Look Out: Inflation Impact on Earnings, Peloton Treadmills, Cryptocurrency Bubble Concerns to Drive Volatility

Corporate earnings will be the major focus in the week ahead, with investors especially zeroed-in on the impact of rising costs on margins. Investors will be looking for evidence that inflationary pressures are already having a negative influence on corporate profit margins.

CNBC is reporting that from Coca-Cola and IBM to Johnson & Johnson and Netflix, investors will hear from a broad swatch of corporate America. So far, with one week in, companies are beating earnings estimates by a wide margin of more than 84%, according to Refinitiv.

This three-month period is the first to be compared to year earlier profits that were affected by the pandemic. Profit growth for the S&P 500 is a stunning 30.2% for the quarter so far, based on actual reports and estimates. That makes it the best three-month period since the third quarter of 2010, according to FactSet.

In other news, the U.S. Consumer Product Safety Commission (CPSC) on Saturday warned consumers about the dangers of Peloton’s treadmill Tread+ after reports of multiple incidents of small children and a pet being injured beneath the machines.

The price of bitcoin tumbled over the weekend and was down as much as 19.5% from record highs posted by the popular cryptocurrency in the past week. The move comes after new concerns of a bubble in the cryptocurrency market.

US Regulators Warn Consumers on Dangers of Peloton’s Treadmill

Peloton shares could take a major hit on Monday after a warning from a key government safety agency.

“CPSC staff believes the Peloton Tread+ poses serious risks to children for abrasions, fractures, and death,” the safety regulator said in a statement, adding that consumers with children should stop using the product immediately.

Peloton in a response to the regulator’s statement said it was “troubled by the CPSC’s unilateral press release about the Peloton Tread+ because it is inaccurate and misleading.”

The company said there was no reason to stop using the Tread+, but children under 16 should not use the treadmill.

The regulator said it was aware of 39 incidents including one death and was investigating all known incidents related to the Peloton Tread+.

Bitcoin Tumbles from Recent High as Cryptocurrencies Take Weekend Hit

The price of Bitcoin dropped as low as $52,148.98 on Sunday morning, days after reaching an all-time high above $64,800. Ether and Dogecoin also saw their prices drop, following a week in which investors worried that the cryptocurrency market was in a bubble.

An unverified report on Twitter claimed that the U.S. Treasury Department could be looking to crack down on financial institutions for money laundering using cryptocurrency.

Coinbase shares could drop on the news since it could mean the cryptocurrency market could face tougher U.S. regulation. Last week, it became the largest cryptocurrency company to go public.

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 – Vulnerable to Reversal Top

June E-mini Dow Jones Industrial Average futures rallied on Friday, setting another record in the process amid strong earnings from blue-chip companies especially the bank stocks, which continued to rise on bumper quarterly earnings reports.

Morgan Stanley reported a 150% jump in quarterly profit on Friday, helping to boost the performance of Dow components JPMorgan Chase & Co and Goldman Sachs Group as investors continued to bet on a swift economic recovery.

On Friday, June E-mini Dow Jones Industrial Average futures settled at 34081, up 158 or +0.46%.

In other news, the University of Michigan said Friday its preliminary consumer sentiment index rose to a one-year high of 86.5 in the first half of this month form 84.9 in March. Additionally, Federal Reserve Governor Christopher Waller said Friday the U.S. economy is set to take off, but there’s still no reason to start tightening policy.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Friday when buyers took out the previous high at 33862. A trade through 34144 on Monday will signal a resumption of the uptrend.

A trade through 31951 will change the main trend to down. This is highly unlikely but due to the prolonged move up in terms of price and time, the Dow is ripe for a closing price reversal top.

We’re not going to guess when the pattern will form. We’re not going to sell a new high and hope for a lower close. We’re likely to let it form first then wait for the confirmation. The uptrend is strong so it doesn’t make sense to try to guess until we start to see evidence of sellers.

We do suspect, however, that the top won’t be formed by economic data, but rather a surprise event. Something has to happen that will create enough uncertainty to encourage the longs to start trimming positions.

Short-Term Outlook

A higher-high, lower-close will be the best sign that the selling is greater than the buying at current price levels. The next best sign will be a lower-low, which will make 34144 a new minor top.

A third sign of a top will be the failure to hold the minor 50% level at 33651.

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

Wall Street Closes Higher Friday as S&P 500, Dow Hit Record Highs

The major U.S. stock indexes finished higher on Friday, setting new records in the process on the back of strong earnings from blue-chip companies as well as robust economic data that signaled a solid recovery from the pandemic was in the works.

In the cash market, the benchmark S&P 500 Index settled at 4185.47, up 15.05 or +0.36%. The blue chip Dow Jones Industrial Average finished at 34200.67, up 164.68 or +0.48% and the technology-based NASDAQ Composite closed at 14052.34, up 13.58 or +0.10%.

The S&P 500 Index scored three closing highs this week, while the Dow surpassed its best finish two days running. The tech-heavy NASDAQ Composite finished less than one percent below its own all-time closing high achieved on February 12.

Investor Sentiment Boosted by Slew of Economic Data

Housing starts surged 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the highest level since June 2006. Economists polled by Reuters had forecast starts would rise to a rate of 1.613 million units in March.

Permits for future home building rose 2.7% to a rate of 1.766 million units last month, recouping only a fraction of February’s 8.8% plunge. They jumped 30.2% compared to March 2020.

Inflation concerns were on consumers’ minds early this month. A separate report from the University of Michigan on Friday showed its preliminary consumer sentiment index rose to 86.5 from a final reading of 84.9 in March. Economists had forecast the index would rise to 89.6.

Finally, the survey’s one-year inflation expectation jumped to 3.7%, the highest level in nearly a decade, from 3.1% in March. Its five-year inflation outlook was unchanged at 2.7%.

Strong Bank Earnings Reflect Snapback in Economy

The last of the six largest U.S. banks to report – Morgan Stanley – posted stronger-than-expected earnings, bolstered by strong trading and investment results. The bank reported a 150% jump in quarterly profit on Friday, joining the other U.S. banks in posting first-quarter numbers that reinforced hopes of a swift economic recovery. Still, the investment bank’s shares fell 2.8% as it also disclosed an almost $1 billion loss from the collapse of private fund Archegos.

PNC Financial gained more than 2% after the bank beat estimates on the top and bottom lines for its first-quarter report.

Meanwhile, shares of JPMorgan Chase & Co, Goldman Sachs Group, Bank of America Corp and Wells Fargo & Co rose between 0.7% and 3.8%. This helped the S&P Financials Index climb to a second consecutive record finish.

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

The Week Ahead – Economic Data, Monetary Policy, and Geopolitics in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 45 stats in focus in the week ending 23rd April. In the week prior, 72 stats had been in focus.

