INDICES OUTLOOK – 5 JULY 2021

The tech-heavy NASDAQ and Dow Jones closed out last week at +2.57% and +0.75% respectively. Could the rotation from value stocks back into technology be on the cards again?

Traders were waiting in anticipation for Non-Farm Payrolls data last week Friday where we saw the actual beating out the forecasted 700k which strengthened the prospects of a US economic recovery which in turn boosted market sentiment sending stocks higher. Friday, however, also brought us the US Unemployment Rate which came in higher than the expected sending the Dollar on a short term pullback.

In terms of risk events this week, investors will be eyeing PMI data being released on Tuesday to gauge post-pandemic manufacturing levels. Jobless Claims hit the print on Thursday to continually gauge unemployment levels and the Fed will be delivering their Monetary Policy report on Friday.

FUNDAMENTALS FOR THE WEEK AHEAD

An important correlation going forward with earnings season once again approaching will be the Treasury Yield Curve. A hawkish shift in the Fed’s policy stance could flatten the yield curve which would in turn send technology stocks higher. The flattening yield curve makes tech stocks look more appealing when front-end borrowing costs rise faster than the longer-end rates.

This leaves the Dow Jones more vulnerable to a rapid rise in near-term rates. Companies like McDonald’s, 3M and Coca-Cola will be affected as higher short-end borrowing costs make these dividend-paying stocks look less attractive during an ultra low interest rate era. Looking at the chart below, we can see the Yield curve has been flattening creating Lower Lows and Lower Highs underpinning bearish momentum. Should 1.5% hold as resistance going forward, this could be the catalyst for the rotation to start.

10 TREASURY YIELD CURVE DAILY TIMEFRAME

Looking at NASDAQ technically, most of its momentum has been due to investors pricing in optimism for the upcoming earnings season due to a decent economic data releases showing a slow recovery within the US economy. With the reflation trade put on pause, the rotation back into tech might mean NAS takes back the crown of the leading US index.

At the time of writing, NAS looks to be pulling back slightly after once again making a new ATH last week. With price trading so high, we can expect a technical correction to take place before seeing a new leg to the highs. For the week going forward, we will be waiting for price to fall into one of our Fibonacci retracement levels in line with a previous level of resistance turned support. An interesting inflection point is around the Aspire Profit Pocket which lines up with the psychological level of $14 500 as well as the 50 Day Exponential Moving Average to act as dynamic support to potentially take price into the $14 800 region. A break below the $14 500 level would constitute short term bearish momentum with price then potentially targeting the Prior Weekly Low around $13 350.

NASDAQ 4 HOUR TIMEFRAME

Looking at the Dow, it has been on a bull run since price collapsed during June with the flattening of the yield curve. Since price is bullish, creating Higher Highs and Higher Lows, the bias still remains long. For the week ahead, pullbacks into one of our Fib retracement levels could provide high risk to reward positions should this momentum continue. Should price manage to break below our most previous swing low ($34 150 region), that could be our first clue into a potential reversal back into the downside invalidating long positions.

DOW JONES 4 HOUR TIMEFRAME

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INDICES MARKET OUTLOOK – 28 JUNE 2021

The US indices market enjoyed quite a green week as the they recovered following the Fed’s Interest Rate Decision on the 16th of June. The Dow Jones, NASDAQ and S&P closed +3.44%, +2.35% and +2.74% respectively.

Last week’s theme was mainly the results of the Core PCE (The Fed’s preferable measure of inflation) which came in at 3.4%. This is the highest level seen since 1992 as raw materials and labour costs surged on the back of pent-up demand for goods and services. This data figure could result in investors pricing in full confidence of a rate hike as early as next year.

This week, traders will be eyeing NFP data on Friday as it looks to spark some volume in the market as well as provide some insight on the taper talk taking place within the Fed. Forecasts are expecting 700k jobs to be added. Average hourly earnings are also expected to rise from 2% to 3.6% Y.O.Y. A strong outcome in the latter could bring forward Fed tapering bets. Thursday also brings Initial Jobless Claims as well as ISM Manufacturing PMI which will continue to help investors gauge the progress of employment within the economy as well as supply and demand.

