E-mini S&P 500 Index (ES) Futures Technical Analysis – Momentum Could Shift on Close Under 4132.75

June E-mini S&P 500 Index futures are trading lower late in the session after giving back earlier gains. The index was supported shortly before the cash market opening after upbeat earnings reports from Goldman Sachs and JPMorgan boosted investor expectations of a strong rebound for corporate America amid swift COVID-19 vaccinations.

At 18:28 GMT, June E-mini S&P 500 Index futures are trading 4123.75, down 9.00 or -0.22%.

Goldman Sachs Group Inc rose 3.9% after it reported a massive jump in first-quarter profit, capitalizing on record levels of global deal making activity. JPMorgan Chase & Co’s shares fell 1.0% even as the largest U.S. bank’s earnings jumped almost 400% in the first quarter, as it released more than $5 billion in reserves it had set aside to cover coronavirus-driven loan defaults.

Daily June E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the late session weakness may be an indication that momentum is getting ready to shift to the downside.

A trade through the intraday high at 4144.00 will reaffirm the uptrend. The main trend will change to down on a move through 3843.25. This is not likely, but the index is in a position to post a potentially bearish closing price reversal top.

The minor trend is also up. A trade through 4101.25 will change the minor trend to down. This will also shift momentum to the downside.

The new minor range is 4101.25 to 4144.00. The index is currently testing its 50% level or pivot at 4122.50.

The short-term range is 3843.25 to 4144.00. Its retracement zone at 3993.50 to 3958.00 is the nearest support area.

Daily Swing Chart Technical Forecast

The direction of the June E-mini S&P 500 Index into the close on Wednesday is likely to be determined by trader reaction to 4132.75.

Bullish Scenario

A sustained move over 4132.75 will indicate the presence of buyers. If this move can create enough upside momentum then look for the buying to possibly extend into 4144.00.

Bearish Scenario

A sustained move under 4132.75 will signal the presence of sellers. The first downside target is 4122.50. Taking out this level could create the downside momentum needed to challenge the minor bottom at 4101.25. This price is a potential trigger point for an acceleration to the downside.

Side Notes

A close under 4132.75 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.

S&P 500 Price Forecast – S&P 500 Continues to March Higher

The S&P 500 has gotten a bit stretched over the last couple weeks, and we are starting to see that as the momentum is most certainly dropping. At this point in time, the market is likely to continue to see a lot of noise, but I do think that we have a couple of support levels underneath that should come into play. The first one would be the 4100 level, which of course has support due to the fact that we have tested it recently, and it is also a large, round, psychologically significant figure.

S&P 500 Video 15.04.21

After that, we have a gap near the 4000 level, which not only would it be supportive because of that gap, but also that large figure as well. The 50 day EMA then follows at the 3935 level. It is not until we break down below 3900 that I would be concerned about the uptrend, and even then, I would be a buyer of puts, not necessarily someone looking to short this market. After all, we have been taught over the last 13 years that the Federal Reserve will certainly jump into the fray every time it has to pick the market up, so the last thing you want to do is be short of an index when something like that happens. With that being the case, I am looking for pullbacks as potential buying opportunities going forward and will treat them as such. With that being the case, I am going to simply sit on the sidelines and wait for an opportunity to pick up “value” going forward.

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

US Equities Climb A “Wall Of Worry” To New Highs

Low volume rallies have become a standard of trending recently.  We see higher volume when volatility kicks in near areas of broad market volatility.  Otherwise, we see lower volume trending push the prices higher recently in a “melt-up” type of mode.

Two recent standout events confirm this type of trending and volatility phases of the markets: (1) the September 2020 to early November 2020 (pre-US Election) rotation in price; and (2) the recent February 2021 to late March 2021 sideways price rotation related to the FOMC meeting/comments.  Both of these events centered around external market components and prompted an extended period of price volatility related to uncertainty.  After these events passed, price fell back into a low volume rally mode for many months, where most of the actual price gains happened.

The following Daily QQQ chart highlights my observations related to this type of price activity.  We start in the pre-COVID-19 price rally from October 2019 to the peak near mid-February 2020.  It is easy to see the decreased volume activity while prices climbed more than 27%.  Then, the COVID-19 even sent volatility skyrocketing higher and prices collapsed by 30%.  This type of “Wall Of Worry” trending is common and presents a very clear opportunity for traders.

After the March 2020 bottom, prices began another low volume rally that lasted from April 2020 to August 2020 – totaling a substantial +45% gain.  Again, starting in mid November 2020 and ending in mid February 2021, the QQQ rallied over 15% in a low volume “melt-up” trend.

Currently, the volume has started to subside after the FOMC meeting/comments volatility and we are starting to see moderately strong upward price trending in the QQQ.  This suggests we have entered another “Wall Of Worry” trend which may continue for many weeks or months.

The following Weekly XLY, SPDR Consumer Discretionary ETF chart highlights how diverse this “Wall of Worry” trend really is.  It translates into other sectors with almost the same velocity as it does in the QQQ.  In this example, we can see the strong trending, highlighted by GREEN ARROWS, at the same time as the decreasing volume took place.  Each of these rally trends coincides with the QQQ trends.  The rally from April 2020 to August 2020 represented a +35% gain.  The rally from November 2020 to February 2021 represented a +21% gain.  The current rally attempt has already advanced over 17% higher and may continue to rally for many more weeks.

If there is no future disruption of this low volume trending, then we may expect to see the US stock market continue to move in this manner for many weeks or months to come.  These low-volume “Wall Of Worry” trends can be very profitable and can prompt big moves in sector ETFs.

Many traders continue to miss opportunities in these markets because of worry or concerns of a breakdown in the trend. Eventually, something will prompt a correction or breakdown of this rally trend.  But until that happens, traders need to be able to identify and profit from these strong low volume rallies as they present some of the lowest volatility price advances recently. Being able to identify and trade these sectors is key to being able to efficiently target profits.  You can learn more about the BAN strategy and how to identify and trade better sector setups by registering for my FREE Trading Course here.

