The S & P500 experienced an uphill session during which it pushed a short distance from the 3,000 point threshold. Do you expect further increases?
The S & P500 recorded a 3.86% rise on a weekly basis and the words of the FED number one, Jerome Powell, were the driving force behind the climb in the first days of the last eighth.
The latter in an interview said that “he would never bet against the American economy”.
In addition, like a bolt from the blue, it was made known that the “Modern” company would be making significant strides on the search for the Covid vaccine19.
So the markets are betting everything on the vaccine, as evidenced by a latest investigation by Morgan Stanley, who expects a vaccine by the autumn.
From the point of view of data instead, there is little to celebrate in my opinion. There are two updates that should be carefully monitored: unemployment data and consumer confidence data.
Initial unemployment claims rose 2.8 million units this week from 2 million expected, reaching nearly 40 million unemployed in America.
As for consumer confidence, remembering that consumption represents about 70% of American GDP, the spread between the S&P 500 trend and the trend of this economic figure is widening widely.
It is therefore strange to see instead how the technology sector has reached a point where it seems to have forgotten the crisis from Covid19.
In fact, the Nyse FAANG + index (+ because it contains other tech companies such as Alibaba, Tesla, Baidu, Nvidia, and Twitter) has returned to its pre-crisis highs, drawing one of the fastest V-shots ever seen before.
Ultimately, from an operational point of view, since this is a moment of absolute uncertainty, in which on the one hand we have a strong recovery market (with even the tech sector that seems to have overcome the crisis), on the other macroeconomic data that continue to be strongly negative and tensions between the USA and CHINA are growing, it is preferable to be very cautious.
Personally, I would lower the risk on equity indices at the moment and would prefer short intraday transactions with tight stop losses in a speculative trading perspective.
Speaking of asset allocation, on the other hand, since it is impossible to guess the market highs / lows, I would operate with a PAC long strategy on declines higher than 2-3%.
The Dax also gained ground, returning above the 11,000 point mark. What are the possible scenarios in the short term?
Dax also finished last week with a positive performance.
The German index celebrates the release of macroeconomic data, which all in all beat analyst estimates positively.
Starting from the ZEW sentiment of the conditions of the German economy which reached 51 points after a drop of up to 28 points from the previous survey.
In short, German consumers are confident in the future recovery of their country’s economy.
The Franco-German proposal on the 500 billion fund to support the economies of the Eurozone is also promoted by the markets.
Their decision lies in the middle between the proposal of the countries of northern Europe (which prefer money to lend) and those of southern Europe who would like money.
In fact, the 500 billion plan proposed by Merkel and Macron would provide 80% of the non-repayable money, while the remaining 20% to be loaned.
All of this has certainly benefited the performance of the main European indices, but the growing tensions between the US and China weighed on the last session of the week and could influence the next sessions.
From an operational point of view, I would adopt the same approach as the S & P500 index, with a view that is still short for the moment in a trading perspective.
The euro-dollar started a corrective phase after the 1.10 level was not exceeded. Is there a risk of further falls from current levels?
The euro-dollar gained 0.8% last eighth and for several weeks has continued to move in a trading range from 1.07 to 1.10, without showing signs of directionality.
What has just ended has been a positive week thanks to the Macron – Merkel proposal on the recovery fund which has given a great boost to the single currency.
However, while on the one hand there is the FED which continues to be as expansive as possible, to try to keep the dollar value low, on the other we find the ECB, whose intentions are certainly to buy corporate debt.
The sum of these events generates these lateral movements of uncertainty.
My view on the euro-dollar remains long, because I believe that the fair value is in the 1.25 area. However, for the next week, given the uncertainty, I would prefer to stay flat on the gearbox, just to observe.
Gold went above $ 1,750, only to fall below that threshold. What are the possible developments in the short term?
Gold, given the Risk-on phase, weakened during the week recording a drop of 1.23%.
Despite this slight decline, after a strong bullish impulse that brought the yellow metal to new highs in the period, gold remains with a nice upward setting.
Surely the overcoming of the psychological threshold of 1,800 dollars could easily bring the quotations to the historical highs, recorded in 2011, in the 1,900 dollars area.
The huge amount of liquidity introduced by the Central Banks, as I stated in the previous analyzes, has favored the rise in gold which is seen as a “reserve” currency compared to other currencies.
From an operational point of view, my view continues to remain long and I would evaluate this decline to open long positions on a weekly basis with the first target in the $ 1,770 area.