FUNDAMENTALS FOR THE WEEK AHEAD

An interesting theme to keep an eye on is that of value stocks (Dow Jones) losing their shine as Treasury Yields continue to slide lower. Earlier this year, rising yields were against Tech stocks with stretched evaluations, but this seems to have flipped again in favour of the tech sector which could leave the Dow susceptible to weakness in the weeks ahead. Looking at the 10 Year Treasury Yield, the 1.6% handle looks like it will provide insight into where the curve could be heading going forward.

US 10 YEAR TREASURY YIELDS DAILY TIMEFRAME

Looking at NASDAQ technically, we saw a slight pullback in the tech sector due to Tesla announcing a recall of 285k vehicles in China due to safety issues concerning its driving software. Other than that, NASDAQ has continued its grind upwards eventually creating a high around the $14 435 region last week. Pullbacks in the tech-heavy index are bound to take place after the bullish week we saw last week. Should the current high hold, the first point of interest is around the $14 200 region which is the 50% Fibonacci retracement level in line with an area of resistance turned potential support. Further pullbacks into the psychological level of $14 000 will bring the 78.6% fib retracement level into play as well as the ascending trendline stemming from lows printed throughout June. Bullish reversals around these regions could provide high risk to reward positions targeting the $14 550 region. Any break and closure below the Prior Week Low would invalidate this bullish momentum.

NASDAQ 4 HOUR TIMEFRAME

The Dow is at a very interesting level of price action. Price has slowly climbed into the descending trendline stemming from highs created in May and June respectively. At the time of writing, price is trading around the 78.6% Fibonacci retracement level. Bearish reversals around this region could open up the door for further downside on the Dow targeting $32 550 potentially. Be weary of manipulation spikes into the $34 750/34 650 region. A break above the previous high around $34 850 would invalidate this setup and would most likely lead to new highs being seen on the Dow.

DOW JONES DAILY TIMEFRAME

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INDICES MARKET OUTLOOK – 21 JUNE 2021

The Dow Jones, NASDAQ and S&P500 closed the week at -3.45%, +0.37% and -1.91% respectively, as we saw a large influx of volatility due to the Fed bringing forward their interest rate hike projections.

Last week Wednesday brought traders the US Interest Rate Decision in which the Fed laid out their plan of two rate hikes by the end of 2023, which was more hawkish than expected and in turn led to huge strength in the DXY. The Dow and S&P retreated on Friday on the back of St. Louis Fed President, James Bullard, making comments which raised more fear about Fed rate hikes.

DXY DAILY TIMEFRAME

The 10 Year Yields flattened as well showing us the retreat in reflation bets as traders are trying to price in the possibility of a rate hike in 2022. After a spike into the 1.6% region following the interest rate decision, Yields have fallen back into the 1.4% region for the first time since March 2021. Should bearish price action continue on Yields, we could see the rotation out of blue chip companies and back into tech i.e NASDAQ.

10 YEAR YIELDS DAILY TIMEFRAME

In terms of risk events this week, the two main events everyone will be focusing on mainly is Core PCE on Friday (This is the Fed’s preferred gauge of inflation) as well as Jerome Powell’s speech on Tuesday. These two events have the potential to sway the threat of Fed tapering. Thursday also brings us Initial Jobless Claims which will help traders keep track of job recovery within the economy.

FUNDAMENTALS FOR THE WEEK AHEAD

Technically, NASDAQ is still printing bullish price action as it continues to keep printing new highs. With price being bullish, the bias remains with long positions until a break of structure presents itself. For the week going forward, immediate areas of potential support comes in the form of our Fibonacci retracement zones. Specifically the 78.6% which lines up with a liquidity zone stemming from highs created in February as well as the ascending trendline line which could also offer a form of dynamic support. Breaks below the Prior Week Low would invalidate our setups as this would be a break of structure.

