There’s no doubt about it now. The stock markets have been behaving like the heat gauge on a car, a broken heat gauge. They just keep going up no matter what the economy is doing.
The economy might be overheating under the hood, but since the gauge isn’t working we have no way of knowing. The yellow check engine light has been on since November 8th but that doesn’t necessarily mean anything is wrong either.
A car can run like this for quite a while without incident, and the stocks may just keep going up for weeks or months ahead. The only issue is, that if a problem does occur under the hood, by the time we figure it out we’ll be stranded on the side of the highway.
Today’s Highlights
- Show me the FOMC
- Top of the Oil Range
- Pressure in France – EURUSD Breakout
Please note: All data, figures & graphs below are valid as of February 22nd. All trading carries risk. Only risk capital you can afford to lose.
Market Overview
Global stock markets continue to climb. The US indices are going further into record-breaking territory, with the Dow Jones now looking for 21,000.
The DAX continues to outpace the rest of the markets with a gain of more than 1% yesterday. It seems that German investors are quite happy that the Greek situation is comfortably under the rug and off of the front pages again.
Asian markets are pretty flat today with gains of less than 0.25%.
For the first time in months, the news cycle seems to be in a lull and traders can once again concentrate on the charts and technical analysis. Of course, with the news always on because, in the fragile state the world is in, you never know what can happen.
For example, crude oil has been trading in an excellent range since December from $51 to $55 a barrel.
At the moment the momentum seems to be in an upward direction as OPEC has surprisingly been able to honor their commitment to reduce production, but for now, the range is holding tightly.
Pressure’s Mounting
Upcoming elections are weighing heavily on the Euro at the moment. In the Netherlands, it’s looking more and more likely that we’ll see an anti-European government take power on March 15th.
A bigger problem is currently being brewed in France though. The extremist populist Marine La Pen, who is currently campaigning to abolish both the Hijab and the Jewish Yarmulka from the streets of Paris, is gaining massive momentum.
In a conversation with one of the top analysts from JP Morgan about two months ago, the feeling was that La Pen has no chance of victory. Looking at the stats today tells a different picture though. Remember, Donald Trump was given only 28% chance of victory by analysts on November 7th.
At the moment, the French bond market is going nuts as investors try and hedge the risk of a radical government.
The Euro, as we can see, is tanking…
Zooming out to the long term chart we can see some light support at 1.05, the red line remains at 1.337.
Today’s Shindig
There are a few items on the Calendar today but the most prominent is the FOMC, who will be releasing their minutes from the meeting on February 1st.
Virtually all Fed members are telling us to expect two or three rate hikes this year, but only few will tell us more specifically if it will be two or three. In the words of the Vice Chair Stanley Fischer “I’m not going to speculate on two or three hikes.” Meaning, they don’t know so it depends how we go.
As many traders, especially at the moment, are trading on an ultra short time frame, they want to know specifically about the meeting on March 15th. Market expectations have indeed been rising and currently stand at 38% as of this morning.
The US Dollar will be listening directly for any hints that may lay within these minutes. Talk of a rising inflation, better job growth, increased earnings, or less risk from the Trump administration could point to a sooner rate hike and send the Greenback flying.
What else?
Keep an eye on the South African Rand. For those of you who enjoy high volatility, this is a great currency. Today, Finance Minister Gordhan will submit what could be his last annual budget.
The UK’s house of Lords has passed the first round of the Brexit Bill. Debates continue and there is increasing speculation that they will want to make changes.
Please note that the Copper contracts that we’re trading in eToro will expire tonight. Any open positions should be closed before the end of the New York trading session. The new contracts will be available from 23:00 GMT.
Copper has been one of the fastest rising commodities in the past few months and still has room to go higher so if you feel this trend will continue, tonight or tomorrow morning could be your opportunity to join in and have the option to hold your positions rollover-free until April 24th.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.