For those who believe in the power of trading on relative strength, market cycles, and momentum but don’t have the time to do the research every day then my BAN Trader Pro newsletter service does all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers.

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

Enjoy the rest of the week!

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

Wells Fargo Q1 Earnings Blow Past Estimates on Release of Loan Loss Reserves; Target Price $47

San Francisco, California-based multinational financial services company Wells Fargo reported better-than-expected earnings in the first quarter, largely driven by the release of $1.6 billion in its reserves for credit losses.

The fourth-largest lender in the U.S. reported adjusted earnings per share $1.05, beating analysts’ expectations of $0.69 per share. With $18.06 billion in revenue, Wells Fargo surpassed Wall Street’s consensus estimates of $17.5 billion.

“Our results for the quarter, which included a $1.6 billion pre-tax reduction in the allowance for credit losses, reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities. Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low-interest rates and tepid loan demand continued to be a headwind for us in the quarter,” said Chief Executive Officer Charlie Scharf.

Wells Fargo shares, which slumped more than 40% in 2020, rebounded over 31% so far this year.

Wells Fargo Stock Price Forecast

Sixteen analysts who offered stock ratings for Wells Fargo in the last three months forecast the average price in 12 months of $39.64 with a high forecast of $47.00 and a low forecast of $32.00.

The average price target represents a -0.38% decrease from the last price of $39.79. Of those 16 analysts, nine rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $47 with a high of $67 under a bull scenario and $21 under the worst-case scenario. The firm gave an “Overweight” rating on the financial services company’s stock.

Several other analysts have also updated their stock outlook. BofA raised the price objective to $44 from $43. Wells Fargo & Company had its price target lifted by Barclays to $42 from $36. They currently have an equal weight rating on the financial services provider’s stock. Seaport Global Securities raised to a buy rating from a neutral and set a $42 target price. Oppenheimer reaffirmed a hold rating on shares.

Analyst Comments

Wells Fargo (WFC) appears to be beginning to take action to restructure its business mix as it works to exit the Fed consent order/asset cap and reduce its expense base. While uncertainty remains around the impact of business exits and timing of consent order/asset cap exit, we believe risk more than accounted for in the stock at 9x our 2022e EPS,” noted Betsy Graseck, equity analyst at Morgan Stanley.

WFC benefit to EPS from rising long end rates is the highest in the group, with each ~50bps increase in the 10yr driving ~4% to NII and as much as ~8% to EPS. We model WFC driving their expense ratio down to 64% by 2023 on reduced risk and compliance spend, operational efficiencies, and branch optimization. Lower expense ratio possible.”

Check out FX Empire’s earnings calendar

Wells Fargo Posts Strong First Quarter Earnings

Wells Fargo and Co. (WFC) is ticking higher in Wednesday’s pre-market after beating Q1 2021 top and bottom line estimates by wide margins. America’s third largest bank posted a profit of $1.05 per-share, $0.40 better than expectations, while revenue rose  just 2.0% year-over-year to $18.06 billion, beating consensus by $600 million. Credit loss provisions decreased by $5.1 billion, underpinned by “continued improvements in the economic environment.”

Waiting on Fed Approvals

The bank is overhauling its risk management and governance as part of a Fed-guided plan to lift asset caps, which in turn will improve shareholder benefits and allow greater risk taking. It’s now expected that temporary restrictions on bank holding company dividends and share repurchases put into place at the start of the pandemic will end for most firms on June 30. Wells is scrambling to get required policies in place ahead of final approvals later this quarter.

Credit Suisse analyst Susan Roth Katzke summed up improved sentiment recently, noting, “We asked for targets and supporting disclosure to increase clarity on the path to improved returns; both were delivered with fourth quarter results. To be sure, the path forward has its obstacles and revenue growth remains a challenge, but the combination of evident progress, incremental investment, excess capital, and the inherent franchise opportunity reduce the downside risk and render the aspiration of a 15% ROTE achievable, in time”.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 14 ‘Buy’, 3 ‘Overweight’, and 10 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $34 to a Street-high $65 while the stock is set to open Wednesday’s session about $3 below the median $43 target. While modest upside is possible with this placement, prolific gains many have to wait for the Fed’s OK on dividends and buybacks.

Wells Fargo underperformed its rivals after 2016’s disclosure it created millions of fraudulent savings and checking accounts. The stock posted an all-time high in January 2018 and turned sharply lower through 2019 and into 2020 when the bottom dropped out following the Wuhan outbreak. The recovery wave since October has stalled at the .618 Fibonacci retracement of the selloff that began in December 2019, generating much weaker gains than bank indices and commercial rivals that are now trading at multiyear and all-time highs.

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. 

Stocks Set To Open Higher As Big Banks Report Strong Earnings Results

Treasury Yields Stay Close To Recent Lows

S&P 500 futures are gaining some ground in premarket trading as Treasury yields remain close to recent lows. Yesterday, U.S. inflation reports indicated that inflation was rising a bit faster than analysts expected.

However, this increase is not sufficient enough to trigger any response from the Fed so Treasury yields declined after the release of inflation reports. Today, Treasury yields remain close to yesterday’s levels which is bullish for tech stocks which look ready to continue their upside move.

Big Banks Report Earnings

JPMorgan has recently released its quarterly results. The company reported revenue of $32.3 billion and earnings of $4.50 per share, beating analyst estimates on both earnings and revenue. Goldman Sachs and Wells Fargo reports also exceeded analyst estimates.

Financial stocks had a strong start of the year as yields moved higher, and it looks that investors have made a right move by betting on the financial segment as results look strong.

Interestingly, shares of Goldman Sachs and Wells Fargo are gaining some ground in premarket trading while JPMoran stock is down by about 0.5%, but the situation may change quickly when the regular trading session begins.