NASDAQ 4H TIMEFRAME

As mentioned in last week’s blog, $34 450 was an important area for the Dow Jones. A break below signaled potential downside on the blue chip index. With the flattening of the Yield curve sending tech stocks higher, we saw the inverse on the Dow as price collapsed around 14 000 pips over the course of last week. Currently, NASDAQ and the Dow having its strongest inverse correlation since June 2017. With price being in a bearish market structure, the bias going forward will be shorts as we wait for pullbacks in price to potentially go lower. At Aspire, we will be sitting on our hands until price reaches the psychological level of $34 000 again to sport potential reversals.

DOW JONES 4 HOUR TIMEFRAME

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INDICES MARKET OUTLOOK – 14 JUNE 2021

If you were away from your trading station last week, you did not miss much as we saw last week provide some of the tightest trading ranges in the market post-pandemic with the Dow Jones, Nasdaq and S&P500 closing -1%, +1.6% and +0.34% respectively for the week.

Last week also saw the US 10 Year Treasury Yields falling below and properly clearing the 1.5% region for the first time since the initial pump during March. A simple definition of Treasury Yields is the return on investment on the U.S government’s debt obligations. It is expressed as a percentage. Treasury Yields affect the interest rates that individuals and businesses pay for various goods and services. Treasury Yields also tell us how investors feel about the economy. Since yields have declined, the stock market has climbed since the returns appear more profitable in current market conditions. Investors will be looking at this drop in yields as a potential calming method to potential tapering of Fed stimulus.

US 10 YEAR YIELDS 4 HOUR TIMEFRAME

With the drop in the 10 Year Yields, we also saw a decline in VIX (Fear Gauge) which suggests that market sentiment is positive since there is less fear in the market. This still leaves the market vulnerable to risk events. Tuesday brings us Retail Sales as well PPI as investors continue to gauge at the rate of economic growth within the US. Everyone has their eyes set on Wednesday as we see the US Interest Rate Decision as well as FOMC Statements being made. This will provide us with much needed insight from the Fed on the Central Bank’s planned policy path and might help settle the taper tantrum and transitionary inflation debate once and for all. Then lastly Thursday brings us Initial Jobless Claims which will show us if the US job market continues to recover post-pandemic. 

FUNDAMENTALS FOR THE WEEK AHEAD

Technically, the NASDAQ is trading near current All Time Highs as we saw bullish momentum last week following the decline in US 10 Year Yields. With price being bullish, the simple plan of action is to wait for the next Higher Low (HL) to be printed to execute potential Long positions. Key areas to keep an eye on is the $13 900 region which is a liquidity zone stemming from highs created in February 2021 as well as the ascending trendline plotted from lows created in May and June respectively. A clear break and retest of the All Time High could however open up the door for even further upside.

NASDAQ 4 HOUR TIMEFRAME

The Dow has been trading in quite a tight range for the past week suggesting the Summer Doldrums might be starting early as volume and volatility continues to dry up. At the time of writing, price is currently trading around the psychological level of $34 500. This week’s main area of importance will be within the liquidity region of $34 450. If we look left we can see price has moved rapidly when it has previously come into this region. Should $34 450 hold as support, this could open up room for bullish momentum on the Dow taking us into the descending trendline which could act as dynamic resistance. A break below $34 450 will change our bias to downside with our first target being in the $33 000 region. 

DOW JONES 4 HOUR TIMEFRAME

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USD/JPY – UPSIDE CALLED BY ASPIREFX

In today’s article we are going to be covering USD/JPY and the long position taken by us and our students here at AspireFX. 

USD/JPY DAILY

As you can see in the above picture, we have highlighted this weeks price action. This is to give you a clear understanding of the price action we had available to us at the start of the week and to show you how we decided to gain our long positions. 

