News over the weekend transpired that one Asian hedge fund, Archegos Capital Management, had gone under last Friday, and the prime brokers that lend it funds were forced to take a hit. By Monday, the world found out that Nomura, a Japanese investment bank, took a loss of $20 billion. Also, Credit Suisse warned its shareholders about a similar development, while Goldman Sachs and Morgan Stanley managed to sell off blocks of company shares quickly enough to avoid such losses.
Some other time, such news was enough to trigger at least a modest selloff on Wall Street. Not only that this did not happen yesterday, but the equity market indices in the U.S. traded at all-time highs.
Take the Dow Jones, for instance. It made a new all-time high yesterday, although on low volume and little follow-through. However, these are ideal conditions for the market to “levitate,” as this is the Easter week, characterized by such price action.
In Europe, the German Dax index closed above 14,800, the French CAC40 traded above 6,000, and the UK100 above 6,730.
The ship stranded in the Suez Canal was finally released, and so the price of oil eased back a bit to start the trading week. However, futures currently trade above $61, only two days ahead of the OPEC meeting.
Finally, the currency market remains dominated by a stronger dollar, spoiling the reflation trade seen dominant at the end of 2020.
One can ignore the economic data to be released today and pretty much all the data this week, with one exception – the U.S. Non-Farm Payrolls next Friday. Until then, look for little or no price action and the stock market to remain strong on every dip.
Markets to Watch
Silver, EURUSD, Dax – markets in focus today.
Silver remains under pressure as the market did not yet reach the measured move of a head and shoulders, nor the projection of a bearish flag. While the price action maintains the series of lower highs, traders would better expect the market to remain under pressure.
The main currency pair of the Forex dashboard keeps dropping without any sign of a reversal. Yesterday, the ECB revealed its weekly purchases under the PEPP program, and, as it turned out, there was no “significant increase” yet, as the bank promised. However, the news did not stop the EURUSD from trading lower, and the pair made a new lower low this morning.
A weaker currency bodes well for the Dax index. The German index bullish breakout from an ascending triangle last month is close to reach the measured move. On top of that, a bullish flag, another continuation pattern, points to even higher levels. If the market manages to keep the series of higher highs and higher lows, the Dax index remains bullish with a target of 15,500 as given by the bullish flag pattern.
Winners and Losers
The dollar remains the winner on the FX dashboard, while the JPY is well offered. One should also note the ongoing strength in the equity markets.