Oil Moves Higher As Iran Tensions Increase

WTI oil is currently trying to settle above the $61 level as the fate of renewed nuclear talks with Iran is under question. Recently, participants of the 2015 nuclear deal made an attempt to put Iran and U.S. back to the negotiation table, but the recent attack on Iran’s Natanz nuclear facility increased tensions.

In response to the attack, Iran stated that it would enrich uranium up to 60% purity. It is not clear whether Iran has the technical capability to do so in the near term, but the move clearly raises stakes in the complicated game between U.S., Iran and other participants of the 2015 nuclear deal.

It should be noted that the recent API Crude Oil Stock Change report indicated that crude inventories decreased by 3.6 million barrels and provided additional support to the oil market. If today’s EIA Weekly Petroleum Status Reports confirms API numbers, oil may gain additional upside momentum.

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

Morgan Stanley Lifts Magna International’s Target Price to $96, Upgrades to Equal-weight

Morgan Stanley raised their stock price forecast on Magna International to $96 from $61 and upgraded the mobility technology company’s stock to an “Equal-weight” rating.

“We upgrade Magna International (MGA) to Equal-weight from Underweight as we have greater confidence that management’s strategy can drive higher share/content on high growth BEV platforms. We double our revenue CAGR to 4% and raise our price target to $96,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Raised exit EBITDA margin forecast to 8.9% vs. 8.2% previously as our higher growth drives operating leverage, primarily in the BEV-exposed businesses (BEV Power & Vision, Body & Exterior, Complete Seating and Complete BEV vehicle assembly). This change adds approximately $5 to our price target.”

The company is set to announce its next earnings report on Thursday, May 6. According to ZACKS Research, Magna International is expected to post $9.75 billion in sales for the current fiscal quarter.

The U.S. listed Magna International’s shares, which surged over 25% in 2020, rose 4.6% to $93.64 on Monday.

Eleven analysts who offered stock ratings for Magna International in the last three months forecast the average price in 12 months at $92.18 with a high forecast of $100.00 and a low forecast of $61.00.

The average price target represents a -1.56% decrease from the last price of $93.64. Of those 11 equity analysts, seven rated “Buy”, three rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the bull-case scenario target price of $135 and the worst-case scenario forecast of $55.

MGA is the third-largest global auto supplier, with leadership in many product segments, strong balance sheet, and attractive valuation vs. peers. We believe Magna has an ability to grow its EV and AV-related business lines in a way that can more than compensate for the run-out of ICE/legacy OEM product lines,” Morgan Stanley’s Jonas added.

“The net result is modest growth over market, balanced by a starting point of peak cycle and margins. We see the stock as largely fairly valued with a mostly even risk-reward skew.”

Other equity analysts also recently updated their stock outlook. Magna International had its price target upped by KeyCorp to $98 from $86. They currently have an overweight rating on the stock. Barclays upped their target price to $87 from $75 and gave the company an equal weight rating.

Check out FX Empire’s earnings calendar

PepsiCo Q1 Earnings to Rise about 4%; Target Price $150

Harrison, New York-based global food and beverage leader PepsiCo is expected to report its first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 4% from $1.07 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of over 5% to about $14.6 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of nearly 6%.

PepsiCo’s better-than-expected results, which will be announced on Thursday, April 15, would help the stock to recoup this year’s losses. PepsiCo shares, which rose over 8% in 2020, slumped about 4% so far this year.

PepsiCo Stock Price Forecast

Seven analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $150.67 with a high forecast of $161.00 and a low forecast of $136.00.

The average price target represents a 5.49% increase from the last price of $142.83. Of those seven analysts, three rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $158 with a high of $185 under a bull scenario and $102 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. Zacks Investment Research raised shares of PepsiCo from a “hold” rating to a “buy” rating and set a $142price target. Sanford C. Bernstein issued an “underperform” rating and a $136 target price. Deutsche Bank increased their target price to $148 from $143 and gave the company a “hold” rating. Wells Fargo issued an “equal weight” rating and a $157 target price.

Analyst Comments

“We are OW PEP. We forecast Pepsi will post superior topline growth relative to peers driven by exposure to the higher growth/higher margin snacks category (2/3 of PEP’s profit). Snacks is a higher growth category given: (1) shift to snacking vs. sit-down meals; (2) less pressure from health/wellness vs. beverages, and (3) PEP’s leading share in snacks vs. fragmented competition, driving share gains, and higher margins/ROIC,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We also see more structural Pepsi market share benefits post-COVID, as PEP uses its DSD distribution advantage, to gain shelf space and share in snacks, and in beverages, where PEP is advantaged vs competition with a much lower mix in away-from-home.”

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast – Stock Markets Continue Drive Higher

The S&P 500 has initially pulled back towards the 4100 level on the Globex exchange overnight, but then turned around to show signs of strength. By doing so, it suggests that the market is ready to continue going higher, especially considering that the Johnson & Johnson vaccine has been paused, but it seems that the markets are completely willing to overlook that. If that is going to be the case, then I do not see any reason why we will go looking towards 4200.

S&P 500 Video 14.04.21

I would like to see some type of pullback in order to get involved, as it would give us an opportunity to pick up a little bit of “value” in the market. Ultimately, the 50 day EMA is starting to reach towards the 4000 handle, where I also see a massive gap. That is an area where we would see a lot of interest in the market, and I do think that a massive amount of buying pressure would come back in.

I have no interest in shorting this market anytime soon, as the 13 previous years have been full of money flooding into the market, and it is only a matter of time before more comes. Central banks will keep the pedal to the metal when it comes to quantitative easing and cheap money, and of course Wall Street loves that. With that being the case, I do not think that there is much that is going to drive us below the 4000 handle, barring some type of “black swan event.”

