Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Opening Bell: Futures Point To Continued Upside; Oil Rally Slows; USD Slips

Published 07/22/2021, 08:33 AM
Updated 09/02/2020, 02:05 AM
  • Global shares set for largest 3-day gain since April
  • Oil maintains gains but hits resistance
  • Gold and the dollar slide

Key Events

A strong start to earning season is helping traders ignore the risk to economic growth from the Delta variant of COVID-19 and the worst inflation levels since 2008. That positive sentiment pushed futures on the Dow, S&P, NASDAQ and Russell 2000 higher in trading on Thursday.

However, falling Treasury yields have dragged the dollar lower.

Global Financial Affairs

All four US contracts were slightly in the green as investors hold on to gains in the current rally.

Futures contracts on the NASDAQ 100—whose listed mega-cap tech companies were in maximum demand when consumers relied on their services to work, shop and play during coronavirus lockdowns—lagged today, while Russell 2000 and Dow Jones futures were leading. The Russell index of 2000 small-cap domestic players as well as the Dow 30 index of blue chip mega-caps equate with the value trade cyclicals which benefit from an expanding economy.

In Europe, the STOXX 600 Index traded higher, led by travel and leisure which were outperforming, again demonstrating optimism on easing social restrictions and the economy getting back on track to what used to be considered 'normal.'

Financials were also among the leaders of Thursday's European rally as the European Central Bank meeting is taking place today. At the ECB's last meeting, the bank took a page out of the Fed’s playbook, announcing it will allow inflation to surpass its 2% inflation target.

At the same time, it increased its 2021 GDP prediction to 4.6% from 4%. Traders must now grapple with the benefit of an upgraded GDP forecast while rising inflation chips away at the buying power of the single currency.

Not only has the euro lost 4% of its value in the last two months, it might be on a path to lose much more.

EUR/USD Daily

The single currency's 50 DMA is tapping on the top of the 200 DMA, as bears attempt to force it into a Death Cross, which would have special meaning as any further dip in the price would complete a massive, full year-long, H&S top. Note the negative divergence volume provided since the January high, and the head of the reversal pattern.

When it reported results today, UK-based Unilver (AS:ULVR) lowered its earnings guidance due to increased costs, an illustration of the real impact of inflation. Traders expressed their dissatisfaction with the global consumer staples giant and sold the stock, sending it tumbling 4%. Technicals signal there signs of a deeper drop ahead.

Unilever Daily

The selloff coincided with several simultaneous bearish indicators. The price completed a top, whose neckline is reinforced with the 50 DMA. It also formed a breakaway gap, which included crossing the 200 DMA below which it was rejected. That sent shares even lower.

Both the MACD and the RSI topped out as well, demonstrating that a broad spectrum of price gauges reversed. That momentum supported the move, promising further downside.

Yesterday, on Wall Street, US stocks advanced, as solid company profits distracted investors from the continued spread of the coronavirus, which last year was responsible for the fastest recession in history.

On Wednesday, the S&P 500 Index posted its biggest two-day rally in two months, closing in on its all time high, led by value stocks which were sold off the most during social restrictions.

Yields on the 10-year Treasury note managed to come back from a dip, climbing for the third day in a row, for the first time in more than a week. Investors are diverting capital from safe havens into risk assets as their risk appetite increases after seeing corporate quarterly profit figures. Technically speaking, however, Treasuries are likely to keep rising, pushing yields further down.

10-year Treasuries Daily

Rates fell below their uptrend line, reinforced by the 200 DMA, as the 50 DMA plummets to what appears to be an inevitable Death Cross.

The dollar retreated for a second day, following a four-day rally. However, we’re betting the greenback will continue higher.

Dollar Index Daily

The USD is trading within a rising channel, as the 50 DMA goes for a Golden Cross. And, if it resumes along its channel, it will soon take on the Mar. 31 high, completing a large double bottom.

The current indifference to inflation pushed gold lower for a second day,

Gold Daily

The yellow metal is extending the downside breakout of a bearish, rising wedge, formed below a Death Cross.

Bitcoin returned to north of $32,000 after Elon Musk said that SpaceX owns some of the virtual currency, and Ark Investment Management’s head, Cathie Wood touted the cryptocurrency at Ark's 'B-Word" virtual conference. We, however, are bearish on the digital token at this time.

Bitcoin Daily

Bitcoin was struggling to remain within a descending triangle, a pattern that develops when selling pressure increases, while demand stagnates. We have long put $29,000 as a crucial level, which if broken, would lead us to expect a strong additional downside.

Although oil extended Wednesday’s breathtaking gains, it slowed dramatically. The market has been volatile this week due to the shift in OPEC+ policy as well as mixed signals on future demand.

Oil Daily

Oil bulls are challenging a bearish stronghold, the neckline of a recent, small H&S top.

Up Ahead

Market Moves

Stocks

  • The STOXX 600 rose 0.5%
  • Futures on the S&P 500 rose 0.1%
  • Futures on the NASDAQ 100 rose 0.2%
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index rose 0.8%
  • The MSCI Emerging Markets Index rose 1%

Currencies

  • The Dollar Index was little changed
  • The euro was little changed at $1.1795
  • The Japanese yen was little changed at 110.26 per dollar
  • The offshore yuan was little changed at 6.4671 per dollar
  • The British pound rose 0.2% to $1.3745

Bonds

  • The yield on 10-year Treasuries declined two basis points to 1.27%
  • Germany’s 10-year yield was little changed at -0.40%
  • Britain’s 10-year yield was little changed at 0.60%

Commodities

Latest comments

hi
ViSa 002-003-281
Hello
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.