North American News
Stocks snatch victory from a jaws of defeat (at least for the S&P and Dow)
- S&P averts closing in bear market territory. The Nasdaq has a moral victory as it erased most of a -3.10% intraday decline.
The major US stock indices snatched victory from the jaws of defeat – at least for the Dow industrial average and S&P index. The NASDAQ index still closed negative on the day as did the Russell 2000. However, both indices had moral victories after erasing most of the intraday declines (the Nasdaq was down -3.10% at session lows).
At session lows:
- The Dow industrial average was down -617.37 points or -1.98%
- S&P index was down -90.29 points or -2.31%
- NASDAQ index was down -352.81 points or -3.10%
At the end of the day:
- Dow industrial average rose 7.45 points or 0.02% at 31260.57
- S&P index rose 0.60% or 0.02% at 3901.38
- NASDAQ index fell -33.87 points or -0.30% at 11354.63
- Russell 2000 fell -2.95 points or -0.17% at 1773.26
Fed’s Bullard speaking on FOXBusiness was anticipated by markets. Stocks were trading near low levels as he started to speak, with expectations he would be ultra hawkish.
Instead he maintained that he prefers 50 basis point hikes (and not 75 or 100 bps). He sees above trend growth going forward. He sees employment moving lower to perhaps less 3%, and does not see a recession in 2022 or 2023.
He DOES expect rates to rise to 3.5% by the end of the year which implies 50 basis point hikes at each meeting until then. However, that is the cost of doing business to have his economic viewpoint.
Stocks started to bounce soon after he was done speaking.
The bad news is:
- The Dow closed lower for the 8th consecutive week which has not been done since 1923
- The S&P and NASDAQ index closed lower for the 7th consecutive week.
For the week:
- Dow industrial average fell -2.9%
- S&P fell -3.02%
- NASDAQ index fell -3.28%
The last 3 month has seen:
- Dow industrial average -10.15%
- S&P index -11.18%
- NASDAQ index -13.81%
Today the S&P index broke into their market territory but the index falling -20.9% from its all-time high to the low reached today. However, it is closing down around -19% from that high averting a close in bear market territory.
The NASDAQ index reached a new year and cycle low and traded down -31.93% from its all-time high reached in November before rebounding.
The Dow industrial average also reached a new cycle low and fell -17.09% from its January all-time high before rebounding.
QQQ index moves to its 50% retracement of the move up from the pandemic low
- QQQ ETF is a proxy for the big cap tech stocks
The QQQ ETF is a big cap high tech ETF. The top 10 holdings which account for about 50% of the index is made up of the following big cap tech stocks. Apple and Microsoft account for 23.5%. The only non tech name in the list is PepsiCo (2.03%). Needless to say, it is heavily weighted toward the names that many investors and funds hold. Many people include it in their retirement accounts as well as they represent the best of the best in technology.
Looking the daily chart below, the index is down $2.95 or -1.02% at 1286.62 currently. That has the price testing the 50% midpoint of the move up from the post pandemic low reached on March 23, 2020 at 285.82.
The high price extended to 408.71 on November 23, 2021. Since then, the index has shed -29.79%. The low price last week dipped below the 50% but quickly rebounded. That low at 284.94 is the next target on a break of the 50% level.
Why is this important?
The QQQ ETF is a quick and dirty way to buy the major high tech big cap stocks, while not being a stock picker per say. That works great in a rising market. Buyers beget buyers and as the price steps higher and higher and higher, it forces the underlying stocks to also moved higher.
Conversely when there are sellers, sellers can beget sellers and force the underlying stocks to be dragged down as well.
Moving below the 50% retracement level with momentum, could accelerate the move lower in the top 10 names as well.
I guess it is not a great surprise, but a 30% haircut from the high will start to get investors attention when they check their retirement account balances. It could alter the tone in the market even more as traders realize even the safest of tech are not immune from the declines.
Conversely, if the buyers want to make a play in these high tech/big cap names, this is the low risk area to put a toe in the water or average more shares in….
Key level for buyers and sellers. Be aware.
Baker Hughes US oil rig count 576 vs 563 prior
- Weekly US oil and gas rigs
- Oil rigs up 13
- Gas rigs +1 to 150
Commodities
Gold Price Forecast: XAU/USD conquers the 200-DMA but remains weak at around $1840s
- Gold prepares to finish the week on a higher note, up some 1.76%.
- Risk-aversion fails to boost Gold prospects, and also a buoyant greenback is weighing on XAU/USD prices.
- Gold Price Forecast (XAU/USD): Failure at the 20-DMA leaves the precious metal vulnerable to further selling pressure.
Gold spot (XAU/USD) is almost flat on the day, in a choppy trading session on Friday, as market players’ sentiment shifted negatively, as reflected by US equities tumbling between 0.67% and 1.76%, while the greenback recovers some ground, after falling from YTD highs at around 105.00. At $1843.03, XAU/USD is set to finish the week with decent gains, snapping four straight weeks of losses.
Sentiment remains negative due to the option expiring
Early in the North American session, a buoyant market mood courtesy of the People’s Bank of China (PBoC) 15-bps rate cut to its 5-year LPR was cheered by investors as Asian and European equities finished with gains. Nevertheless, in the mid-New York session, the mood turned sour. Analysts attribute the shift to options expiring on equities and ETFs, which triggered high volatility, and sent the Dow Jones Industrial and the Nasdaq to fresh 52-week lows.