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

NVIDIA at Cusp of Major Breakout

NVIDIA Inc. (NVDA) is testing February’s all-time high after raising Q1 2021 revenue estimates above consensus during Monday’s Analyst Day, predicting “good visibility” and “another strong year”. In addition to rising Data Center income, the company raised estimates for a new industrial-scale cryptocurrency mining product from $50 million to $150 million, highlighting intense demand for digital assets. It topped off the bullish guidance by insisting that demand will “exceed supply for much of this year”.

Cutting Edge Product Line

The graphics giant announced a flurry of new high tech computing products at the event, including BlueField-3, a next generation data processing unit that “delivers the equivalent data center services of up to 300 CPU cores”, and the NVIDIA DRIVE Atlan system-on-a-chip for autonomous vehicles. The company also revealed a host of partnerships and collaborations for Arm computing, AI-capable supercomputers, and AI-on-5G solutions.

Cowen analyst Matthew Ramsay raised his target to $675 on Tuesday, noting “NVIDIA’s Analyst Day discussed its expanding accelerated compute portfolio, as well as a broadening set of business models to extract value in gaming, autos and datacenter. The announcement of the Project Grace CPU was the surprise of the day given the ARM acquisition is still under review. An $8B auto funnel and Q1 pre-announcement were also positives.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s outstanding 122% return, based upon 26 ‘Buy’, 5 ‘Overweight’, 5 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $380 to a Street-high $800 while the stock is set to open Tuesday’s session about $55 below the median $662 target. New highs are likely between now and the May earnings release, given this modest placement.

NVIDIA broke out above 2018 resistance in the 290s in May 2020 and took off in a powerful trend advance that topped out near 600 in September. November and February 2021 breakout attempts failed while downturns have held rectangular support near 460. The stock traded within 80 cents of range resistance on Monday while accumulation readings have lifted to new highs, setting the stage for a breakout that could reach 800 in the next two to three months.

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. 

Stocks Mixed After Inflation Exceeds Analyst Expectations

Inflation Rate Increased By 2.6% In March

The U.S. has just released Inflation Rate and Core Inflation Rate reports. The reports indicated that Inflation Rate increased by 2.6% year-over-year in March compared to analyst consensus which called for growth of 2.5%. Core Inflation Rate increased by 1.6% year-over-year compared to analyst consensus of 1.5%.

Inflation is moving higher on a year-over-year basis as prices were weak during the acute phase of the coronavirus crisis a year ago. Inflation looks more calm on a month-over-month basis although it also exceeded analyst expectations. Inflation Rate grew by 0.6% month-over-month in March compared to analyst consensus of 0.5%, while Core Inflation Rate increased by 0.3%.

S&P 500 futures are swinging between gains and losses in premarket trading after the release of inflation reports. Meanwhile, Treasury yields failed to gain additional upside momentum after reports indicated that inflation exceeded analyst expectations.

U.S. Recommends Pausing The Use Of Johnson & Johnson’s COVID-19 Vaccine

Shares of Johnson & Johnson found themselves under pressure in premarket trading after U.S. health agencies called for a temporary pause of the use of the company’s coronavirus vaccine.

The problems of Johnson & Johnson are similar to AstraZeneca‘s problems. In rare cases, recipients of the vaccine developed blood clots.

While these cases are extremely rare, the negative headlines may decrease people’s confidence in vaccination in general, so Johnson & Johnson’s problems may serve as a bearish catalyst for the market.

Euro Area Economic Sentiment Declines

Today, EU reported that Euro Area ZEW Economic Sentiment Index decreased from 74 in March to 66.3 in April. Analysts expected that it would grow to 77. In Germany, Economic Sentiment Index declined from 76.6 to 70.7 compared to analyst consensus of 79.

The reports indicated that European businesses have started to feel the pressure from the third wave of the virus. At the same time, it should be noted that ZEW Economic Sentiment Index remains at high levels.

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

E-mini S&P 500 Index (ES) Futures Technical Analysis – Set Up for Closing Price Reversal Top

June E-mini S&P 500 Index futures are trading lower shortly before the release of a U.S. consumer inflation report at 12:30 GMT and the cash market opening at 13:30 GMT. The benchmark index erased earlier gains in a quick plunge after the U.S. Food and Drug Administration (FDA) said it’s recommending a pause in the Johnson & Johnson Covid vaccine after reported cases of blood clotting.

At 12:06 GMT, June E-mini S&P 500 Index futures are at 4108.50, down 11.75 or -0.29%.

Economists polled by Dow Jones are projecting the headline consumer inflation index to rise by 0.5% month-over-month and 2.5% year-over-year.

Daily June E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out the previous high.

A trade through 3843.25 will change the main trend to down. This is highly unlikely, but the early price action suggests the index may be poised for a potentially bearish closing price reversal top. This won’t change the trend, but it could trigger the start of a 2 to 3 day correction.

The minor range is 3843.25 to 4127.00. If a correction generates enough downside momentum then look for the selling to possibly extend into its retracement zone at 3985.00 to 3951.50.

Daily Swing Chart Technical Forecast

The direction of the June E-mini S&P 500 Index on Tuesday is likely to be determined by trader reaction to 4120.25.

Bullish Scenario

A sustained move over 4120.25 will indicate the presence of buyers. Taking out the intraday high at 4127.00 will indicate the buying is getting stronger. This could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 4120.25 will signal the presence of sellers. This could put pressure on the index.

A close under 4120.25 will actually form a closing price reversal top. If confirmed on Wednesday, this could trigger a 2 to 3 day correction with the minor 50% level at 3985.00 the nearest 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.

UnitedHealth Could Hit New All-Time High on Strong Q1 Earnings; Target Price $393

Minnesota-based health insurer UnitedHealth is expected to report its first-quarter earnings of $4.38 per share, which represents year-over-year growth of about 18% from $3.72 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 13%. The largest insurance company by Net Premiums would post revenue growth of over 7% of around $68.9 billion.

