U.S. stock market managed to break through to a new highs above 4200 points. Excellent impressive record. However, too many positive reasons were needed to gain this achievement.
The Federal Reserve Chairman Jerome Powell had to convince investors on the press conference the any tapering of the stimulus program of $120 billion a month is not even being considered at the moment. Meanwhile, U.S. President Joe Biden has announced $1.8 trillion infrastructure plan. Corporate quarterly earnings reports from Apple, Microsoft, Facebook, Tesla and Amazon was much better than expected. Finally, U.S. Q1 2021 GDP surprised by soaring by 6,4% beating expectations at 6.1%. However, along with this excellent figure GDP price index jumped to 4.1%, the highest reading since November 2008.
Despite that S&P 500 broad market index is struggling to continue its rally above 4200 points. So, investors might be waiting to buy another dip this time. Mr Powell himself when answering questions has agreed that some asset prices are too high now. Together with the confirmation of rising taxes by Joe Biden along with increasing government spending 10-year Treasuries yields peaked 1.68% on Thursday.
The combination of these factors may curb investors interest for further stock buying. The market could not go any higher without such interest. So, it might be wise to step back a little for further directions. The key support level for S&P 500 remains at 4175 points. If the index fail to hold above this level a correction scenario to 4040 and 3930 points would be activated.
Crude oil market is running on a full positive tank this week after OPEC Technical Committee raised its forecast for crude demand to 6 million bpd from 5.6 million bpd in 2021. Crude reserves in the United States rose slower than expected by 90,000 barrels vs 650,000 barrels expected.
Crude market has more bearish picture with the prime resistance at $64.40 per Brent crude barrel that guards the path to $60.00 per barrel level. If this prime resistance level would sustain we may expect prices to recover to $65.80 and $66.80 per barrel, where sell position would be interesting to consider. Traders should also monitor OPEC+ meeting that is expected this week. We expect no surprises with OPEC+ to reconfirm its planned crude production commitments in May-July. Negotiation between the U.S. and Iran over nuclear deal are also on the table. Biden’s infrastructure plan supported crude prices with Brent crude price broke the resistance level at $66.80 a barrel and lift off to $68.90 a barrel. However, traders may take a breather today with Brent crude prices to edge down to $66.80 a barrel.
Gold prices are retreating as the U.S. ten-year Treasuries yields rose to 1.68%. Prices of the yellow metal fell to $1757 per ounce on Thursday. We may expect excessive volatility of gold prices without any particular direction. So, wait and see position could be better solution at the moment until the market provides more accurate signals.
The Greenback is mixed to other major currencies weakening to the Euro and the Pound and strengthening to the Yen. The EURUSD is still heading for its resistance level at 1.21800 that would provide excellent sell opportunities with targets at 1.20500 and 1.19400.
The GBPUSD is consolidating at 1.39400. However, it is better to wait until the Cable reaches the resistance 1.40700 to try sell positions.
The USDJPY has reached the resistance at 109.00 and performed a clear reversal pattern. Nevertheless, new sell positions are not likely to be opened until the next week.