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Profit Taking From The Open Or A Reversal?

Market Wrap

As we closed in on the opening of the US session the US equities were pushing upwards to new all-time highs. Almost as soon as the opening bell rang, the Nasdaq sold off to the tune of 150 points just after the London session closed.

Pre US market data releases today included the US Advance GDP q/q which came in at 6.4%, which was above the 6.1% consensus but below the wildest calls of 10%. However, the data print did put 2.1% on the last reading, so the US economy is definitely moving in the right direction. Though if you breakdown the GDP equation:

GDP = consumer spending + business investment + government spending + net exports

You could be excused for wondering why GDP wasn’t higher? The $trillions put into the economy in stimulus has essentially given a 2% increase this quarter when you take into account the US is a net importer which is a drag on the economy.

The telling sign was that the US Bonds sold off and the yields rose, as the need for a safe haven like a bond is less necessary when the economy is doing better. The worry of rising inflation due to stimulus is still real within the markets and the Nasdaq once again sold off on the steepening yield curves. Bottlenecks as described by Fed Chair Powell yesterday were backed up by corporate filings, where companies are telling the markets that they are seeing rising inflation in materials, which is being exacerbated by disruptions in supply chains. The most talked-about disruption currently is the lack of microchips which the next-generation electric vehicles in particular need.

The other drag on sentiment today was from the US unemployment claims which came in above expectations and on the back of an upwardly revised previous week’s number. Which prompted the US Labor Secretary Walsh to say most US gig workers should be classified as employees. This put some downward pressure on Uber, Lyft, Grubhub, and DoorDash as these companies have been scrutinized in the past for their treatment of the drivers that use the apps.

The US dollar is keeping its head above the $90 level as the EURUSD came down to find a previous consolidation zone around the 1.2110 price level. The USDJPY took out yesterday's high and looks to be printing a bullish engulfing candle which bodes well for the USDJPY bulls that are just pipping the bears on the ActivTrader sentiment indicator.

Crude has started to come off its day's highs but the breakout above the recent swing high market structure does suggest that the bull trend is full in play as we now have a clear higher high and higher low to keep an eye on. This makes $67-$68 the next target and them new yearly highs.

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