For the Dollar:

After a quiet 1st half of the week, the weekly jobless claims figures on Thursday will influence.

Expect any increase in claims to test market risk appetite.

On Friday, prelim private sector PMI figures for April wrap things up. The services PMI will have the greatest impact on the markets.

In the week ending 16th April, the Dollar Spot Index fell by 0.66% to 91.556.

For the EUR:

It’s a quiet start to the week on the economic data front.

German wholesale inflation figures for March are due out on Tuesday. Increased market sensitivity to inflation will give the numbers greater attention than usual.

The focus will then shift to prelim April private sector PMIs for France, Germany, and the Eurozone on Friday.

On the monetary policy front, the ECB will also deliver its first monetary policy decision of the quarter on Thursday.

While the ECB is expected to stand pat on interest rates, updates on the bond purchasing program will be the main area of interest.

From the ECB press conference, views on the economic outlook will also need monitoring on the day.

At the end of the week, ECB President Lagarde will be back in action. Following the Thursday press conference, however, there shouldn’t be too many surprises.

The EUR ended the week up by 0.66% to $1.1977.

For the Pound:

It’s a busy week ahead on the economic calendar.

In the first half of the week, employment, wages, and inflation figures will be in focus.

Expect March claimant counts and annual rate of inflation to be the key drivers.

The focus will then shift to March retail sales and prelim private sector PMIs for April on Friday.

Expect the retail sales and services PMI figures to be the key drivers at the end of the week.

On the monetary policy front, BoE Gov. Bailey is scheduled to speak on Wednesday. Expect any views on the economic outlook or monetary policy to influence.

The Pound ended the week up by 0.53% to $1.3779.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, March inflation figures will be in focus ahead of house price figures on Thursday.

Expect the inflation figures to be the key driver, with focus likely to be on the core inflation figures.

On the monetary policy front, the BoC is also in action on Wednesday. With the BoC expected to stand pat on policy, the monetary policy report will be the main area of focus.

The Loonie ended the week up 0.22% to C$1.2503 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week ahead.

Prelim retail sales figures are due out on Wednesday. With consumption key to the economic recovery, expect plenty of sensitivity to the numbers.

On the monetary policy front, the RBA meeting minutes on Tuesday will also influence.

The Aussie Dollar ended the week up by 1.46% to $0.7734.

For the Kiwi Dollar:

It’s a quiet week ahead.

1st quarter inflation figures are due out on Wednesday.

Expect sensitivity to the numbers, with the markets having little else to consider in the week.

The Kiwi Dollar ended the week up by 1.55% to $0.7142.

For the Japanese Yen:

It is also a relatively quiet week ahead.

Early in the week, March trade data and finalized industrial production figures for February are due out.

Expect the trade data to have the greatest influence in the week.

At the end of the week, inflation figures for March and private sector PMIs will also draw interest. Expect the private sector PMI and services PMI in particular to have the greatest influence.

The Japanese Yen rose by 0.79% to ¥108.80 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead.

There were no material stats to provide the broader financial markets with direction in the week.

While there are no stats to consider, the PBoC is in action on Tuesday. The markets are expecting the PBoC to leave 1-year and 5-year loan prime rates unchanged.

The Chinese Yuan ended the week up by 0.49% to CNY6.5206 against the U.S Dollar.

Geo-Politics

U.S-China and U.S-Russia relations are the main areas of focus in the week ahead.

The markets will also need to monitor any chatter from Iran, however.

Corporate Earnings

There are some big names on the docket in the week ahead…

From the U.S:

IBM (Mon), Coca Cola (Mon), Procter & Gamble (Tue), Netflix (Tue), Johnson & Johnson (Tue), and American Express (Fri).

From the EU:

Nestle (Thurs), Renault (Thurs), Daimler (Fri), and Software AG (Fri).

The Weekly Wrap – Economic Data, COVID-19 Vaccine News, and Geopolitics Were in Focus

The Stats

It was a busy week on the economic calendar, in the week ending 16th April.

A total of 72 stats were monitored, following 36 stats from the week prior.

Of the 72 stats, 38 came in ahead forecasts, with 21 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 36 of the stats reflected an upward trend from previous figures. Of the remaining 36 stats, 23 reflected a deterioration from previous.

For the Greenback, it was a second consecutive weekly loss. In the week ending 16th April, the Dollar Spot Index fell by 0.66% to 91.556. In the previous week, the Dollar had fallen by 0.90% to 92.182.

The Dollar remained under pressure following the dovish FOMC meeting minutes from the week prior. This was in spite of a pickup in inflationary pressures, with FED Chair Powell’s reassurances resonating across the markets.

Out of the U.S

It was a busier week on the economic data front.

Key stats included inflation, retail sales, and jobless claims figures, which were market risk positive.

Early in the week, a pick in inflationary pressure failed to spook the markets. In spite of the annual core rate of inflation accelerating to 1.6%, the FED’s assurance of unwavering support was key.

In the week ending 9th April, initial jobless claims decreased from 769k to 576k. Economists had forecast a decline to 700k.

In the month of March, retail sales jumped by 9.8%, reversing a 2.7% decline from February. Core retail sales rose by 8.4%, reversing a 2.5% decline from February.

Economists had forecast retail sales to rise by 5.9% and for core retail sales to increase by 5.0%.

From the manufacturing sector, the Philly FED Manufacturing PMI fell from 51.8 to 50.2 in April. Economists had forecast a sharper decline to 42.0, however.

At the end of the week, stats were also skewed to the positive. The Michigan Consumer Sentiment Index rose from 84.9 to 86.5 in April, according to prelim figures.

In the equity markets, the NASDAQ rose by 1.09%, with the Dow and the S&P500 gaining 1.18% and 1.37% respectively.

Corporate earnings supported the indexes in the week.

Out of the UK

It was a relatively busy week.

Industrial and manufacturing production, trade, and GDP figures were in focus in the week.

It was a mixed set of numbers for the Pound.

While industrial and manufacturing production partially recovered from declines in January, trade data disappointed. Manufacturing production increased by 1.3% in February, after having fallen by 2.3% in January.

The UK’s trade deficit widened from £12.59bn to £16.44bn in February. While exports to the EU picked up, it was with the rest of the world that led to the sharp widening.

In February, the UK’s trade deficit with non-EU countries widened from £4.46bn to £10.73bn.

GDP numbers also disappointed. The economy grew by just 0.4% in February, partially recovering from a 2.2% contraction in January.

In the week, the Pound rose by 0.53% to end the week at $1.3779. In the week prior, the Pound had fallen by 0.90% to $1.3707.

The FTSE100 ended the week up by 1.50%, following a 2.65% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Key stats included Eurozone retail sales, industrial production, and trade data along with economic sentiment figures for Germany and the Eurozone.

It was a mixed set of numbers for the EUR.