UnitedHealth’s better-than-expected results, which will be announced on Thursday, April 15, would help the stock hit new all-time highs.

UnitedHealth shares, which surged more than 19% in 2020, rose over 7% so far this year.

UnitedHealth Stock Price Forecast

Nine analysts who offered stock ratings for UnitedHealth in the last three months forecast the average price in 12 months of $393.78 with a high forecast of $415.00 and a low forecast of $370.00.

The average price target represents a 4.65% increase from the last price of $376.28. Of those nine analysts, eight rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $462 with a high of $529 under a bull scenario and $261 under the worst-case scenario. The firm gave an “Overweight” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. Mizuho raised the stock price forecast to $394 from $380. UBS lifted the price target to $362 from $355. Deutsche Bank upped the target price to $409 from $404. Bernstein lowered the target price to $409 from $413. Citigroup increased the price objective to $408 from $390. Stephens lifted the target price to $390 from $380.

Analyst Comments

UnitedHealth Group is the number one Medicare Advantage player with ~28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with ~15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” noted Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

Check out FX Empire’s earnings calendar

United Airlines Shares Slump Over 4% as Q1 Revenue Outlook Disappoints

United Airlines Holdings, one of the largest airlines in the world, in its filing with the U.S. Securities and Exchange Commission (SEC), said it expects revenue to slump 66% to $3.2 billion in the first quarter of 2021, sending its shares down over 4% on Monday.

Following this, United Airlines shares, which rose over 29% so far this year, slumped over 4% to $55.98 on Monday. The stock declined more than 50% last year.

In March 2021, the Chicago, Illinois-based airline said it observed a forward acceleration in customer demand for travel and new bookings, resulting in positive average daily core cash flow and expected positive average daily core cash flow moving forward. The average daily core cash flow (or core cash burn) for the first quarter of 2021 is expected to be nearly negative $9 million per day, an improvement of about $10 million from the last quarter of 2020.

The airline which operates a large domestic and international route network is scheduled to report first-quarter 2021 earnings on Monday, April 19.

United Airlines would post a loss for the fifth consecutive time of $6.76 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions. That would represent a year-over-year decline of over 160% from -$2.57 per share seen in the same quarter a year ago.

United Airlines Stock Price Forecast

Twelve analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months of $60.27 with a high forecast of $74.00 and a low forecast of $40.00.

The average price target represents a 7.68% increase from the last price of $55.97. Of those 12 analysts, six rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $65 with a high of $96 under a bull scenario and $30 under the worst-case scenario. The firm gave an “Equal-weight” rating on the airline’s stock.

“Why Equal-weight? We like UAL’s confidence in providing a 2023 cost guide which includes a goal to permanently reduce $2 bn of cost and at least match 2019 margins. The market is also very keen to see UAL’s go-to-market strategy on the revenue side as travelers return,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“However, the legacy network footprint is a slightly bigger overhang than its network peers and the cap structure will likely take years to normalize, which could remain overhangs on the stock.”

Several other analysts have also updated their stock outlook. Citigroup raised the stock price forecast to $67 from $54. Jefferies lifted the target price to $60 from $55. Bernstein upped the target price to $67 from $61. UBS increased the target price to $67 from $58. Deutsche Bank raised the target price to $60 from $56. Berenberg lifted the target price to $38 from $32.

Analyst Comments

UAL pre-announced revenues of ~$3.2BB (vs. our prev est./cons. of $3.4BB/3.3BB), down 66% vs. 2019 levels. This compares to UAL’s previous guidance of down 65-70% for the quarter. We adjust our revenue estimate down another 5% to account for the slightly weaker demand environment,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“However, in March 2021 UAL observed a forward acceleration in customer demand for travel and new bookings. For Q2, we estimate the declines moderate slightly with revenue down 60% vs. 2019 levels and accelerates in the back half, exiting the year at down 30%.”

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast: Stock Markets Levitate to Start Earnings Season

The S&P 500 was relatively quiet during the trading session on Monday as traders are starting to focus on earnings season more than anything else. That being the case, it looks like we are going to continue to see more upward pressure than down, but quite frankly I would not be surprised at all to see a little bit of a pullback. In fact, that pullback would probably be a good thing, as the market has gotten far ahead of itself. I believe that the gap underneath at the 4000 level makes the most sense, as it is not only a large, round, psychologically significant figure, but it is also an area that features that gap.

S&P 500 Video 13.04.21

Underneath there, then we have the 50 day EMA coming into the picture, which of course will attract a certain amount of attention in and of itself. With this, I think that pullbacks are value plays, but you can say that about the stock market for the last 13 years in general. Federal Reserve Chairman Jerome Powell stated over the weekend that the Federal Reserve was nowhere near slowing down the economy, so at this point in time it is all about the cheap money again. Once we get through earnings season, it is almost certain that buyers will take over again, but we may have the occasional choppy session. Look at those choppy sessions as potential buying opportunities, as it will make for value occasionally. That being said, we have gotten a bit ahead of ourselves so at this point in time any pullback will probably be welcomed by bullish and bearish alike. The last thing you should do here is chase the trade.

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

Gold Miners: Corrections are Normal

Just as the USD Index recently (last week) suffered a countertrend decline within a medium-term uptrend, so has the GDX ETF experienced a corrective upswing within a medium-term downtrend.

Nothing moves in a straight line, so recent developments in both the gold miners and the USD Index are nothing to worry about. Everyone is still on track. Gold and the miners are headed for a medium-term downtrend and the USD Index is still gathering steam and will be leaving the station.

With the gold miners attempting to dig themselves out of their 2021 hole, the labor of love could end as quickly as it began. With a temporary retreat of the USD Index last week and dormant U.S. Treasury yields doing much of the heavy lifting, the GDX ETF had plenty of help breaking down its wall of worry.

