The S & P500 index gained ground last week, stopping slightly below the 3,100 area. What to expect in the short term?
The S & P500 closed last week with a slight rise of 0.77% and after having made a climb in less than 2 months of over 40%, it is starting to hint at the first signs of hesitation.
The main driver who led this strong climb was certainly the expansion of the Federal Reserve budget which, according to an analysis by Morgan Stanley, could reach 10 trillion dollars by 2021.
However, in recent weeks we have seen a decrease in the purchases of securities by the American Central Bank and consequently a decrease in the index in question, despite the purchase of corporate bonds.
From the economic calendar point of view, historical rebound in retail sales for the month of May increased by more than 17%, far exceeding analysts’ expectations, whose forecast was for an 8% rebound.
However, initial unemployment claims increased by 1.5 million compared to the 1.3 million expected.
One event that needs to be monitored is the increase in the contagion curve in the U.S.
In fact, it is clear that the peak was reached in New York, but not in the other federal states that record a continuous increase in new infected people. The situation is also serious in Brazil.
So there are two events that can be catalysts of new bearish waves: excessive increase in new cases of Covid19 and a deterioration of macroeconomic data.
Beware that we are entering the second half of the year, with the release of the company quarterly reports shortly.
Operationally my speculative view on the S & P500 remains bearish, preferring short intraday trades.
The Dax gained even more than the S & P500 in the last eighth. Will the current bullish trend continue in the short term?
The Dax30 gained 3.19% last week and continues to be related to the American index, so the movement has been very similar with the due volatility differences between the two indices.
During the last eighth we saw economic data that bode well, starting from the Zew index, much better than expected. According to the Zew survey, German consumers expect a recovery in the economy and a return to complete normalcy by the end of the summer.
A case that is important to cite regarding the dax is the collapse of the prices of the Wirecard company, which in less than two days has lost 94% of its value with the consequent resignation of its CEO.
It appears that the company in question had huge budget holes.
As for the meeting of the members of the Eurogroup, held on Friday to talk about the Recovery Fund and its conditionalities, once again the decision is postponed to the next meeting as the countries of Northern Europe consider the current conditions unacceptable.
Finally, it is necessary to monitor the trend of the contagions here both in Germany and in Europe.
According to a Reuters survey, the virus’s reproductive rate in Germany jumped to 1.79 compared to 1.06 on Friday, a sign that it could shake up markets in the first part of the week.
My trading on the Dax index is the same as that suggested for the S & P500.
The euro-dollar is continuing to lose ground and has also returned below the 1.12 threshold. What are your expectations in the short term?
Negative week for the euro-dollar which dropped just under 1%: after a significant rise that brought the cross to touch the 1.14 level, we witnessed a few days of uncertainty and then gave in to the bearish pressures of the last sessions .
The fall was triggered by strong dollar demand due to the moment of uncertainty that we are experiencing in this last period, and then ended on Friday with a further decline due to a weakness of the single currency after the Eurogroup meeting.
My view continues to be bullish on the euro-dollar and last week’s decline increases my likelihood of a long entry.
However, to ensure a more favorable risk-return ratio, I would wait for a further drop of at least 50/100 pips before intervening.
Gold lengthened its pace at the end of the week. Are there conditions for further bullish hints in the short term?
Gold closed positively last week, climbing more than 1%: gold
it seems to have finished its phase of sideways which lasted a few weeks and has firmly returned above $ 1,740.
Commodity continues to be very interesting also because the price can move upwards both due to uncertainty and thanks to the “generosity” of the Central Banks.
Furthermore, expectations of low real rates can push quotations even higher. According to Goldman Sachs, following the model of expectations on future real rates, gold could soon reach $ 2000, a target that we have been keeping an eye on for some time.
Operationally, the view continues to be long and here too I wait for a reversal of at least 2.5% before entering long.