Optimism returns to the global economy, driven by positive corporate earnings and receding pessimism about stagflation across the board after strong economic data.
The long-term U.S bond yields also came into focus with the U.S 10-year treasuries yield advancing to levels last seen in May. Shorter bond yields moved lower as market participants are placing bets on a hawkish Fed this coming policy meeting. "The Fed is likely to become more hawkish, probably tweaking its language on its assessment that inflation will be transient. While the Fed will maintain tapering is not linked to a future rate hike, the market will likely try to price in rate hikes and flatten the yield curve," - Naokazu Koshimizu
Here is what’s expected this week:
The Wall Street 30 Technical Analysis
Another tell-tale sign that optimism has returned to the market is that usually with rising bond yields, you would expect growth shares and tech shares to sell-off, but they rallied. We could expect that this is a positive sign that the global expectations for corporate earnings should remain positive.
The tide seems to have turned for short term dip buyers as the market outlook turns bullish as the price action on the WS30 closed above our level of interest mentioned in our previous note.
We might expect traders to start taking some profits which could see a move lower to our new adjusted level of support if the market does not just rally further.
- We have adjusted our levels with the new 35025-support level coming into focus for a test and pushed higher to our long-term target price at 36030.
- The 50-day SMA (blue line) is pointing higher and could come into focus as a support level to watch on the 4H chart.
- The Relative Strength Index (RSI) is at overbought levels, but this is no indication that markets should turn lower as a healthy run could see extended overbought levels on the RSI.
Chart Source: Wall Street 4H Timeframe - GT247 MT5 Trading Platform
Trading Term of the day:
Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP). – Investopedia
Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 20th of October 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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