However, with April showers likely to derail further construction activity, off-site momentum may not be as kind. Case in point: the GDX ETF is still trading below the neckline of its bearish head & shoulders pattern, and while the senior miners’ bounce above their March high may seem like a ground-breaking event, the synthetic strength is likely to hammer the miners over the medium term. Why so? Well, like a current running on extremely low voltage, Friday’s (Apr. 9) intraday bounce occurred on relatively low volume – with the positive momentum evaporating into the close.

Please see below:

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As further evidence, the March/April corrective upswing took the form of a zigzag pattern, which is indicative of a countertrend move within a medium-term downtrend. In addition, if you analyze the chart above, notice how fits and starts were part of the senior miners’ price action back in January? In both cases, the GDX ETF moved above the declining blue resistance line and the 50-day moving average. Yet … the GDX ETF is lower now than it was then.

Furthermore, back in January, the GDX ETF initially ignored gold’s daily (Jan. 6) weakness. Thus, Friday’s (Apr. 9) outperformance by the GDX ETF is far from an all-clear. In fact, it could be the final creak before the foundation crumbles.

Some might say that mining stocks are showing strength compared to gold as the GDX to gold ratio broke above its declining resistance line.

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However, I don’t think it’s fair to say so. I think that seeing a breakout in the GDX to gold ratio is not enough for one to say that the miners to gold ratio is breaking higher.

After all, the GDX ETF is just one proxy for mining stocks, and if miners were really showing strength here, one should also see it in the case of other proxies for the mining stocks when compared to gold.

For instance, the HUI Index to gold ratio, the XAU Index to gold ratio, and the GDXJ ( junior mining stocks ) to gold ratio.

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There is no breakout in the HUI to gold ratio whatsoever. In fact, the ratio is quite far from its declining resistance line. Even if we chose other late-2020 tops to draw this line, there would still be no breakout.

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There is no breakout in the XAU to gold ratio either. The previous attempts for the XAU to gold ratio to rally above their 2020 high marked great shorting opportunities, which is very far from being a bullish implication.

But the most bearish implication comes from gold’s ratio with another ETF – the GDXJ.

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The breakout in the GDXJ to gold ratio is only tiny and unconfirmed. These moves always (since Oct. 2020) provided sell signals – the small breakout below the declining resistance line were always invalidated and they were then followed by visible short-term declines.

Five out of five previous attempts to break above the declining resistance line failed and were followed by short-term declines. Is this time really different?

It seems to me that the five out of five efficiency in the GDXJ to gold ratio is more important than a single breakout in the GDX to gold ratio, especially considering that the latter was preceded by a similar breakout in mid-March. That breakout failed and was followed by declines.

Taking all four proxies into account, it seems that the implications are rather neutral to bearish. Especially when taking into account another major ratio – the one between HUI and S&P 500 is after a major, confirmed breakdown.

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When the ratio presented on the above chart above is rising, it means that the HUI Index is outperforming the S&P 500. When the line above is falling, it means that the S&P 500 is outperforming the HUI Index. If you analyze the right side of the chart, you can see that the ratio has broken below its rising support line. For context, the last time a breakdown of this magnitude occurred, the ratio plunged from late-2017 to late-2018. Thus, the development is profoundly bearish.

Playing out as I expected, a sharp move lower was followed by a corrective upswing back to the now confirmed breakdown level (which is now resistance). Mirroring the behavior that we witnessed in early 2018, after breaking below its rising support line, the HUI Index/S&P 500 ratio rallied back to the initial breakdown level (which then became resistance) before suffering a sharp decline. And with two-thirds of the analogue already complete, the current move lower still has plenty of room to run. Likewise, the early-2018 top in the HUI Index/S&P 500 ratio is precisely when the USD Index began its massive upswing. Thus, with history likely to rhyme, the greenback could spoil the miners’ party once again.

In addition, the HUI to S&P 500 ratio broke below the neck level (red, dashed line) of a broad head-and-shoulders pattern and it verified this breakdown by moving temporarily back to it. The target for the ratio based on this formation is at about 0.05 (slightly above it). Consequently, if the S&P 500 doesn’t decline, the ratio at 0.05 would imply the HUI Index at about 196. However, if the S&P 500 declined to about 3,200 or so (its late-2020 lows) and the ratio moved to about 0.05, it would imply the HUI Index at about 160 – very close to its 2020 lows.

All in all, the implications of mining stocks’ relative performance to gold and the general stock market are currently bearish.

But if we’re headed for a GDX ETF cliff, how far could we fall?

Well, there are three reasons why the GDX ETF might form an interim bottom at roughly ~$27.50 (assuming no big decline in the general stock market ):

  1. The GDX ETF previously bottomed at the 38.2% and 50.0% Fibonacci retracement levels. And with the 61.8% level next in line, the GDX ETF is likely to garner similar support.
  2. The GDX ETFs late-March 2020 high should also elicit buying pressure.
  3. If we copy the magnitude of the late-February/early-March decline and add it to the early-March bottom, it corresponds with the GDX ETF bottoming at roughly $27.50.

Keep in mind though: if the stock market plunges, all bets are off. Why so? Well, because when the S&P 500 plunged in March 2020, the GDX ETF moved from $29.67 to below $17 in less than two weeks. As a result, U.S. equities have the potential to make the miners’ forthcoming swoon all the more painful.

Also supporting the potential move, the GDX ETF’s head and shoulders pattern – marked by the shaded green boxes in the first chart above – signals further weakness ahead.

I wrote previously:

The most recent move higher only made the similarity of this shoulder portion of the bearish head-and-shoulders pattern to the left shoulder) bigger. This means that when the GDX breaks below the neck level of the pattern in a decisive way, the implications are likely to be extremely bearish for the next several weeks or months.

Turning to the junior gold miners , the GDXJ ETF will likely be the worst performer during the upcoming swoon. Why so? Well, due to its strong correlation with the S&P 500, a swift correction of U.S. equities will likely sink the juniors in the process. Besides, junior miners have been underperforming recently even without general stock market’s help.

