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The rally is back on after a strong week for equity markets. The main indices avoid an eighth straight down week. US market still has had one of its worst starts to the year in history. The week began with peak fear and ended with optimism high. Surely it can't be that easy to turn things around. But investor sentiment appears markedly improved after a week of promising earnings from the retail sector, coupled with some strong consumption data to end the week on Friday. Interest rate markets also took a noted doveish turn and now have taken down estimates for year-end interest rates by a full 25 bps. One week ago Fed funds futures were pricing in a 2.75-3% year-end rate. Now they are looking at 2.5-2.75% as the rate by December.  Source: CMEGroup.com That curious move enabled equities to breathe a little easier. The dovishness was perhaps added to on Friday with the Fed's favorite measure of inflation, the PCE, coming in as expected and showing a decline versus a month earlier. This welcome decline was seized upon by equity markets which pushed aggressively higher throughout the day. However we must urge caution, inflation is spreading its wings out… Read More »Week Ahead on Wall Street (SPX QQQ): Return of the rally as yields fall and retail remains strong

Summary So far in 2022, inflation has outpaced income, yet real consumer spending has increased every month this year including another 0.7% in April as we learned in today's personal income and spending report. The source of funds for these outlays are not infinite. For real spending to be sustained, we'll need to see income outpace inflation. That happened in April for the first time since October 2021. Consumers getting close to the end of the lollipop? On the day after revised GDP numbers showed an even faster pace of consumer spending in the first quarter, fresh data today for April showed that momentum continued into the second quarter. Personal spending shot up 0.9% in the month and, after adjusting for inflation, real spending still added 0.7%; that comes on the heels of revisions that more than doubled March's real spending gain from 0.2% to 0.5%. Spending was relatively broad-based with real services outlays growing another 0.5% and real goods spending up 1.0%. Goods spending got a lift from motor vehicles, the category with the largest increase on a real basis. Other durables categories, where frankly we have been expecting some weakness like recreational goods and vehicles and durable household… Read More »Consumer staying power on full display in April

Europe It’s been a decent week of gains for markets in Europe, with the FTSE100 enjoying a particularly strong performance, on course for its best week in over two months. This outperformance has been helped by decent gains from the likes of Ocado, Kingfisher, B&M European Retail and Primark owner Associated British Foods, after yesterday’s fiscal stimulus package, took the pressure off UK consumer incomes with over £650 of help for the most vulnerable households, along with a £400 one-off payment to every homeowner. Having had a bit more time to dissect yesterday’s windfall tax announcement from the UK government we’ve seen further weakness in the UK oil and gas sector. While BP and Shell shares have held up quite well, they are still down today, after BP said it would review all of its investment in the UK and North Sea, which could well lead Shell to do the same thing. Earlier this year Shell submitted a new plan for its Jackdaw gas project with a delivery date in late 2025, after it was rejected last year. Could yesterday’s events prompt a reappraisal of that, even if it gets approved?    The smaller UK oil and gas companies have… Read More »FTSE100 hits a 3-week high, windfall levy weighs on UK oil and gas

The Canadian dollar hasn’t made any spectacular daily gains since May 13th, when it shot up 1.1%. The currency has, however, made slow but steady progress against its US cousin. Earlier today, USD/CAD touched a low of 1.2731, its lowest level in three weeks. Canada Retail Sales jump in Q1 Canada’s retail sales for March helped the Canadian dollar rally on Thursday. The headline figure was virtually unchanged, but core retail sales rose 1.5%. According to StatsCan, retail sales jumped 3.0% in Q1, its highest level since Q3 2020. Consumers continue to spend despite red-hot inflation, but if consumers decide to tighten the purse strings, the economy would likely take a hit and drag the Canadian dollar lower. The US dollar finds itself under pressure as risk appetite has rebounded. Investors were pleased with the FOMC minutes, as the Fed signalled that it planned to press ahead with 50-bps rate increases in June and July, which soothed concerns about a possible massive 75-bps hike. This gave the equity markets a boost and sent the greenback lower. The US economy may not be in a recession, but negative growth in the first quarter is certainly a concern. Second-estimate GDP came in… Read More »Canadian dollar higher on Retail Sales

USDCAD is extending its retreat from the recorded 17½-month high of 1.3076, heading lower towards the converged simple moving averages (SMAs), which are not now endorsing any sturdy price trend. The pair has retracted within the region of a trading range that had lingered for a period of nearly ten months.   The short-term oscillators are reflecting the increase in negative momentum. The MACD, in the positive area, has distanced itself below its red trigger and is approaching the zero mark, while the RSI is falling in bearish territory. Moreover, the renewed negative charge of the stochastic oscillator is promoting additional downward price action in the pair. To the downside, an initial fortified support section from the 1.2718 barrier until the inside swing low of 1.2646 exists. This includes all the SMAs and the lower Bollinger band and could prove to be a difficult task for sellers to accomplish. However, if this upside defence fails to dismiss selling intentions, the price may then tumble towards the April 21 trough of 1.2457, simultaneously testing the 1.2450 support too. In the event bearish pressures continue to overwhelm, the 1.2402 low and the adjacent 1.2351-1.2386 support band could draw traders’ attention. On the… Read More »Technical analysis: USD/CAD trickles toward SMAs as sellers retake control

