Ready for Earnings Season…. Volatility Ahead.. Can Stocks Continue to Trend Higher??

by John Knobel

Global Market Insights:  

 

  • Most European and US stock indices have gained nearly +10% in 1 and a half months; stocks markets at all-time highs;  earnings season can put the record move higher at risk of pulling back, but at the same time, earnings season could also be the next catalyst to boost markets even higher;

 

  • European Central Bank (ECB) promising to add stimulus to support EU economies; the weaker US Dollar and lower interest rates prospects from the US; have been helping stocks move higher recently; US stocks closed last week at record highs; US Dow Jones jumps +570 points last 5 days while the US dollar index falls -0.54% last 5 days; Eurostoxx 50 index +3.64% last 30 days; and the Euro has traded 0.3% higher against the USD over the last month;

 

FX Daily Trends

  • USD/ZAR lower ahead of South African Reserve Bank forecast interest rate cut on Thursday; the rand now has 6 days of gains against the USD; while volatility at lowest in nearly two years suggesting a potential high impact break-out move in either direction may be on the way;
  • GBP/USD is at its weakest level so far this year; Brexit uncertainty and seasonal price patterns indicate that the GBP has fallen during August against the USD for the last 5 years;

Commodities Daily Trends

  • Silver +2% last 5 days; Bloomberg reports that exchange traded investment funds are neutral on gold and buying silver adding +26.4 million ounces this year so far;
  • Natural Gas prices give back recent gains; cooler temperatures are forecasted in the northern parts of the US Northeast; bulls may be waiting for prices to reach support levels before attempting to take back control;
  • Coffee prices in an uptrend; current price 110.25;  +13.55% last 30 days; good weather is forecasted over the next 7 days in Brazil's main coffee growing regions; support at 105.55; a break above 114.05 opens up the potential for a 119.60 price extension;

Charts

Coffee prices consolidating the April low to June +28% gains; price support at 105.55; current 110.25; key resistance at 114.05; a break above opens up the potential for a further continuation of the longer term uptrend;

 

GBP/USD trending lower (daily chart); however signs that the downtrend may be slowing;  current price 1.2491 is below its multi-month downward trendline (bearish); support at 1.2441; resistance at 1.2590; RSI crossed above its 30 signal line indicating that buyers are committed to support price near the 1.2440 lows; however a break below opens up the prospects for the current downtrend to continue towards the 1.2219 – 1.1860’s.

 

Source: FXGM / Bloomberg