The “Sell in May and Go Away” saying seems to be true this year as the recent gains in global Indices look more and more like a “dead cat bounce” than a recovery.
Inflation fears and global uncertainties have prompted investors to “ditch” riskier assets for now until a cleared way forward is established.
U.S Index Futures have continued to move lower overnight which has spilt over into the Eurozone session but might start to consolidate ahead of the FOMC meeting minutes.
Bitcoin is trading below the 40 000 psychological level after peaking a month ago as investors offload riskier assets. Adding more fuel to the fire is that China banned financial institutions from providing crypto transaction services.
The FOMC’s April meeting minutes will be released later today around 20:00 SAST which will put the focus back on its inflation policies. "Inflation remains the biggest theme, whether it is real and whether the Fed may need to change its policy because of that," and “At the moment, markets are putting faith, after a fashion, in the Fed's narrative."- Kazushige Kaida
Here is what’s expected this week:
The Wall Street 30 Technical Analysis
The daily close above the 34237 - resistance level as described in our previous WS30 note did not give the optimal entry or give the desired outcome as the bears overpowered the bulls.
The 33765-support level will the next focal point to see if this is indeed a dead cap bounce which will target lower prices and the point of interest (blue rectangle) and lower. If the 33765-support does hold we can either expect a consolidation between this support level and the 34237-resistance or a push higher back to all-time highs.
- The price action is testing the resistance level at 34237 and we might expect a daily close above this level the negate the downtrend.
- The 50-day SMA (blue line) is above the price action higher on the 4H chart and could also act as resistance to higher prices.
- The Relative Strength Index (RSI) is above oversold levels and is pointing higher.
Chart Source: Wall Street 4H Timeframe - GT247 MT5 Trading Platform
Trading term of the day
Sell in May and Go Away
"Sell in May and go away" is a well-known financial-world adage. It is based on the historical underperformance of some stocks in the "summery" six-month period commencing in May and ending in October, compared to the "wintery" six-month period from November to April. If an investor follows this strategy, they will divest their equity holdings in May (or at least, the late spring) and invest again in November (or the mid-autumn). – Investopedia
*Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 19th of May 2021) U.S Market open.
Sources – MetaTrader5, Reuters, Investopedia.
Barry Dumas | Market Analyst at GT247.com
Barry has 12 years of experience in the financial markets. He enjoys educating clients on trading / investing and providing punchy technical analysis on securities. He currently holds a Wealth Management qualification and is studying towards becoming a Chartered Market Technician® (CMT) designation holder.
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