Furthermore, erratic signals from the MACD indicator epitomizes the GDXJ ETF’s heightened volatility. Remember though that the MACD indicator is far from a light switch. While false buy signals often precede material drawdowns, the reversals don’t occur overnight. As a result, it’s perfectly normal for the GDXJ ETF to trade sideways or slightly higher for a few days before moving lower.

Please see below:

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And unlike its senior counterpart, the GDXJ ETF cemented its relative underperformance by moving lower on Friday.

So, how low could the GDXJ ETF go?

Well, absent an equity rout, the juniors could form an interim bottom in the $34 to $36 range. Conversely, if stocks show strength, juniors could form the interim bottom higher, close to the $42.5 level. For context, the above-mentioned ranges coincide with the 50% and 61.8% Fibonacci retracement levels and the GDXJ ETF’s previous highs (including the late-March/early-April high in case of the lower target area). Thus, the S&P 500 will likely need to roll over for the weakness to persist beyond these levels.

Some people (especially the permabulls that have been bullish on gold for all of 2021, suffering significant losses – directly and in missed opportunities) will say that the final bottom is already in. And this might very well be the case, but it seems highly unlikely. On a side note, please keep in mind that I’m neither a permabull nor a permabear for the precious metals sector, nor have I ever been. Let me emphasize that I’m currently bearish (for the time being), but about a month ago, we went long mining stocks on March 4 and exited this profitable trade on March 11.

As another reliable indicator (in addition to the myriads of signals coming not only from mining stocks, but from gold, silver, USD Index, stocks, their ratios, and many fundamental observations) the Gold Miners Bullish Percent Index ($BPGDM) isn’t at levels that elicit a major reversal. The Index is now back at 40. However, far from a medium-term bottom, the latest reading is still more than 30 points above the 2016 and 2020 lows.

Back in 2016 (after the top), and in March 2020, the buying opportunity didn’t present itself until the $BPGDM was below 10.

Thus, with sentiment still relatively elevated, it will take more negativity for the index to find the true bottom.

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The excessive bullishness was present at the 2016 top as well and it didn’t cause the situation to be any less bearish in reality. All markets periodically get ahead of themselves regardless of how bullish the long-term outlook really is. Then, they correct. If the upswing was significant, the correction is also quite often significant.

Please note that back in 2016, there was an additional quick upswing before the slide and this additional upswing had caused the $BPGDM to move up once again for a few days. It then declined once again. We saw something similar also in the middle of 2020. In this case, the move up took the index once again to the 100 level, while in 2016 this wasn’t the case. But still, the similarity remains present.

Back in 2016, when we saw this phenomenon, it was already after the top, and right before the big decline. Based on the decline from above 350 to below 280, we know that a significant decline is definitely taking place.

But has it already run its course?

Well, in 2016 and early 2020, the HUI Index continued to move lower until it declined below the 61.8% Fibonacci retracement level. The emphasis goes on “below” as this retracement might not trigger the final bottom. Case in point: back in 2020, the HUI Index undershot the 61.8% Fibonacci retracement level and gave back nearly all of its prior rally. And using the 2016 and 2020 analogues as anchors, this time around, the HUI Index is likely to decline below 231. In addition, if the current decline is more similar to the 2020 one, the HUI Index could move to 150 or so, especially if it coincides with a significant drawdown of U.S. equities.

In conclusion, akin to Humpty Dumpty, “all the King’s horses and all the King’s men” are unlikely to put the GDX ETF back together again. With the HUI Index to gold ratio, the XAU Index to gold ratio and the GDXJ ETF to gold ratio all splintering beneath the surface, the GDX ETF’s recent strength simply masks all of the cracks in the precious metals’ foundation. Furthermore, with the USD Index and U.S. Treasury yields threatening to swing the wrecking ball, the metals’ house of cards could soon face demolition. Thus, even though the long-term outlook for gold, silver , and mining stocks is very bullish, the short- and perhaps medium-term outlooks remain profoundly bearish, and investors that ignore the warning signs will likely find themselves submerged in the rubble.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

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

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

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

 

Tesla Well-Positioned for Relief Rally

Tesla Inc. (TSLA) is trading higher by more than 1% in Monday’s pre-market following a major analyst upgrade. The stock has struggled since topping out at 900 in January despite better-than-expected production and deliveries in the first quarter, underpinned by strong Model Y demand in China. Worldwide chip shortages and forced assembly line shutdowns have contributed to the downturn and could weigh on shares through the second quarter.

Post-Rally Exhaustion

In addition, the stock rallied more than 830% in 2020, setting off extreme overbought technical readings similar to 2013 and the first quarter of 2014 when it gained over 760%. Tesla posted no additional gains for the next three years, following the classic market adage that “the bigger the move, the broader the base”. Of course, it’s hard to forecast the beneficial impact to shares of the market bubble set into motion by U.S. and world stimulus since March 2020.

Canaccord Genuity analyst Jed Dorsheimer upgraded the stock to ‘Buy’ with a $1,071 target on Monday, noting “Tesla’s focus on first-principle engineering we believe will radically change the battery market, enabling the company to further the lead in BEVs and expand into the solar and home energy markets with its Powerwall products. Battery supply constraints will begin to alleviate in 2022, as the new 4680 cell design production comes online in Giga Nevada”.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, lifting to a ‘Hold’ rating based upon 13 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, and 3 ‘Underweight’ recommendations. More importantly, six analysts still recommend shareholders close positions and move to the sidelines. Price targets currently range from a low of $67 to a Street-high $1,200 while the stock is set to open Monday’s session about $100 below the median $787 target.  This placement bodes well for a bounce off corrective lows but another breakout may not be in the cards.