As indicated, we can see price had a sharp decline on 23rd April, creating a new lower low. After this, price failed to continue in a descending manner as we created a lower high, but this was followed by a higher low, indicating that the bears within the market were struggling to stay in control.

From this point in time, we knew buys were a huge possibility but we needed more confirmation and as you can see, very quickly after creating the higher low for the first time, price left 3 wicks into the psychological level of 108.500 before we continued upwards to create a new high. Once the new high was printed, this confirmed a bullish structure for us and we knew we needed a pullback to gain entry and it was just a matter of time. 

USD/JPY 4H

Looking at the 4H timeframe above, we placed our fibs from the higher low to the new high created and awaited a pullback. In the picture above, you can see an inner and an outer trendline. AspireFx originally gained our entry on the inner trendline and the 61.8% Fib level, however we went into some drawdown with our entry being at 108.850 as USDJPY had a slightly deeper push into the 78.6% Fib level before making the move to the upside.

USD/JPY CURRENT PRICE

The above image is how the trade is running as of right now. USDJPY is up 100 pips since the call we made in our Telegram group with us targeting the area of 110.000 – 110.200 giving us a total profit of about 130 pips on this trade. 

NEXT WEEK MONDAY’S FUNDAMENTALS

Above we can see the fundamentals for next week Monday. With it being a bank holiday in the US we might look to close our positions and not hold them over the weekend but this is something we will let our students know. We also have JPY retail sales coming in which previously came in lower than expected to if this happens again it could be the catalyst to hit our TP if its not hit before then.

If any of the analysis used in the above article interests you or if you are interested in becoming a member of our telegram group please don’t hesitate to contact us via email ( info@aspireinv.co.za ) or DM our Instagram page directly ( @Aspireinv_fx ) and we will assist you in getting your journey to become a profitable trader started. 

We hope you enjoyed the read and have a great weekend!

USD/CAD – Reversals On Route ?

Backtracking to our “Oil Super Cycle In Motion” article published on the 10th of March, we have seen major movements in the Dollar as well as some price action to cover on Oil.

PRIOR ARTICLE ANALYSIS

Looking to the left, we have USD/CAD where price was consolidated within a daily range as we awaited further downside and to the right we have Oil after its hot run from the beginning of March.

THIS WEEK’S PRICE ACTION

The prior article price action has been marked up with a vertical line. As we can see USD/CAD broke the consolidation and had a continuation to the downside. However, when we look at Oil, this didn’t translate to extended highs. On the 18th of March, we saw Oil break down with closures back below the $60 handle. This in part, triggered a lower low formation on USD/CAD and began the retracement back towards consolidation.

From here we ranged for roughly a month before seeing Oil break higher and USD/CAD broke lower. Oil hasn’t seen as strong of a move in comparison to the currency pair, however this is due to DXY price action.

DXY DAILY TIMEFRAME

As expected we had an extended push higher after seeing our first push into resistance on the DXY. We see a retracement into the 78.6% fibonacci level which coincides with USD/CAD creating the lower low and retracing back towards our boxed off consolidation.

Once this resistance held and formed a clear lower high, we have seen further downside on DXY back into an extremely important level of support which will prove pivotal in the coming weeks/months.

DXY MONTHLY TIMEFRAME

Should we clear this monthly support, the path forward will be rocky for the US Dollar.

USDCAD WEEKLY TIMEFRAME

Analysing the weekly timeframe on USD/CAD, we can see a decisive bearish close followed by multiple wick rejections into the 50% fibonacci level. As we can see, price has now reached our 2nd fibonacci extension of -61.8% where we look to take profits. This coincides with DXY beginning to find support.

USDCAD 4HR TIMEFRAME

Applying a fib from the wick rejections off the 50% down to the lows, we have 2 fibonacci levels where we will monitor for retracements as well as a minor level of resistance inline with the descending trendline dating back to March 2020. As we can see, price has not made a higher high yet so we will need confirmation in a structural break before acting on this potential move higher.