Retail sales rose by more than expected in February, while industrial production hit reverse.

Economic sentiment figures for Germany and the Eurozone disappointed Sentiment waned in both Germany and the Eurozone.

For Germany, the ZEW Economic Sentiment Index fell from 76.6 to 70.7, while the Eurozone’s declined from 74.0 to 66.3.

At the end of the week, the Eurozone’s trade surplus widened from €11.0bn to €17.7bn, delivering a positive spin at the end of the week.

Throughout the week, inflation figures for member states and the Eurozone were aligned with prelim figures. The pickup in inflationary pressures delivered EUR support in the week.

For the week, the EUR rose by 0.66% to $1.1977. In the week prior, the EUR had risen by 1.19% to $1.1899.

The CAC40 rallied by 1.91%, with the DAX30 and EuroStoxx600 ending the week with gains of 1.48% and 1.20% respectively.

For the Loonie

It was a quieter week.

Manufacturing sales and wholesale sales figures were in focus in the week.

The stats had a muted impact on the Loonie, however, with market sentiment towards crude oil demand providing support. WTI and Brent ended the week up by 6.42% and by 5.90% respectively.

From the Bank of Canada, the BoC’s business outlook survey reflected a pickup in optimism amongst businesses in Q1. The timing of the survey, however, muted the impact as a pickup in new COVID-19 cases and fresh containment measures were introduced after the survey dates.

In the week ending 16th April, the Loonie rose by 0.22% to C$1.2503. In the week prior, the Loonie had risen by 0.38% to C$1.2530.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 16th April, the Aussie Dollar rose by 1.46% to $0.7734, with the Kiwi Dollar ending the week up by 1.55% to $0.7142.

For the Aussie Dollar

It was a relatively busy week.

Key stats included business and consumer confidence and employment figures.

It was a mixed set of stats for the Aussie Dollar.

Business confidence softened modestly in March, while consumer sentiment improved in April.

The numbers were Aussie Dollar positive ahead of the all-important employment figures late in the week.

In March, Australia’s unemployment rate fell from 5.8% to 5.6% in spite of a rise in the participation rate. Another marked increase in employment led to the fall in the unemployment rate. It was noteworthy, however, that full employment fell in the month.

For the Kiwi Dollar

It was also a relatively busy week.

Early in the week, business confidence and electronic card retail sales were in focus.

The stats were Kiwi Dollar positive. Business confidence improved in the 1st quarter, with retail sales on the rise after a slide in February.

At the end of the week, the business PMI jumped from 53.4 to an all-time high 63.6 in March. A sharp increase in new orders and production drove the PMI to its all-time high.

On the monetary policy front, the RBNZ was also in action. While holding rates steady, the rate statement tested the Kiwi Dollar mid-week. Talk of a willingness to cut the cash rate further amidst a slowdown in the recovery pegged the Kiwi back.

For the Japanese Yen

It was a quiet week.

There were no material stats to provide the Yen with direction.

The lack of stats left core machinery orders in focus mid-week, which took an unexpected slide in February.

While the numbers drew interest, concerns over a fresh spike in new COVID-19 cases, geopolitics, and a weaker Greenback delivered Yen support.

The Japanese Yen rose by 0.79% to ¥108.80 against the U.S Dollar. In the week prior, the Yen had risen by 0.92% to ¥109.67.

Out of China

It was a busy week on the data front.

In the first half of the week trade data impressed, with exports surging by 49.0% and imports by 38.1%.

At the end of the week, GDP and industrial production figures were also in focus.

In the 1st quarter, the China economy expanded by 0.6%, quarter-on-quarter, following 2.6% growth in the 4th quarter. Economists had forecasted growth of 1.5%.

Year-on-year, the economy expanded by 18.3%, versus a forecasted growth of 19.0%. In the 4th quarter, the economy had expanded by 6.5% year-on-year.

Industrial production was up by 14.1% in March, year-on-year, falling short of a forecasted 17.2% rise. In February, industrial production had risen by 35.1%.

Other stats from China included fixed asset investment, unemployment, and retail sales figures.

Fixed asset investment rose by 25.6% year-on-year, coming in ahead of a forecasted 25.0% rise. In February, fixed asset investment had increased by 35.0%.

Retail sales increased by 34.2%, which was better than a forecasted 28%. In February, retail sales had risen by 33.8% year-on-year.

Finally, the unemployment rate fell from 5.5% to 5.3% in March. Economists had forecast for unemployment to hold steady at the end of the quarter.

In the week ending 16th April, the Chinese Yuan rose by 0.49% to CNY6.5206. In the week prior, the Yuan had risen by 0.22% to CNY6.5526.

The CSI300 fell by 1.37%, while the Hang Seng ended the week up by 0.94%.

Earnings Season’s Hot Start

“Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”

As a stock nerd and NFL fan, I love this quote from Ryan Detrick , the chief market strategist at LPL Financial.

Historically in April, the S&P 500 has seen gains in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

April 2021 has been no exception. Although March, and Q1, for that matter, ended with more questions than answers, this month has been nothing but white-hot.

The month kicked off with a blowout jobs report. It then continued with two consecutive weeks of jobless claims crushing estimates, retail sales coming in almost ⅓ higher than projected, and bank earnings blowing past forecasts. The Dow Jones and S&P 500 seemingly hit fresh record-highs every other day, and despite complications with JnJ’s one-dose vaccine, all signs point towards our life returning to normal by this summer.

While optimism is high right now, I implore you to remain cautious. I’m really not sure how much higher the Dow and S&P can go without pulling back somewhat. Not to mention, it still has not been smooth sailing for Cathie Wood stocks or SPACs for the last two months either. This rotation into recovery names is very real.

Remember that every month in 2021 thus far has started off hot and saw a pullback and volatility occur by the second half of the month.

We are now officially in the latter half of April. Although, as I said, April is historically a strong performing month, think about this. By the second half of January, we had Reddit trades spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.

According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months because of potentially full valuations and inflation fears. Even if this $2 trillion infrastructure plan doesn’t pass in full, do we really need to spend any more trillions with an economy starting to turn red hot?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We’re hot right now.

However, we could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please monitor overvaluation, inflation, bond yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 The Dow Jones- How Much Higher Could We Go?

Figure 1- Dow Jones Industrial Average $INDU

The Dow Jones remains red hot in 2021. Strong bank earnings, a recovering economy, and the potential for further infrastructure spending have sent the index to record highs in what seems to be every other day. Unfortunately, we are nowhere close to buyable any longer and are firmly overbought with an RSI over 72.

For the longest time, I’ve said to HOLD the Dow and let the gains ride. Now, I think it’s an excellent time to trim and take profits. Many analysts believe the index could end the year at 35,000 or higher, and the wheels are still in motion for that to happen. The problem, though? We’re above 34,000, and we’re only in mid-April.

