The US equities market closed higher on Friday with investor confidence being boosted on the back of positive economic data as well as reflation hopes being led by President Biden’s stimulus package. The NASDAQ, S&P500 and Dow Jones closed +0.51%, +0.77% and +0.89% respectively.
There has been a seasonal downtrend in volume and volatility with price being somewhat steady. The VIX Fear Gauge is trading at pre-COVID levels suggesting that the waters are calm for now. With Earnings Season kicking off this week, we could see an uplift in volume and volatility as it could give us a clue about possible economic recovery. Wednesday sees major financial institutions such as Wells Fargo, JPMorgan, Goldman Sachs and Bank Of America releasing their Q1 reports.
A string of positive quarterly results could trigger an extended bull run after recent upbeat economic data ranging from NFP to consumer confidence. With the stimulus-led reflation hopes boosting investor confidence, key risk events to keep an eye on for the week are US Core Inflation on Tuesday as well as Retail Sales on Thursday. The result of Retail Sales will affect the Bond Market as well which in turn will affect the stock market. We also have Jerome Powell speaking on Wednesday at the Economic Club of Washington.
Technically, we saw the S&P500 continue to grind higher as price has managed to break that psychological level of $4100 with no clear signs of a bearish reversal just yet. Since the S&P is trading at All Time Highs, there is no immediate level of resistance. With price continually rising, some form of a technical pullback is inevitable. Should pullbacks occur, the ascending trendline stemming from swing lows in March as well as the psychological level of $4000 would provide a good risk to reward ratio on a potential long position to take price higher.
We’ve seen similar price action on the Dow as price has continually made Higher Highs and Higher Lows showing bullish momentum. Pullbacks are inevitable as price has still not shown any signs of a reversal just yet. Pullbacks into one of our Fibonacci retracement zones in line with a level of support as well as the psychological level of $33,400 is the main theme this week as we keep an eye on the event risk lined up for the week.
The tech-heavy NASDAQ continues to trade close to its All Time High posted in February with price creeping closer and closer. The first immediate level of technical resistance would be said All Time High and if price does not manage to break this high, we can look for price to pullback and test March 2021’s high before potentially reaching that psychological level of $14,000 and higher.
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