Stocks, Risk Currencies, Crude Oil Higher on Improved Risk Sentiment
Skerdian Meta • 3 min read
The risk sentiment improved last summer, as Europe and the western world came out of the winter/spring coronavirus restrictions and most sectors of the economy were surging. As we were heading toward winter, the Omicron variant broke out, which hurt the sentiment, especially as restrictions were coming back in China. But, now it is confirmed that this variant is pretty mild, which means that the sentiment has improved again and the global economy is picking up speed in certain sectors.
Risk assets went through a retreat at the end of 2021 and in January this year, but now that the sentiment has improved again, they have resumed the uptrend. Apple Inc. broke below the 20 SMA (gray) on the weekly chart but in the last three weeks, it has reversed higher, after finding support at the 50 SMA (yellow). The bounce has been pretty strong, which suggests strong buying pressure after the retreat and soon AAPL shares will head for all-time highs.
Apple Stock Weekly Chart Analysis
AAPL bouncing off the 50 daily SMA
The S&P equity index is currently trading up around 46 points at 4567.41. That is up about 1.03%. The high price reached 4575.85. In the process, the price briefly traded above its 100 daily moving average of 4571.74. Recall from last week, the price high extended up to 4595.31 points, and closed at 4589.37 on Wednesday.
That close was above the 100 daily moving average at the time. However, the very next day, the price opened below that key moving average, and the price retested its 200 day moving average during Friday’s trade. Buyers leaned against that level and pushed the price back higher, so the 200 SMA is acting as support now.
S&P500 Daily Chart Analysis
S&P will resume the uptrend completely when it pushes above all MAs
US WTI Crude Oil Daily Chart Analysis
Crude oil doesn’t seem to stop. it has been on the strongest bullish run in history for nearly two years now, increasing from $-37.50 to $93.20 late last week, after the OEPC+ meeting didn’t produce much, apart from a very small increase in production.
US WTI Oil got another boost from that outcome and jumped higher, but it has been retreating lower since then. Although, the 50 SMA (yellow) and the previous resistance at $89 seem to have turned into support. We decided to open a buy signal down there and now the price is starting to reverse higher.
The 50 SMA held as support for Oil on the daily chart
Central banks are turning hawkish, bringing an end to the massive QE stimulus programmes and starting to hike interest rates already. The chief economist of the Bank of England made some hawkish comments, after the BOE has increased interest rates already twice in the last two meetings.
Comments from the BOE Chief Economist Pill
- Unusually large steps may validate the market narrative that it’s either ‘foot-to-the-floor’ on the accelerator or ‘foot-to-the-floor’ on the brakes
- Were energy prices to fall steadily in line with futures pricing rather than to stabilize as they assume, then lower rates could be maintained
- Were we to see evidence of second-round effects in wage and cost developments, a tighter policy than otherwise might be required
- We have signaled that more is to come in the coming months if the path sketched out in our February forecasts play out
- Says he’s not going to give any specific view on what the yield curve should look like
- Financial markets have come to expect a lot of guidance from central banks on where rates are heading
- Reason why central banks have got inflation forecast wrong of past year is because energy prices are very hard to forecast
- 1% bank rate is not a trigger, it is a point for consideration
- Should not assume that if we get to 1% in the next few months, BOE will automatically sell gilts
- I cannot give guidance on how gradual gilt sales will be
- Key question is how much churn in labour market leads to people going into more productive jobs
- We need a rebalancing of monetary policy and BOE is in the vanguard of this