You could do a heck of a lot better for a buyable entry point.

Having Dow exposure is valuable. The index has many strong recovery cyclical plays that should benefit from what appears to be an economic recovery and reopening going even better than expected. The Dow could also be quite beneficial as a hedge against volatile growth stocks and SPACs. You won’t see bond yields spooking this index as much.

But at this level, it’s probably better to SELL and consider trimming profits.

For an ETF that aims to correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a great option.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely 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 the 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.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA 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, Matthew Levy, 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. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’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. Matthew Levy, 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.

 

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Inside Window of Time for Short-Term Top

June E-mini Dow Jones Industrial Average futures surged to a record level on Thursday after several major companies reported strong earnings and robust economic data pointed to a rebound in consumer spending and an improving jobs market.

At 20:19 GMT, June E-mini Dow Jones Industrial Average futures are trading 33919, up 295 or +0.88%. This marked the first-time the blue-chip benchmark has crossed the 34,000 milestone.

In economic news, retail sales surged 9.8% in March as additional stimulus sent consumer spending soaring, the Commerce Department reported Thursday. That number topped the Dow Jones estimate of a 6.1% gain.

Another report released on Thursday showed that first-time filings for unemployment insurance dropped to the lowest level since March 2020. The Labor Department reported 576,000 new jobless claims for the week ended April 10. Economists polled by Dow Jones expected a total of 710,000.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed when buyers took out Wednesday’s high at 33800.

The main trend will change to down on a trade through the nearest main bottom at 31951. This is highly unlikely, but since the Dow is up 14 sessions from this main bottom, it is vulnerable to a potentially bearish closing price reversal top.

A closing price reversal top won’t change the main trend to down, but if formed then confirmed, it could trigger the start of a 2 to 3 day correction. Sometimes, it even retraces at least 50% of the current rally. The current range is 31951 to 33962. This makes 32957 a key 50% level to watch. This level will continue to rise as the market moves higher.

The minor range is 33157 to 33962. Its 50% level at 33560 is a potential downside target.

Short-Term Outlook

There is no resistance so we’re going to continue to watch for a closing price reversal top to tell us the selling is greater than the buying at current price levels.

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

UnitedHealth at All-Time High After Strong Quarter

Dow component UnitedHealth Group Inc. (UNH) is trading at an all-time high on Thursday after beating Q1 2021 top and bottom line estimates. America’s largest publicly-held health care provider benefited from its enormous Medicare/Medicaid administration footprint, posting a profit of $5.31 per-share, $0.94 better than expectations. Revenue rose a healthy 9.0% year-over-year to $70.2 billion, beating consensus by more than $1 billion. The stock currently pays a 1.33% annual dividend.

COVID Still Impacting Profits

The company also raised fiscal year 2021 earnings-per-share (EPS) guidance from $17.75 – 18.25 to $18.10 – 18.60. Those estimates include an approximately $1.80 per-share charge for the “potential net unfavorable impact to accommodate continuing COVID-19 effects, such as: testing and treatment costs; the residual impact of people having deferred care in 2020; and unemployment and other economy-driven factors”. UnitedHealth now serves 49.5 million customers, or more than 15% of the U.S. population.

The earnings report included a cautionary statement about the pandemic-driven profit deferral, noting that “COVID-19 treatment and testing during the quarter was higher than expected, paired with higher elective care deferral patterns. UnitedHealth Group is focused on encouraging and helping people to obtain the care they need, including vaccinations, and expects a continued rise in provision of care as the year progresses.”

Wall Street and Technical Outlook

Wall Street consensus hasn’t budged so far in 2021, maintaining an ‘Overweight’ rating based upon 28 ‘Buy’, 1 ‘Overweight’, and 6 Hold recommendations. Price targets currently range from a low of $360 to a Street-high $462 while the stock is set to open Thursday’s session more than $25 below the median $409 target.  This humble placement could support a rapid advance above 400 in coming sessions.

UnitedHealth failed a breakout above 2018 resistance in the 280s during 2020’s pandemic decline and bounced strongly, hitting new highs in June. Channeled price action stalled near 370 in November, giving way to a modest correction that found support at the 200-day moving average in February 2021. The stock bounced to range resistance in March and broke out once again, targeting an advance that that could reach 450 in the second half of the year.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Reaction to 33570 Sets Tone into Close

June E-mini Dow Jones Industrial Average futures are trading higher shortly before the cash market close on Wednesday. The blue chip average hit another record high early in the session as investors digested the first batch of corporate earnings that largely exceeded expectations.

Shortly before the cash market opening, futures were trading higher, led by Goldman Sachs and JPMorgan Chase.

At 19:09 GMT, June E-mini Dow Jones Industrial Average futures are at 33632, up 62 or +0.18%.

Shares of Goldman Sachs climbed more than 3% after the bank blew past analysts’ expectations with record first-quarter net profits and revenues on strong performance from the firm’s equities trading and investment banking units.

JPMorgan Chase beat analysts’ estimates on the top and bottom lines, helped by a $5.2 billion benefit from releasing money it had previously set aside for loan losses that didn’t develop.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed early in the session when buyers took out the previous high at 33712.

A trade through 31951 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the Dow is inside the window of time for a potentially bearish closing price reversal top.

The minor range is 33157 to 33800. Its 50% level or pivot at 33479 is potential support.

The short-term range is 31951 to 33800. Its retracement zone at 32876 to 32657 is the nearest support area.

Daily Swing Chart Technical Forecast

The direction of the June E-mini Dow Jones Industrial Average futures contract into the close is likely to be determined by trader reaction to 33570.

Bullish Scenario

A sustained move over 33570 will indicate the presence of buyers. If this creates enough upside momentum then look for a possible retest of the intraday high at 33800.

Bearish Scenario

A sustained move under 33570 will signal the presence of sellers. The first downside target is the pivot at 33479. Taking out this level could trigger an acceleration to the downside with 33157 the next potential downside target.

Side Notes

A close under 33570 will form a closing price reversal top. If confirmed on Thursday, this could trigger the start of a 2 to 3 day correction.

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 – Reaction to 33631 Sets the Tone

June E-mini Dow Jones Industrial Average futures are trading lower following the release of the U.S. consumer inflation report and on a steep loss in shares of Johnson & Johnson after the Food and Drug Administration (FDA) asked states on Tuesday to temporarily halt using Johnson & Johnson’s COVID-19 vaccine “out of an abundance of caution” after six women in the U.S. developed a rare blood-clotting disorder.

At 12:36 GMT, June E-mini Dow Jones Industrial Average futures are trading 33553, down 78 or -0.23%.

The consumer price index rose 0.6% from the previous month but 2.6% from the same period a year ago. The year-over-year gain is the highest since August 2018.

