $1 million or more.

Fundamental analysis

Democrats planned a tax hike for a long time. So, it wasn’t that big surprise. A big question is when the rate hikes might go into effect, which would likely impact decisions on when or if to book profits from the market. And that’s what we all want to pay attention to. Meaning, if a big tax hike is coming next year, could we see a selloff this year with investors looking to ensure the lower tax rate?

And what if the timing is different? Stock bears have been warning for a while that investors were not pricing in higher taxes ahead. The market reaction last week was relatively mild, with markets down overall but the major indexes all lost less than a full percentage point.

tax biden

Congress has to approve the tax high. And I believe it will be not that easy. It will likely find no support from Republicans and possibly many Democrat defectors. So the early consensus in Washington seems to be that these tax increases stand little chance of passing at the levels being suggested. It will be interesting to see if Wall Street agrees as more details are revealed.

President Biden is expected to unveil the proposal next Wednesday, April 28. Keep in mind, the White House has already announced a plan to raise corporate taxes to 28%.

Economic reports

Economic data last week was a sort of a mixed bag. Initial jobless claims posted another decline to hit the lowest levels of the pandemic. However, there are some signs of headwinds for the housing market with Existing Home Sales falling for the second straight month but inventory levels are at record lows, so it’s tough to draw a negative conclusion. Housing supply did climb nearly +4% last month but it was still more than -28% lower than 2020 levels.

The Wall Street Journal pointed out that, nationally, there were more real estate agents than there were homes listed for sale in March. At the same time, the median home sale price rose to a new record high of $329,100, marking a +17.2% gain over last year as supply constraints have led to the fastest selling pace on record.

What to look for next week?

Things kick into high gear next week though with announcements from some of America’s largest companies, including Tesla on Monday, followed by tech giants Alphabet and Microsoft on Tuesday, Apple and Facebook on Wednesday, and Amazon on Thursday.

Other big names reporting next week include AbbVie, Agco, Altria, Amgen, AstraZeneca, BASF, Boeing, Boston Scientific, BP, Bristol Myers Squibb, Caterpillar, Charter Communications, Chevron, Chubb, Clorox, CME, Colgate Palmolive, Comcast, Dominos, Ebay, Eli Lilly, Exxon, Ford, General Electric, Gilead Sciences, GlaxoSmithKline, Intercontinental, Keurig Dr. Pepper, Kraft Heinz, Mastercard, McDonalds, Merck, MGM Resorts, Mondelez Int., Moody’s, Nio, Norfolk Southern, Northrop Grumman, Novartis, O’Reilly Automotive, Phillips 66, Qualcomm, Royal Dutch Shell, Shopify, Spotify, Starbucks, Texas Instruments, Thermo Fisher, Twitter, UPS, Visa, Yum Brands, …among many others.

Data to watch

Nearly every sector will get some coverage which will help analysts and investors get a better sense of what to expect from the rest of this earnings season. It will also help shape expectations for the quarters ahead as more companies provide full-year guidance.

Next week also brings the Federal Reserve’s two-day policy meeting on April 27-28, which comes amid a busy economic data schedule that includes Consumer Confidence Tuesday; the first read on first quarter GDP and Pending Home Sales on Thursday; and Consumer Sentiment, Chicago PMI, PCE inflation reads, and Personal Income and Spending on Friday.

SP500 technical analysis

tax hike sp500

SP500 futures found support near 4100 last week. In the absence of big news, we can expect it to hold. However, Biden’s tax proposal can shake the market. So, I wouldn’t rely on that support much. Advanced Decline Line shows signs of weakness. However, there is no clear divergence. If the price sustains above last week’s high, 4250 is the next magnet. But as I mentioned above we may see big volatility next week. So, I don’t trust those levels much.

The range 3950 – 4000 is technically more important and more reliable. However, with cycles turning to the downside and ADL showing signs of weakness, tax proposals may be catalysts for sell-off. Yet, in the absence of clear signal, I think traders have to stick to Gann levels on an intraday basis.

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