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Market Wrap
If you look across Fin Twit you’re quickly confronted with the bear thesis as to why the stock markets are heavily over valued even after quite a dramatic decline since the start of 2022. At the start of the year the US Treasury was running a surplus for most of January and then we found the US economy in the same situation at the start of May. As of today, the US economy is again running a deficit, which means that the government are net spending into the economy more than they tax back out. This may be the one and only reason why the market rallies. However, as traders we have our setups and as analyst, we attribute different economic scenarios and data points to why the market moves. One thing I do try and do is go against the grain when it is so heavily biased one way. The entire list of indices that we can follow are green today. The Hang Seng closed 3.27% to which is the highest index close today. The Australian ASX was the smallest gainer this morning but even that moved 0.27% higher to add to the bullish week so far.
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In today’s TA video I described how I was expecting the data today to help push the S&P500 towards the double top and the FOMC highs as I believe that is the area of most liquidity, nearest to current price. If that is where the shorts cover, we could accelerate higher and test the upper bounds of the descending channel and potentially higher.
US retail sales came in as expected and the previous month was raised higher, which is a great sign for the US economy and maybe a sign that there is liquidity making its way to the back pockets of ordinary citizens as well as corporate profits.
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The US dollar came off its highs and pushed back into the range under $104. I am not looking to short the US dollar until we break market structure to the downside and essentially close below the $102 level. Today’s action was great for anyone looking to counter trade the GBPUSD and EURUSD.
The forex heatmap is all mixed up ahead of the Fed Chair Powell speech with no clear risk sentiment. The pound has held on to its strength and the yen is currently the weakest currency, so the GBPJPY was a great trade along with EURJPY and USDJPY to the long side. The key high for the GBPUSD and GBPJPY is the one that formed on the 5th of May as that was the day the Bank of England raised rates, but the market sold off from. There will be stop orders resting there and that makes a great target for the traders looking to short the US dollar from the $105 with a major forex cross like the GBPUSD or EURUSD. If Fed Chair Powell gives the market more reason to sell the US dollar, we could be in for a wild ride into the end of this week and the options expiries on Friday.
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