The index was projected to rise 0.5% on a monthly basis and 2.5% from March 2020, according to Dow Jones estimates.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, may be getting ready to shift to the downside. The uptrend was reaffirmed earlier in the session when buyers took out yesterday’s high.

A trade through 31951 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the market is inside the window of time for a potentially bearish closing price reversal top.

This chart pattern won’t change the main trend to down, but if confirmed, it could fuel the start of a 2 to 3 day correction.

The minor range is 33157 to 33712. Its 50% level at 33435 is potential support.

The short-term range is 31951 to 33712. If the closing price reversal top is confirmed then its 50% to 61.8% retracement zone at 32832 to 32624 will become the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the June E-mini Dow Jones Industrial Average futures contract on Tuesday is likely to be determined by trader reaction to 33631.

Bullish Scenario

A sustained move over 33631 will indicate the presence of buyers. The first upside target is the intraday high at 33712. Taking out this level could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 33631 will signal the presence of sellers. The first downside target is the minor pivot at 33435.

Buyers could come in on the first test of 33435, but if it fails then look for the selling to possibly extend into the minor bottom at 33157.

Side Notes

A close under 33631 will form a closing price reversal top on the daily chart. If confirmed on Wednesday, this could trigger the start of a 2 to 3 day correction with 32832 to 32624 a potential downside target.

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

US Stock Index Futures Turn Lower after FDA Recommends Pausing J&J Covid Vaccine

The major U.S. stock indexes are trading lower shortly before the cash market open on reports that U.S. regulators are calling for a pause in the use of the Johnson and Johnson vaccine due to clotting issues. This is breaking news so watch for updates as the market approaches its opening at 12:30 GMT.

At 11:09 GMT, June E-mini S&P 500 Index futures are trading 4106.00, down 14.25 or -0.35%. The June E-mini Dow Jones Industrial Average futures contract is at 33505, down 126 or -0.37% and the June E-mini NASDAQ Composite is at 13789.00, down 19.75 or -0.14%.

Investors Bracing for US Consumer Inflation Data

Ahead of the breaking news, U.S. stock futures were mostly flat ahead of a highly anticipated inflation report set for release before Tuesday’s opening bell on Wall Street.

The pace of consumer inflation is likely to have returned to pre-pandemic levels in March, and it is expected to heat up even more in the next couple of months.

Rising inflation is one of the biggest fears in the market, and if it gets too hot, it could corrode asset values, limit buying power and eat away at corporate margins.

It is inevitable the reopening economy will generate some pick-up in inflation, with demand up sharply and supply chain issues resulting in shortages. Newly vaccinated consumers are also expected to resume traveling and other activities outside the home, which could create a temporary surge in services inflation.

But the Fed and some economists argue this inflationary pick up will be temporary, meaning it should not derail the recovery or result in Fed rate hikes. That makes every new inflation report very important to markets, and that is the case with Tuesday’s 12:30 GMT release of March CPI.

CPI Report Expectations

The March consumer price index is expected to show a moderate 0.2% increase in core inflation, excluding food and energy prices, according to economists polled by Dow Jones. On a year-over-year basis, that is a 1.5% pace, compared to 1.3% in February.

March headline inflation is expected to increase by 0.5% or 2.5% year-over-year, up from 1.7% in February. By May, some economists expect headline inflation could be running at a year-over-year rate of 3.5% or more. The headline rate was last at 2.5% in January, 2020.

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

US Dollar Posts Worst Week of the Year as Yields Drop on Dovish Fed Minutes

The U.S. Dollar finished lower against a basket of major currencies last week, completing its worst week of the year, after ongoing loose Federal Reserve policy, a drop in Treasury yields and surprisingly soft U.S. jobs figures prompted investors to trim their long bets. The dollar index did recover, however, on Friday as a jump in producer prices helped Treasury yields recover some of their earlier losses.

Last week, June U.S. Dollar Index futures settled at 92.160, down 0.890 or -0.96%.

Fed Expects to Keep Supporting Economy ‘For Some Time,’ Minutes Show

Federal Reserve officials remain wary about the ongoing risks of the coronavirus pandemic and are committed to bolstering the economy until its recovery is more secure, minutes of the U.S. central bank’s latest policy meeting showed last Wednesday.

With their own forecasts projecting the strongest run of U.S. economic growth in nearly 40 years, “participants agreed that the economy remained far from the (Fed’s) longer-run goals and that the path ahead remained highly uncertain,” the minutes from the March 16-17 meeting said.

“Participants noted that it would likely be some time,” before conditions improved enough for the central bank to consider reducing its current level of support.

Labor markets were improving, but remained gashed by the pandemic. Inflation would pick up, the minutes noted, but likely subside next year. A recent jump in U.S. Treasury yields was “generally viewed … as reflecting the improved economic outlook.”

Treasury Bonds Finish Lower, Weakening Dollar Demand

Yields fell last week following dovish comments from the economy from Federal Reserve Chairman Jerome Powell. He called the recovery from the pandemic “uneven” on Thursday, signaling a more robust recovery is needed. This move dampened the U.S. Dollar’s appeal as an investment.

“The recovery remains uneven and incomplete,” Powell said Thursday in a virtual event presented by the International Monetary Fund and moderated by CNBC’s Sara Eisen. “This unevenness that we’re talking about is a very serious issue.”

Treasury yields moved rapidly moving higher earlier this year over concerns about inflation, amid the economic recovery from the coronavirus. However, the Federal Reserve has said it will let inflation run hotter if this helps achieve full employment.

Mixed Economic Data Fuels Volatility

Helping to pressure yields and the dollar was a report that showed first-time claims for unemployment insurance rose more than expected the week-ending April 3. The Labor Department reported Thursday first-time claims during the period totaled 744,000, well above the expectations for 694,000 from economists surveyed by Dow Jones.

On Friday, however, the benchmark U.S. Treasury yield and the dollar index rose after the March producer price index, which measures wholesale price inflation, showed a larger-than-expected increase.

The March PPI data showed a rise of 1.0%, compared with a projected rise of 0.4% from economists surveyed by Dow Jones. The majority of the increase came from a jump in prices for final demand goods, the U.S. Bureau of Labor Statistics.

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

JPMorgan Chase Could Hit New Highs After Earnings

Dow component JPMorgan Chase and Co. (JPM) kicks off first quarter earnings season for the banking sector on Wednesday, followed by Citigroup Inc. (C) and Bank of America Corp. (BAC) on Thursday. The western hemisphere’s largest bank is expected to post a profit of $2.94 per-share on $29.96 billion in Q1 2021 revenue. If met, earnings-per-share (EPS) will mark a dramatic 377% profit increase compared to the same quarter in 2020.