Global stocks continued their recovery as investors have rushed to buy the dip. Futures tied to the Dow Jones and S&P 500 have risen by more than 0.50%. If this trend continues, it will be the first weekly gain since March. The same situation happened in Europe, where the German DAX and CAC 40 rose by almost 1%. Some of the top movers in the pre-market session were Kraft Heinz, Medtronic, and Centene, which fell by over 5%. Dollar General, Dollar Tree, and DXC Technology rose by more than 15% after these firms reported strong results. Other top gainers were firms like Dell and Ulta Beauty. The price of crude oil jumped sharply as the EU continued to debate measures to ban Russia’s crude oil. While many countries support the measure, a small group of them have opposed the measure citing the vast amount that they buy from the country. Meanwhile, oil prices rose even after a sharp decline in China’s industrial output. According to the country’s statistics agency, industrial profits declined by 8.5% in April compared to the same period in 2021. The contraction piles pressure on the government after it has implemented Covid-zero strategies.  The Japanese yen moved… Read More »Crude oil price spikes as China’s industrial output shrinks

The Dow Jones Industrial Average cash index traded higher on Wednesday, breaking above the downside resistance line drawn from the high of April 21st. The index continued its recovery today as well, reaching the 32755 resistance zone, marked by the high of May 10th. Bearing in mind that the index broke the aforementioned downside line, we would see decent chances for some more advances. A clear and decisive break above the 32755 zone could encourage the bulls to climb to the 33350 zone, marked by the high of May 3rd, and if they are not willing to stop there, then we may see them pushing towards the 34120 zone, which acted as a key resistance between April 25th and May 5th, or the 34320 barrier, defined by the inside swing low of April 19th. Should neither of those two zones hold, then we could see a test at 34800, the high of April 22nd. Shifting attention to our short-term oscillators, we see that the RSI flattened near its 70 line, but the MACD remains above both its zero and trigger lines. Both indicators detect strong upside speed, which supports the idea of further advances, but the fact that the RSI has… Read More »Dow Jones breaks above a downside resistance line

In this week’s Live from the Vault, iconic financial commentator and life-long stockbroker, Bill Holter, joins Andrew Maguire to share his eye-opening examination of the West’s insurmountable debt. As the Fed’s money-printing tactics start to closely resemble a Ponzi scheme, the precious metals expert explains, with mathematical certainty, why the current system is destined for bankruptcy. Timestamps 00:00 – Start. 01:30 – Bill Holter – the introduction. 02:45 – Jim Sinclair’s “QE to infinity and beyond” going since 2008. 06:05 – 80% of all the dollars have been printed in the last 2 years! 09:05 – About Central Bank Digital Currency (CNBC). 10:50 – Bailing is already in place! How to get out of the system! 16:15 – Silver as the fuse to break the financial system! 20:00 – Silver short positions, nickel blowing up and the Rubicon line. 24:35 – What would Bill do if he came from Mars? 28:20 – Could silver and gold be confiscated? 32:00 – Silver’s Backwardation described. 35:40 – About Exchange of Futures for Physical (EFP). 38:30 – Final parting message From Bill Holter.

US non-farm payrolls (May) – 03/06 – there’s a great deal of uncertainty about how resilient the US economy is when it comes to some of the underlying numbers. A sharp contraction in economic output in Q1 doesn’t appear to be altering the dynamics around the labour market, which is struggling with weak participation levels. This weakness in the participation rate contrasts to over 11m job vacancies, although we are expecting to see this pick up in May to 62.3%. 428k new jobs were added in April, while the March figure was revised lower to 428k, so a nice bit of symmetry there. Average hourly earnings remained steady at 5.5% which again seems counterintuitive with so many unfilled vacancies, while unemployment remained steady at 3.6%. This trend isn’t expected to improve significantly in the May payrolls numbers, with job creation set to slow to 329k, while unemployment is expected to fall to 3.5%. Neither of these numbers is expected to move the dial that much, however wages growth might well offer clues to central banks tightening pace. If wages growth continues to remain lacklustre, with an expectation of a fall to 5.2%, then we could see more urgency go out… Read More »The Week Ahead: US non-farm payrolls, Bank of Canada, EU CPI, Dr Martens and Broadcom earnings

Equities continue to move higher as the week draws to a close, with hopes that this rally might last longer than some of the recent failed bounces. Stocks make fresh gains “Investors have been more comfortable about buying into this rally thanks to the lack of any hints of 75 bps rate hikes in this week’s minutes. This has been enough to move the sentiment dial out of its trough, providing some space for at least a short-term bounce. Worries about inflation have been the big driver of declines of late, so the slowdown in the PCE price index on both the headline and core measures helped to shore up sentiment as well.” Recession not fully priced in “Stocks on both sides of the Atlantic seem content to push higher for the time being, but this isn’t a return to the old ways of steady gains. A gain of even 10% from here might look like an all-clear signal for investors, but growth and earnings forecasts probably need to come down a bit more, which in turn points towards fresh lows for the market in the months to come.”