Fundamentally, we have seen US oil inventories come in today at -1.7M, beating forecasts of -1.0M and a previous figure of +1.3M. Iranian oil exports have also been forecasted to only restart in October causing more supply shock and upside for Oil prices.

On the other hand, we also see fears of inflation drift slightly as the FED reaffirm their transitory outlook. This may put pressure on Oil prices, so we will be keeping a close eye on the inflation narrative. Inflation expectations are essentially a mirror of the Oil prices.

US INFLATION & OIL PRICES

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INDICES MARKET OUTLOOK – 24 MAY 2021

The US equities market enjoyed a slight rebound last week on the back of positive economic data pointing towards a recovery within the US economy. Investors will keep an eye on this week’s fundamental docket as inflation continues to weigh on market sentiment. 

Friday saw The flash Markit US Composite PMI Index coming in at 68.1, beating our last month’s reading of 63.5. The Dow Jones was mainly affected by this as investors are looking to rotate out of growth stocks into value stocks. It is worth noting that this is a record high for the PMI gauge which hints towards a full-blown recovery for the US economy as this is boosting reflation optimism in the market. 

This week’s most influential risk event comes in the form of US Core PCE Price Index on Friday as well as US GDP readings on Thursday as investors continue to gauge on the direction of the US economy as well as the Fed’s stance towards potential tapering. Friday also brings us the weekly Jobless Claims data as we look to see if the employment market remains at steady post-pandemic levels.

FUNDAMENTALS FOR THE WEEK AHEAD

Having a look at NASDAQ on the daily timeframe, we can see that price managed to find a form of dynamic support around our ascending trendline to create the low of last week before taking price higher. At the time of writing, price is currently trading just below the Prior Weekly High as well as a zone of resistance stemming from early February.

NASDAQ DAILY TIMEFRAME

Dropping down to the 4 Hour timeframe, the first thing that is noteworthy is the fact that we have had a bullish break of structure and a perfect retracement around the Aspire Profit Pocket before price made a move to the upside. We’ve also had the break and retest of the 4H descending trendline. Should NASDAQ continue to follow bullish structure, we will simply wait for the next Higher Low to take price higher potentially into the $13 700 region before seeing another pullback. Any closures below the Prior Weekly Low would invalidate my long bias. 

NASDAQ 4 HOUR TIMEFRAME

Moving onto the Dow, we can see last week’s low was created in the form of a 78.6 Fibonacci retracement which was bolstered on the back of positive economic data for the US coming into the end of last week. Price struggled to clear the Prior Weekly High which gives me a sign of potential fading bullish momentum. A break and clear above the previous week’s high would confirm a further move to the upside i.e creating a Higher High, but at the time of writing, it will be treated as a potential level of resistance. 

US30 4 HOUR TIMEFRAME

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Indices Market Outlook – 17 May 2021

The US equities market closed lower last week as inflationary data came in higher than expected sending treasury yields higher. The Dow Jones, S&P500 and NASDAQ closed at -1.14%, -1.39% and -2.34% respectively as they managed to recover for most of Friday on the back of Retail Sales coming out lower than expected which seemed to cool Fed tapering fears and sent equities higher into the close of the week. 

In terms of event risk for the week ahead, traders will be keeping their eyes peeled for Wednesday’s FOMC Meeting Minutes as they look to gain more insight regarding inflationary fears. Rapidly rising wages and prices are indicating a constraint on economic recovery which in turn weighs on consumer confidence within the markets. Thursday also brings us Initial Jobless Claims which always give us an idea of how the recovery of the job market is going. 

FUNDAMENTALS THIS WEEK

Looking at NASDAQ on the Daily timeframe, price managed to find a form of dynamic support on the ascending trendline stemming from November and March swing lows respectively before managing to close above the low printed in April. This could either be on the back of Retail Sales coming in lower than expected on Friday or simply retail traders adopting the “Buy the Dip” mentality. 

