A1 Trading Company

May 6, 2024

Yields Fall Ahead of Earnings

Frank Cabibi

More earnings reports come out this week is causing an inflow of buyers in the equities market while yields begin the week on a decline. Last week's Fed meeting showed up as "less hawkish" than investors expected causing risk appetite to increase at the start of the summer months.

EdgeFinder Analysis

As we come off a few weeks of heavy news in the US, earnings continue to roll out in the stock market. EURUSD is now flashing bullish signs after investors digested the Fed as somewhat eased the fears of a rate hike in the US.

The risk-on trades look to be more optimistic as COT showed a slowdown in USD interest while upping the ante on currencies such as EUR in last week's report. Europe also has no major news events this week so it may just play off the stock market sentiment.

Gold begins the week in the green after nearly a month of downside. Price is now above the support on the 1D timeframe and is testing Friday's high. Smart money is still buying the metal despite falling yields and risk-on sentiment returning.

Geopolitical tensions are still causing issues on the supply side, but China seems pretty bullish on gold who has been buying for some time. The 12% rise from the start of the year suggests the lack of optimism in equities and possibly the dollar too.

Small caps are the only bearish reading on the indices, however. Retail seems to be a heavy influence in the latest stock market rally as COT is selling the indices. The interpretation of Fed sentiment seems skewed in the sense that investors are looking for any excuse to drive prices higher.

The issue I have with stocks right now is that we went from several rate cuts this year, with the expectations of them starting as early as December 2023. Now cut forecasts keep getting pushed back further and further into the latter half of the year, and there might not even be one in 2024.

Retail Spotlight

Retail is majority long oil, crypto, metals, USDCAD, USDCHF, and USDJPY. They are also short the SPX500, GU, EU, AU and NU. The sentiment this week seems to be bearish dollar and bullish risk-on.

Smart Money is selling oil, indices, and ten year notes. This is a sign that the institutions are getting more risk off going into the week.

Fundamental Spotlight

Last week's NFP report in the US came out much weaker than expected after seeing a steady climb in forecasts. A cooling jobs market could indicate pessimism in the US economy even if it means no rate hikes. This is especially true if CPI comes in higher or does not move next week.

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More earnings reports come out this week is causing an inflow of buyers in the equities market while yields begin the week on a decline. Last week's Fed meeting showed up as "less hawkish" than investors expected causing risk appetite to increase at the start of the summer months. EdgeFinder Analysis As we come off […]

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