Gold remains to trade in familiar ranges amidst the lack of a catalyst. Fed policymakers throughout the week have emphasized the need to bring inflation down, and the majority of them telegraphed its stance about hiking rates by 50-bps at least in the June and July meetings. Others like Philadelphia Fed’s Patrick Harker added that he is less worried about a deep recession and is not forecasting it. Meanwhile, Minnesota Fed’s Neil Kashkari said he sees evidence of a long-term high inflation regime and expressed that the central bank needs to be more aggressive.
In the week ahead, the US economic docket will feature S&P Global PMIs, the release of the last Fed’s FOMC meeting minutes, Jobless Claims, and the Fed’s favorite gauge for inflation, the Personal Consumption Expenditure (PCE) for April.
Gold Price Forecast (XAU/USD): Technical outlook
Although it is above the 200-DMA, which lies at $1838.61, Friday’s Gold price action is still vulnerable to further selling pressure. XAU/USD’s bulls, to ease the downward pressure, need to reclaim the 20-DMA at $1858.41, a level that would leave Gold comfortably trading in the $1838-58 range, before finding a fresh impetus to continue its climb towards the 100-DMA at $1885.75.
Nevertheless, until the above scenario plays out, Gold’s path of least resistance is neutral-downwards. XAU/USD’s first support would be the 200-DMA at $1838.62. Break below would expose the two-year-old upslope trendline around $1820-30, followed by the bottom band of the Bollinger’s band indicator at $1798.05, immediately followed by the YTD low at $1780.18.
Oil scores yet-another daily and weekly gain
- Four straight weeks of gains
The June oil contract rolled off today at $113.23, up $1.02 to close it out.
The volume and speculative trading is all in July now but that was higher as well, up $43-cents to $110.23
I feel like I’m beating a dead horse at this point but the resilience in oil is unprecedented. At virtually any other time in history if you had one of the worst stretches for stocks coupled with widespread economic angst, you’d see oil underperforming. Instead, it’s not only outperformed, but it’s made gains. Oil is up 10% in the past four weeks. This is the first close above $110 since March 25.
I keep waiting for this shoe to drop as the mood out there worsens but it’s just not happening. Now there’s talk about Shanghai reopening and at some point stocks need to at least bounce.
It’s increasingly clear that there just isn’t enough supply. I fear how high prices could go, particularly if predictions of Russia losing 3 million barrels per day come true.
The problem for the larger market is that oil spending is taking up a larger share of the wallet. This is data from JPM. Gasoline prices have risen every day since April 26.
EU News
European major indices close higher on the day
- Up and down week for most of the indices
The major indices in Europe are closing with gains for the day:
- German DAX, +0.72%
- France’s CAC, +0.20%
- UK’s FTSE 100 +1.19%
- Spain’s Ibex +0.93%
- Italy’s FTSE MIB +0.12%
For the week, the major indices saw choppy price action:
- German DAX had a low on Thursday at 13683.59, and a high on Wednesday at 14226.47. The index closed at 14027.92 last Friday. It’s closing level today was 13981.92.
- France’s CAC had a low of 6196.19 on Thursday and a high on Wednesday at 6455.80. The index closed at 6362.69 last Friday and closed today at 6285.25
- UK’s FTSE 100 reached a low on Thursday at 7228.67, and a high on Tuesday at 7538.68. The index closed last Friday at 7418.16 and close today at 7389.99.
Other News
Kuroda told G7 that BOJ will patiently continue with powerful easing
- No cracks in the BOJ armor yet
The questions for Kuroda will continue.
Today’s CPI report showed 2.5% headline and 2.1% core prices. Kuroda acknowledged that but also said that he’s forecast 2% inflation for awhile and that it’s not sustainable in Japan. For its part, the yen was largely unmoved by the data and Kuroda’s comments. It’s set for a second doji in a row.
More:
- Japanese inflation excluding energy and fresh food likely to rise quite steadily ahead
- Expects Japan’s inflation to gradually pick up in tandem with rise in wages by maintaining powerful monetary easing
Cryptocurrency News
Bitcoin falls below hourly MAs and buyers turn to sellers
- 100/200 hour MAs at $29845 and $29757 respectively
The price of bitcoin has seen sellers enter in the last hour or so and the move lower has taken the price back below its 100, and 200 hour moving averages. The 100 hour moving average comes in at $29,846. The 200 hour moving average comes in at $29,757.48. The current price is trading at $29,465 after reaching a low of $29,400.
Looking at the hourly chart, the pair moved back above its hourly moving averages yesterday tilting the bias back to the upside. After breaking above, the price corrected down toward its 100 hour moving average on 2 separate occasions, but found support buyers. The 3rd test could not hold support and as a result, buyers turned to sellers on the break.
Often times, if a technical level holds support (or resistance for that matter) on a couple occasions or more, increases the levels of importance going forward. The level becomes a more important barometer for buyers and sellers. It also becomes a risk defining level and bias defining level.
As a result, the break below that level today turned buyers into sellers
Taking a broader look back to May 13, the price of bitcoin has traded between $28,600 and $31,411. The move back below the hourly moving averages – in between those levels – will have traders now looking toward the $28,600 level on the downside. Close risk is now the 100 and 200 hour moving averages.