NAS DAILY TIMEFRAME

From a 4 Hour perspective, NASDAQ is currently bearish printing Lower Lows and Lower Highs with a potential inflection zone around the $13 600 region. At the time of writing, price is approaching our descending trendline in line with the 78.6 Fibonacci retracement level as well as a previous zone of resistance stemming from January. The last point of call for a potential bearish continuation would be the Aspire Profit Pocket (88/93 Fib region). A break and closure above $13 850 would invalidate any short setups and could open up room for NAS to make new highs should it play out. 

NAS 4HR TIMEFRAME

With regards to the Dow, price eventually collapsed last week after the Dow made a new All Time High around the $35 100 region. We’ve seen a slight recovery in price on the back of the retail sales data easing tapering fears as previously mentioned. At the time of writing, price is trading around the 61.8% fib level and reaching a potential zone of support to take it higher. Traders will be eyeing deeper fib retracement levels for better a better risk to reward on short positions. Wednesday’s FOMC Meeting Minutes could also act as a potential catalyst as we wait for the Dow to find a true direction.  

US30 4HR TIMEFRAME

Traders will be eyeing the $4200 region on the S&P as we look to see if the previous ATH will hold as resisitance in line with the Aspire Profit Pocket to take price lower. A break and close above the previous ATH could indicate buying pressure is still present and would invalidate any short positions for the time being. 

S&P500 4HR TIMEFRAME

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Indices Market Outlook 12/04/21

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. 

APRIL EARNINGS CALENDER

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. 

FUNDAMENTALS THIS WEEK

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. 

S&P 500 4 HOUR TIMEFRAME

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.

US30 4 HOUR TIMEFRAME

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. 

NAS 100 4 HOUR TIMEFRAME

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S&P500 CRACKS $4000

The S&P has managed to eventually surpass the $4000 level amidst impressive economic data being released. The Dow Jones has also seen bullish momentum bringing it ever closer to that $34,000 psychological level with building risk appetite playing a factor.

Should economic data continue to impress, this could be enough of a catalyst to trigger a continuation across US Indices. Last week brought us NFP which provided us with an optimistic outlook on the US economy alongside Consumer Confidence. The consensus seems that the US economy is slowly growing and going back to normal with some extra help from President Biden’s $1.9 trillion stimulus relief package.

LAST WEEK’S FUNDAMENTALS

Although US indices might have stumbled going into the end of Q1, the overall theme seems positive. With inflation still being a hot topic, rising yields are still a threat to the stock market. With NASDAQ being so tech heavy, the losses seen there will greatly outpace that of the S&P and Dow, with the latter being well-positioned for Biden’s Infrastructure Bill. For the week ahead, we have already seen positive ISM data boosting investor confidence. Investors will be eyeing data from Initial Jobless Claims as well as PPI to gain a clearer picture on where the economy could potentially be going. 

FUNDAMENTALS FOR THE WEEK

Consolidation is healthy amidst broader uptrends. Pullbacks are inevitable even though the stock market is designed to grow and go up. For the S&P specifically, the crack of $4000 does indeed open the door for a new leg to be formed to the upside pending a pullback. Price is continually making Higher Highs and Higher Lows in the bigger scheme of things showing us that bullish momentum is still very much prevalent. It’s time to exercise patience as we await pullbacks in price into one of our marked out technical levels such as our ascending trendline stemming from swing lows from November and March respectively. The psychological level of $3950 could also provide price with a region of support to take price higher.

S&P500 DAILY TIMEFRAME

Technically, the Dow has been showing us similar signs of bullish momentum. As previously mentioned, pullbacks in price is normal and healthy before seeing price create a new leg. In the case of the Dow, pullbacks are bound to happen as well. We could look at the Prior All Time High as the first region where price could run into some form of support. Should we break this, the next level to keep an eye out for would be the psychological level of $33,000.

US30 4HR TIMEFRAME

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