Tesla rallied above June 2017 resistance at a split-adjusted 77.40 in March 2019 and tested that level successfully during the pandemic decline. It cleared February 2020 resistance in June and took off on an historic trend advance that carved a picture-perfect Elliott five-wave rally into January 2021’s all-time high at 900.40. Monthly relative strength readings have now crossed into active sell cycles, predicting the stock will remain rangebound through most or all 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. 

Stocks Decline As Traders Take Some Profits After Rally

Traders Prepare For Earnings Season

S&P 500 futures are moving lower in premarket trading as traders prepare to take some profits off the table ahead of the earnings season.

Big financial companies like JPMorgan Chase, Wells Fargo and Goldman Sachs will provide their earnings reports this week, marking the beginning of the active phase of the new earnings season.

The stock market is trading at all-time high levels, and stocks may get an additional boost if the earnings season brings positive news. At the same time,  some traders may prefer to wait for actual reports before increasing their exposure to stocks.

Strong Retail Sales Data From Europe Supports Markets

Today, EU reported that Euro Area Retail Sales increased by 3% month-over-month in February after falling by 5.2% in January. Analysts projected that Retail Sales would grow by 1.5% so the report was much better than expected.

The strong report provided some support to global markets as it indicated that consumer activity in Europe increased despite the challenging situation on the virus front.

WTI Oil Gains Ground After An Attack On Iran’s Nuclear Plant

Iran’s Natanz nuclear site has recently suffered an electricity outage which led to unspecified damage. On Monday, Iran blamed Israel for the attack on its plant but noted that the attack would not impact nuclear talks.

The recent nuclear talks went well which put some pressure on oil. If Iran starts to comply with the 2015 nuclear deal, Iranian oil will return back to the international markets and put pressure on oil prices.

In this light, an incident at the key Iranian nuclear site serves as a bullish catalyst for the market. Currently, WTI oil is trying to settle back above the psychologically important $60 level. In case this attempt is successful, WTI oil will gain additional upside momentum and move towards the recent highs at the $62 level which will be bullish for oil-related stocks.

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

What is next for US stock market and dollar?

SP500 index is now up more than +9% year-to-date, while the Dow is up +9.5% and the Nasdaq is up more than +7%. Bulls remain committed to their outlook for an economic boom, all of which is underpinned by the U.S. Federal Reserve’s continued easy monetary policies.

Fundamental analysis

Federal Reserve and monetary policy

Federal Reserve Chairman Jerome Powell reiterated last week that the Fed would continue to remain extremely accommodative until the economy has further recovered. Speaking during an IMF event, Powell pointed out that while parts of the economy are recovering strongly, “there’s a very large group of people who are not.”

The Fed Chair acknowledged the better than expected job gains in March and said the Fed would consider a string of similar monthly gains to progress. Also, Powell again pointed to the weak labor market participation rate as a disinflationary force that will keep temporary price spikes under control. What Powell seems more concerned about is the ongoing pandemic and rising infections across many parts of the world, noting that the “world economy” can’t return to normal until the virus is under control everywhere.

Vaccination

Keep in mind, many of our largest U.S. businesses get +40% or more of their revenue from the global economies. Obviously, it is going to take more widespread vaccination and better efforts in other countries to orchestrate a global recovery. The U.S. remains one of the leaders in vaccinations but there might be a little hiccup the next week or two, as Johnson & Johnson has run into some manufacturing snafus. The CDC said -85% fewer doses of the company’s vaccine will be shipped to states next week, though they did not provide a reason.

Around 15 million J&J doses had to be destroyed because of an ingredient mix up at a factory late last month. Traders are also keeping an eye on developments surrounding AstraZeneca’s Covid-19 vaccine which has been suspended in several country’s due to a possible link to blood clots. Unfortunately, the AstraZeneca drug is the dominant vaccine in use across the globe because of its lower cost and easier distribution. Most advanced economy countries that are using AstraZeneca’s drug also have vaccine supplies from other drug makers but the suspension will still mean a slowdown for vaccine rollouts in many parts of Europe and Asia.

AstraZeneca’s safety issues could mean no vaccine supplies at all for some developing countries where it’s the only option. An underlying concern is that these compounding safety issues, shot suspensions, and other hiccups could lead to an overall “crisis of confidence” in vaccine campaigns, meaning fewer people getting inoculated and delaying the global end to the pandemic.

News and data to watch

Next week brings the Consumer Price Index on Tuesday; Import/Export Prices and the Fed’s Beige Book on Wednesday; Empire State Manufacturing, Retail Sales, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Thursday; and Housing Starts on Friday.

The main focus next week will likely be on Q1 earnings, with the season “unofficially” kicking off with results from big Wall Street banks Goldman Sachs, JPMorgan Chase, and Wells Fargo on Wednesday, followed by Bank of America, Citigroup, and U.S. Bancorp on Thursday.

SP500 technical analysis

sp500 technical analysis

So far SP500 futures still didn’t break above Gann’s resistance. Yet the weekly closing looks very strong. But we can consider longs at this stage only if this resistance turns into support. In that case, 4250 is the natural magnet. However, I am a bit skeptical it may happen.

I like to trade SP500 when Advance Decline Line and cycles give the same signal. At the moment, it is better to pay attention to commodities. There are few markets ready for big moves. At the same time, SP500 cycles turned to the downside, while ADL is very bullish. If we will see a divergence in ADL in coming week or two, I will look for a sell signal. But at the moment, nothing is clear yet.

Dollar Index (DXY) technical analysis

dollar forecast

Overall, the Federal Reserve policy remains bearish for American currency in the long run. But we don’t have a strong fundamental setup to establish swing trades. So, I want you to pay attention to the smaller time frame. The dollar index (DXY) respects 4h MA50 and MA200 quite well. So, we can take advantage of that.

If the price breaks and sustains under 91.90, the price will reach 91.5 and 91 in extension. On the other hand, breaching the 4h MA50, the dollar will target the 93 – 93.5 zone.

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