Banks Lift into Market Leadership

Many U.S. banks have broken out above 2018 resistance in reaction to rising interest rates that should bolster industry profits for several years at a minimum. Historically speaking, rising rates are bullish for banks in the early phases of an economic boom but that tailwind dissipates as soon as rates get too high to support growth. That could happen before the next presidential election, given the current rate trajectory and trillions of printed dollars being handed out to U.S. citizens.

CEO Jamie Dimon sounded the alarm in a shareholder letter last week, warning “In an inflationary case, fiscal and monetary policy may very well be at odds. Also in this case, the cost of interest on U.S. debt could go up fairly dramatically making things a little worse. Rapidly raising rates to offset an overheating economy is a typical cause of a recession. One other negative: In this case, we would be going into a recession with an already very high U.S. deficit.”

Wall Street and Technical Outlook

Wall Street consensus has dropped to an ‘Overweight’ rating in response to Morgan’s 23% year-to-date return, based upon 16 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $95 to a Street-high $187 while the stock ended Friday’s session about $9 below the median $165 target. There’s plenty of room for upside in this configuration, especially if Q1 earnings results exceed expectations.

The stock broke out above the 2000 high in the mid-60s in 2016 and entered a powerful uptrend that stalled above 140 at the end of 2019. It plummeted to a three-year low during the pandemic decline and turned higher in a two-legged recovery that finally reached the prior high in January 2021. Morgan then carved the handle in a cup and handle breakout pattern and took off in a rally that could easily top 200 by the fourth quarter.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Major U.S. Stock Indexes Plow Higher with S&P 500, Dow Closing at Records

The S&P 500 index and the Dow Jones Industrial Average rose on Friday to close at record highs, getting their lift from growth stocks and optimism ahead of quarterly earnings season next week. Meanwhile, data showed U.S. producer prices increased more than expected in March, bringing the largest annual gain in 9-1/2 years.

Cash Market Performance

In the cash market, the benchmark S&P 500 Index settled at 4128.80, up 31.63 or +0.77%, the blue chip Dow Jones Industrial Average finished at 33800.60, up 297.03 or +0.88% and the technology-based NASDAQ Composite closed at 13900.19, up 70.88 or +0.51%.

Growth Stocks Moved Back to Forefront

Growth names have found their footing over the past two weeks after being outperformed by value stocks for most of the year. A pullback in the 10-year U.S. Treasury yield from a 14-month high hit in late March encouraged buying in growth.

Megacap names such as Apple, Amazon and Microsoft, which are in the growth index, advanced to pace the S&P 500. Amazon shares rose as warehouse workers in Alabama rejected an attempt to form a union.

The Russell 1000 growth index, made up largely of technology stocks, outperformed its value counterpart, made up mostly of cyclical stocks such as financials and energy names, for a second week following the pullback in longer-dated Treasury yields.

US Factory Gate Prices Surge

On the data front, the producer price index, which measures wholesale price inflation, jumped in March. The March PPI data showed a rise of 1.0%, compared with a projected increase of 0.4% from economists surveyed by Dow Jones.

Year over year, the PPI surged 4.2%, which marks the largest annual gain in more than nine years.

Many investors now expect higher inflation as vaccine rollouts help the U.S. economy rebound from coronavirus-fueled lockdowns, yet stocks showed little concern as the Federal Reserve has maintained it will allow inflation to overshoot its target.

Stocks in the News

Stocks linked to the recovering economy led the gains again amid the accelerating vaccine rollout. Carnival Corp rose 2.6% after getting two upgrades on Wall Street amid pent-up demand and potential summer restart. General Electric climbed more than 1%. JP Morgan added 0.8%.

Gains in Honeywell helped lift the Dow as Jefferies and J.P. Morgan raised their price targets on the U.S. aero parts maker’s shares.

Earnings Season Begins Next Wednesday

The banks will kick off first-quarter earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo scheduled to report on Wednesday. Analysts expect profits for S&P 500 firms to show a 25% jump from a year earlier.

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

The Week Ahead – Economic Data, COVID-19, and Corporate Earnings in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 63 stats in focus in the week ending 16th April. In the week prior, 36 stats had been in focus.

For the Dollar:

After a quiet Monday, March inflation figures will get things going on Tuesday. In spite of the FED’s assurances of unwavering support, a pickup in inflationary pressure will be a test for the markets.

The focus will then shift to a particularly busy day on the economic calendar.

Key stats include March retail sales, jobless claims, and Philly FED Manufacturing PMI numbers.

Business inventory and industrial production figures are also due out but will likely have limited impact.

At the end of the week, prelim consumer sentiment figures for April will also draw attention on Friday.

In the week ending 9th April, the Dollar Spot Index slid by 0.92% to 92.163.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

Early in the week, Eurozone retail sales and economic sentiment figures for Germany and the Eurozone will be in focus.

Expect Germany’s ZEW economic sentiment figures to have the greatest impact.

Mid-week, industrial production figures for the Eurozone.

Wrapping up the week, March inflation and trade data for the Eurozone will draw attention.

Other stats in the week include inflation figures for France, Germany, Italy, and Spain. We don’t expect the numbers to have an impact on the EUR, however.

The EUR ended the week up by 1.19% to $1.1899.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

Retail sales figures are due out early Tuesday ahead of industrial and manufacturing production figures later in the day.

February trade figures will also be in focus on Tuesday. Expect more interest in the numbers, as the markets look for the effects of Brexit on trade terms.

The Pound ended the week down by 0.90% to $1.3707.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

The markets will have to wait until Thursday for manufacturing sales figures. With little else to consider, the numbers will draw attention ahead of wholesale sales numbers on Friday.

Mid-week, OPEC and the IEA’s monthly report, crude oil inventory numbers will also influence.

From the Bank of Canada, the Business Outlook Survey will provide direction at the start of the week.

Away from the economic calendar, expect economic data from China to also influence…

The Loonie ended the week up 0.38% to C$1.2530 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week ahead.

Key stats include business and consumer confidence figures in the 1st half of the week.

In the 2nd half of the week, March employment numbers are also due out.

Expect plenty of Aussie Dollar sensitivity to the numbers. Business investment and consumer spending are both key to the economic recovery. Any weakening in consumer or business confidence will test support for the Aussie Dollar.

Improving labor market conditions will also be a must.

The Aussie Dollar ended the week up by 0.17% to $0.7623.

For the Kiwi Dollar:

It’s a relatively quiet week ahead.

Key stats include electronic card retail sales and business PMI numbers.

While we can expect the numbers to influence, the RBNZ monetary policy decision is the main event of the week.

With the markets expecting the RBNZ to stand pat, the focus will be on the RBNZ Rate Statement.

The Kiwi Dollar ended the week up by 0.01% to $0.7033.

For the Japanese Yen:

It is a quiet week ahead.

