Intraday Market Thoughts

Sideways Trading & Diverging Arguments

by Ashraf Laidi
May 12, 2020 16:16

As US indices trade at their tightest range in three months, it's time to monitor for opportunities of breakouts or breakdowns. The fundamental narrative contains plenty of arguments for further upside or downside (see below). US CPI fell the most since 2008, while core inflation posted its biggest decline on record, raising questions on real interest rates becoming negative, and their impact on precious metals. Below is this week's Premium Video, detailing the current and potential trades for premium subscribers. The WhatsApp Broadcast Group for VIP Premium subscribers is now fully operational.

Equity bulls point to to the gradual reopening of the economy and consumer expenditure, and any renewed sellin in indices will be cushioned by sector rotation towards the usual defensive sectors and technology. Add to it the US govt's readiness to deliver additional stimulus and the restart of US-China trade talks. Bears argue markets have returned to overvalued levels given the ongoing deterioration in earnings, not forgetting the fact that the consumer spending (and employment) have not yet reached their worst levels yet and fresh doubts on the effectiveness of the US-China trade talks beyond the headlines.

A few things we're watching are the NASDAQ's attempt to fill and break the Feb 24 gap. The semiconductors index 1800 resistance is another. In FX, EURUSD is seen recapturing 1.0950 and gold 1723. There are also crucial developments on the metals space (as per Friday's Premium trade) and the signals behind the prolonged momentum in EURGBP—all discussed in today's video.


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