A1 Trading Company

April 29, 2024

Bet on Volatility

Frank Cabibi

As we open a big earnings week with tech and blue chips, the market is expecting volatility. Not only from this, but from another pivotal FOMC report on Wednesday. PMI and jobs data come out in the US as well. Here is what I'm looking for in the market this week.

EdgeFinder Analysis

EURUSD is still a strong bearish setup on the EdgeFinder at -10. German CPI came in cooler than expected making the inflation divergence in Europe and US steeper. US PMI numbers roll in on Wednesday, the same day as FOMC.

That will be a big directional day for the dollar in general as we dissect what may happen to interest rates this year. If the Fed continues to sound hawkish about keeping rates where they are until they have more "confidence" in the inflationary decline, we may continue to look at higher dollar and yields for some time.

Gold still remains elevated despite higher yields. Smart money looks confused on where they think this metal will go which is not a good sign for traders. With a heavy news week coming up, there are several things to consider.

If earnings shows growth overall, the market may continue to be optimistic despite yields going up. If PMI comes in higher, gold will likely get less optimistic. If the FOMC conference suggests higher rates for longer (maybe even to next year) gold could get hurt as well.

SPX500 is falling into neutral territory on the EdgeFinder after a bullish score was redacted from the scanner's sentiment. PMI news is going to change the score as well; lower PMI from services and manufacturing is going to make the score lower in those categories.

Earnings expectations and reports may be muted by the FOMC conference this week. Last week's rally is not a concrete sign that the market will continue to push higher as a result of risk-appetite. If blue chips and tech report strong numbers, the rally could continue.

Retail Spotlight

Retail has not changed much this week as the crowd stays strongly bullish on crypto, metals, small caps and oil. Indices are mostly mixed while USDJPY and GER30 are the top sellers.

Smart Money Spotlight

Net change shows us that smart money is buying into the NIKKEI, Copper and Silver from Friday's report. Dow Jones Index (US30) was heavily sold along with platinum, CHF, and GBP. Gold, dollar, SPX and NAS saw little attention from institutional positions last week.

Fundamental Spotlight

When comparing the inflation rates for the US and Europe, you can spot the directional divergence between the two. Starting between December 2023, EUR inflation has declined steadily while the US either remained stubborn or rose.

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