Main indexes may struggle to rise further, warns CMT | Powell: Reduced bond-buying comes before rate hike | Technical analysts see rises ahead for commodities
The S&P 500 and Dow Jones Industrial Average scored further record highs last week but technical analyst Terence Gabriel, CMT, notes they are well above their 200-day moving averages, resembling the tops achieved in January 2018 which presaged a downturn. Gabriel also notes that, for several entities, last week's strong earnings reports did not result in significant stock gains, which suggests much of their growth may be already priced in.
When the time comes to reduce support for the economy, the Federal Reserve will start scaling back bond buying "well before" the time it considers raising interest rates, said Federal Reserve Chairman Jerome Powell. The central bank has promised to continue buying $120 billion a month of government-issued and government-backed securities until the economy is closer to full recovery.
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Technical analysts Ian Culley and Steve Strazza have reviewed the Commodity Research Bureau Index alongside a customized chart composed of 33 futures contracts. While there are shades of difference between them, they are both breaching former resistance lines and several individual commodities are strengthening, suggesting the sector "could be in the early stages of the next sustained move higher," the analysts contend.
The 25 largest US banks curtailed their loan holdings by 8% from January to March, reducing the total held to $5.45 trillion, according to Federal Reserve data. Meanwhile, deposits rose 16% to $10.13 trillion, giving the lowest loan-to-deposit ratio since Fed data collection began 36 years ago.
The Federal Reserve is involved in research and development of a digital US currency, but Chair Jerome Powell emphasized it is mainly concerned at the moment with "understanding the technology and the possibilities so that you can really address the policy issues." Powell said there is no rush for the US to be first to launch such a currency, and Congress and the public should be involved in the process.
The Credit Suisse share price was depressed by the bank's involvement in the Archegos collapse, but a chart reading by technical analyst John Burford shows a 50% Fibonacci correction from its earlier rally and a double-strength line of support just below 10 Swiss francs. Given these factors, Burford sees likelihood of a "scalded cat bounce" which could quickly lift the price near 20 Swiss francs.
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A Charles Schwab survey of 1,200 Americans reveals 1 in 6 stock investors started involvement in the market in 2020. The entrants, named Generation Investor by Schwab, have a median age of 35 and are less affluent but more optimistic on the market outlook than traditional investors, the survey finds.
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The flood of deals involving special purpose acquisition companies has slowed since the Securities and Exchange Commission signaled higher scrutiny of SPAC deals. The SEC noted that some SPACs might have to restate their financial results to adjust the accounting treatment of warrants.
Technical analyst Amit Trivadi, CMT, notes the Nifty index rallied briefly for two days last week but has now stalled around 14,700. With an indecisive candle forming on its chart, it will need a firm breakthrough out of that zone to resume upward progress.
The rate of coronavirus vaccinations worldwide is exerting a significant effect on the progress of nations' currencies, with technical analyst Eiji Kinouchi pointing out: "The proliferation of vaccines affects expectations for a restart of the economy." The US, UK and United Arab Emirates have all made major strides in their vaccination programs while Japan, Russia, Brazil and eurozone countries are moving more slowly, and their respective currencies are mirroring this with their rises and falls.
There is a simple volatility indicator available in the public domain that can be used to implement trading strategies based on the concept of VIX. This indicator, the VIX Fix developed by Larry Williams, overcomes the limitations of VIX. Amber Hestia-Barnhart reviews what VIX is, highlight some of its limitations of VIX, describes an alternative to VIX and provides test results demonstrating how well the VIX Fix works.
Since the dawn of investing, practitioners understood the value of contrarianism, writes Chris Diodato, CMT, CFA. In the spirit of contrarian thinking, analysts created oscillators to uncover "overbought" and "undersold" conditions in the 1950s. Some analysts then chose to look at supply and demand factors, namely volume and breadth. Diodato conducts in in-depth review of these indicators.
