April 22, 2021 12:54:37

Headlines

* US stocks flat, European markets more upbeat, earnings doing well

* USD choppy with USDX trading just above 91

* ECB unchanged, awaiting press conference though no fireworks expected

US equity futures are very modestly better bid today after regaining their footing after two days of losses caused a stir in markets. “Buy the dip” is certainly the mantra as rising infection cases are well-known while earnings continue to surprise to the upside.

USD is rather mixed as traders await the ECB press conference. The greenback has desperately tried to regain lost ground after the unrelenting loonie BoC surge and underlying bids are being seen above recent lows on USDX around 91.

Market Thoughts – BTD, FOMO, TINA.

Market psychology is fascinating at the best of times, with the ebb and flow of moves essentially watching greed and fear in action on a live basis, always enthralling. The key thing to remember is that traders love a “story” or some kind of narrative which either is driving the market at that point in time or needs to be on the radar as a potential catalyst going forward. These drivers then come and go in importance with the general risk-on or off dynamic underlying this concept.

After two days of selling, there seemed to be a real sense that markets were in for a correction. Gold was moving higher, oil lower and yep, this was a time to get the tin hats ready as the pandemic was getting worse in India, Brazil and Japan, while Russia was flexing its muscles. There was perhaps too much optimism priced in and that was driving a change in the leadership in stocks. But the key factor pushing risky assets ever higher is the largesse of central banks and governments around the world, continuing to dish out unprecedented stimulus. Of course, this will come to a very slow end in the future, as commenced by the Bank of Canada yesterday, but otherwise, all those acronyms – BTD, TINA, FOMO still look to be in working order.

Chart of the Day – Gold, always believe?

Gold has been enjoying the weak dollar and falling US market interest rates. That’s because a weaker USD makes the yellow metal cheaper for holders of other currencies while higher rates increase the opportunity cost of holding gold which produces no interest.

If caution continues, then we may see the target for the double bottom reversal pattern seen in March and this month, which is around $1830 (the height of the pattern added to the breakout point). Ahead of that, bulls will have to battle with the psychological $1800 level plus the 100-day moving average just above here. Long term funds are short or neutral currently and a move back below last week’s low at $1724 will be needed to see bearish momentum resume.