There are no material stats to provide the Yen with direction. The lack of stats will leave the Yen in the hands of market risk sentiment in the week.

The Japanese Yen rose by 0.92% to ¥109.67 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead.

Early in the week trade data for March will be in focus. Expect plenty of interest in the numbers. The markets will be looking for a sustained improvement in trade terms.

At the end of the week, 1st quarter GDP numbers and March industrial production figures will be in focus.

Other stats include retail sales, fixed asset investment, and unemployment figures. While the numbers tend to draw attention, 1st quarter GDP numbers will overshadow these stats at the end of the week.

The Chinese Yuan ended the week up by 0.22% to CNY6.5526 against the U.S Dollar.

Geo-Politics and COVID-19

U.S foreign policy will remain the main area of focus for the markets, with U.S – China relations key.

For the Eurozone, vaccination roll-outs and COVID-19 news updates will also be in focus in the week ahead.

Corporate Earnings

Earning season also kicks off in the week ahead.

Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo are big names delivering results in the week

The Weekly Wrap – A Dovish FED Pegs Back the Greenback

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 9th April.

A total of 36 stats were monitored, following 60 stats from the week prior.

Of the 36 stats, 23 came in ahead forecasts, with 11 economic indicators coming up short of forecasts. There were 2 stats that were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 12 stats, 11 reflected a deterioration from previous.

For the Greenback, it was a first weekly loss in 4-weeks. In the week ending 9th April, the Dollar Spot Index fell by 0.92% to 92.163. In the previous week, the Dollar had risen by 0.28% to 93.022.

A dovish FED left the Dollar in the red for the week.

Out of the U.S

It was a quieter week on the economic data front.

Key stats included service sector PMI, factory orders, and weekly jobless claim figures.

It was a mixed set of numbers for the Greenback.

The market’s preferred ISM Non-Manufacturing PMI rose from 55.3 to 63.7 in March. It was the only positive, however.

In February, factory orders fell by 0.8%, partially reversing a 2.7% rise from January.

Jobless claims figures were also disappointing, with initial jobless claims rising from 728k to 744k in the week ending 2nd April. Economists had forecast a fall to 680k.

Other stats in the week included JOLTs job openings, trade data, wholesale inflation, and Markit service PMIs.

These stats had a relatively muted impact on the Dollar and the broader markets, however.

On the monetary policy front, the FOMC meeting minutes reaffirmed FED Chair Powell’s stance on low for longer. Late in the week, Powell also delivered a speech talking of the need for unwavering monetary policy support.

In the equity markets, the NASDAQ rallied by 3.12%, with the Dow and the S&P500 gaining 1.95% and 2.71% respectively.

Out of the UK

It was a quiet week on the economic data front.

Finalized service and composite PMI numbers for March were in focus.

Downward revisions from prelim figures had a relatively muted impact on the Pound, however. Service sector and the broader private sector returned to growth in March, delivering Pound support.

Government plans on easing COVID-19 containment measures thanks to progress on the vaccination front also remained Pound positive.

In the week, the Pound fell by 0.90% to end the week at $1.3707. In the week prior, the Pound had risen by 0.31% to $1.3832.

The FTSE100 ended the week up by 2.65%, reversing a 0.05% loss from the previous week.

Out of the Eurozone

It was another particularly busy week on the economic data front.

Mid-week, service sector PMIs for March were in focus after impressive manufacturing numbers from the week prior.

The stats were skewed to the positive, with only Italy reporting a decline in its services PMI.

For the Eurozone, the composite PMI increased from 48.8 to 53.2, which was up from a prelim 52.5. A return to growth across the private sector came in spite of containment measures across a number of Eurozone member states.

From Germany, factory orders, industrial production, and trade data were also in focus.

Orders rose for a 2nd consecutive month, albeit at a slower pace, driven by domestic demand.

Industrial production and trade data disappointed, however.

Industrial production fell by 1.6% in February, month-on-month, following a revised 2% decline in January. Economists had forecast a 1.5% rise.

In February, Germany’s trade surplus narrowed from €22.2bn to €19.1bn, versus a forecasted narrowing to €20.0bn.

On the monetary policy front, the ECB meeting minutes were also in focus. While highlighting downside risks to the economy near-term, optimism was evident over the medium-term outlook.

In line with Lagarde’s assurances from the press conference, the minutes revealed a plan to ramp up bond purchases in the near-term. The minutes did discussed a quarterly review, however…

For the week, the EUR rose by 1.19% to $1.1899. In the week prior, the EUR had fallen by 0.30% to $1.1759.

The DAX30 rose by 0.84%, with the CAC40 and EuroStoxx600 ended the week with gains of 1.09% and 1.16% respectively.

For the Loonie

It was a busier week.

Trade data for February and March Ivey PMI numbers were in focus mid-week.

The stats were mixed. While the Ivey PMI jumped from 60.0 to 72.9, the trade surplus narrowed from C$1.21bn to C$1.04bn.

At the end of the week, employment figures for March were more significant, however.

Employment surged by 303.1K at the end of the quarter, following an impressive 259.2k jump in February.

The unemployment rate fell from 8.2% to 7.5% as a result of the surge in hiring.

In the week ending 9th April, the Loonie rose by 0.38% to C$1.2530. In the week prior, the Loonie had fallen by 0.01% to C$1.2578.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9th April, the Aussie Dollar rose by 0.17% to $0.7623, with the Kiwi Dollar ending the week up by 0.01% to $0.7033.

For the Aussie Dollar

It was a particularly quiet week.

There were no material stats to provide the Aussie with direction.

While there were no stats, the RBA was in action early in the week.

In line with market expectations, the RBA stood pat on policy.

The Rate Statement talked of a hold on the cash rate until wage growth is substantially higher and inflation is sustainably within the 2% to 3% target range. According to the statement, the Board does not expect these conditions to be met until 2024 at the earliest.

For the Kiwi Dollar

It was also a particularly quiet week.

There were no material stats in the week to provide the Kiwi with direction.

For the Japanese Yen

It was a relatively quiet week.

At the start of the week, finalized service PMI figures were in focus. In March, the services PMI increased from 46.3 to 48.3, its highest reading since 2020.

In spite of the continued contraction, optimism hit its highest level since 2013 on vaccine hopes.

Household spending figures for February also provided some hope. Month-on-month, spending increased by 2.4%, partially reversing a 7.3% slump from January.

The Japanese Yen rose by 0.92% to ¥109.67 against the U.S Dollar. In the week prior, the Yen had fallen by 0.96% to ¥110.69.

Out of China

It was a relatively quiet week on the data front.

The Caixin Services PMI for March was in focus early in the week.

Following softer growth across the manufacturing sector, service sector activity picked up in March.

The Services PMI rose from 51.5 to 54.3.

At the end of the week, inflation figures also drew attention, with the PMI surveys highlighting a marked increase in input price.

In March, consumer prices fell by 0.5%, reversing a 0.6% increase in February. In spite of the fall in March, inflationary pressure returned. The annual rate of inflation accelerated from -0.2% to 0.4%. Economists had forecast consumer prices to fall by 0.4%, month-on-month, and to rise by 0.3% year-on-year.

Wholesale inflationary pressures surged at the end of the 1st quarter. The producer price index increased by 4.40%, year-on-year, which was well above a forecasted 3.5% increase. The PPI had risen by 1.7% in February.

In the week ending 9th April, the Chinese Yuan rose by 0.22% to CNY6.5526. In the week prior, the Yuan had fallen by 0.40% to CNY6.5670.

The CSI300 slid by 2.45%, with the Hang Seng ending the week down by 0.83%.

Stocks are Heating Up

In keeping with its historical performance, April has started off white-hot. We ended March, and Q1 for that matter, with more questions than answers.

But April 2021 started with a blowout jobs report, and the indices haven’t looked back since. Right now, the S&P 500 is at yet another record, the Dow is just about at a record, and we’ve seen a furious comeback for Big Tech and growth stocks.

The sentiment is certainly better now than it was just a couple of weeks ago. However, I implore you to remember that every month in 2021 thus far has started off hot and saw a pullback/volatility occur in the second half of the month.

Think about it. In January, we had the GameStop trade spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.

But, as I mentioned before, April historically is a strong month for stocks. According to Ryan Detrick , chief market strategist at LPL Financial, “Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”

During April, the S&P 500 has gained in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

The market concerns, though, are still intact. We still have to worry about inflation, bond yields, and stocks peaking. According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months.

Another thing I’m a bit concerned about is the $2 trillion infrastructure plan. While this is great for America’s crumbling infrastructure, do we really need to spend any more trillions?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We’re hot right now.

However, we could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please continue to monitor inflation, yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000- Still Buyable?

Figure 1- iShares Russell 2000 ETF (IWM)

I proudly switched my call on the iShares Russell 2000 ETF (IWM) to a BUY on March 24. I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February and swore I wouldn’t make that mistake again.

We’re up to over 5% since then.

The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.

The RSI is still hovering around 50. I also checked out the chart and noticed that almost every time the IWM touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to now. The Russell 2000, despite its gains since tanking on March 23, remains right at about its 50-day moving average.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

According to the chart, we may have found double-bottom support too.

Based on the chart and macro-level tailwinds, I feel that you can still BUY this index. In fact, it may be the most buyable of them all.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely 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 the 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.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

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All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA 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, Matthew Levy, 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. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’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. Matthew Levy, 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.

 

Traders Take Profits on Precious Metals

After a sweet bounce, gold finally reached a crucial horizontal resistance and started a small correction.

Silver broke the lower line of the wedge and is aiming for an important horizontal support.

Brent oil is in a sideways trend waiting for a breakout to give us a proper direction.

The DAX is inside a correction pattern, getting closer to another strong buy signal.

The Dow Jones is already done with waiting and has started aiming higher.

The GBPUSD is on its way to test the long-term up trendline.

The GBPAUD tested the neckline of a bog head and shoulders pattern and created a shooting star which is a rather bearish sign.

The EURRUB is aiming lower after the price escaped from a flag and broke the neckline of the inverted head and shoulders pattern.

Dow Jones Index Bullish Breakout Aims at 35,000 Target

The Dow Jones Index (US 30) is building a bull flag continuation chart pattern within a larger uptrend. A bullish breakout should confirm a push higher.

Let’s review the price and wave patterns plus review the main targets and what-if scenarios.

Price Charts and Technical Analysis

Dow Jones 09.04.2021 4 hour chart

The US 30 chart needs a break above the resistance trend lines (orange) to confirm a continuation of the uptrend (green arrows):

  1. The bullish breakout could confirm a wave 3 (light blue) pattern.
  2. The larger wave analysis is indicating a strong uptrend with a potential wave 3 (purple) of wave 3 (red).
  3. Recently price completed an ABC (light blue) within wave 4 (orange) at the 38.2% Fibonacci level and 144 ema close. The -27.2% Fibonacci target of that price swing is located at 34,000.
  4. But a wave 3 (light blue) could go as far as 34,600 or even 35,000 before losing momentum, if this is a wave 3.
  5. Any bearish breakout (orange dotted arrow) would invalidate this immediate bullish outlook. Although the long-term trend is still up and therefore any retracement could simply find support at the 144 ema close (blue dotted arrow).

On the 1 hour chart, price action seems to be building a sideways correction after showing strong bullish impulse (wave 3 green):

  1. The sideways range is probably a wave 4 (green), which respects the 38.2% Fibonacci level.
  2. A bullish breakout could indicate a push higher. Perhaps as part of the wave 5 (green).
  3. A pullback to the 50% Fibonacci level could still be a bouncing spot.
  4. Only a deeper break places this wave outlook in danger. But the uptrend still remains intact even if price action retraces, just with a different wave scenario.

Dow Jones 09.04.2021 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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 – Holding 33331 Sustains Upside Bias

June E-mini Dow Jones Industrial Average futures are edging higher early Friday, but a massive rotation into technology and growth stocks, is not allowing the blue chip average to keep up with the big boys – the benchmark S&P 500 Index and the tech driven NASDAQ Composite.

At 06:14 GMT, June E-mini Dow Jones Industrial Average futures are trading 33413, up 23 or -0.07%.

In other news, from an economic standpoint, Dow investors largely shrugged off an unexpected jump in jobless claims from last week. This means investors didn’t seem to care what it meant to the economic recovery, but they did react when the news drove Treasury yields lower. Yields retreated from their highs with the 10-year Treasury yield hovering around 1.6%.

Daily June E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 33504 will signal a resumption of the uptrend. The main trend will change to down on a move through 31951.00.

The minor trend is also up and the Dow is holding above the 33157 to 33060 gap formed on Monday.

The Dow is up 10 sessions from its last main bottom. This puts it inside the window of time for a potentially bearish closing price reversal top. Taking out 33504 then closing lower will form a closing price reversal top. If confirmed, this could trigger the start of a closing price reversal top.

The current minor range is 31951 to 33504. Its retracement zone at 32728 to 32544 is the nearest support zone.

Daily Swing Chart Technical Forecast

The direction of the June E-mini Dow Jones Industrial Average on Friday is likely to be determined by trader reaction to the minor pivot at 33331.

Bullish Scenario

A sustained move over 33331 will indicate the presence of buyers. This could lead to a test of 33504. Taking out this level will reaffirm the uptrend and could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 33331 will signal the presence of sellers. The next downside target is this week’s low at 33157. Taking out this level could trigger a further break into 33060. This will fill in the gap formed on the daily chart on Monday.

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