The first trading week of June was very difficult for the whole economic society. Plenty of diverse data led investors to choose between risky assets and safe haven assets.
Although the stock market is growing steadily, the first signs of problems appear in the market. A lot of securities took off and exceeded the SMA50 level, which gives grounds for a possible correction. In due course, it is worth considering that the majority of securities have not yet reached the monthly SMA200, which is the second sign of correction. In the near future we will see how the markets will develop, but it is likely that the rally is over and the correction is coming. The S&P500 index rose on Friday to 3193, while the DAX index rose to 12847.
Decisions of the European Central Bank on the expansion of economic support measures have so inspired investors that on Friday the main European currency bounces off the monthly SMA200 and trades at 1.1285. Even negotiations on Brexit do not affect the Euro at all, as the dollar is very bad in the current situation. Wave of protests, army in the streets, tough statements of the US president make it very doubtful that the US economy will be able to recover quickly after the end of the pandemic.
Oil is a product that is highly liquid and always in demand. WTI oil has been growing for two weeks and probably needs a certain rollback. Of course, after such a sharp drop in March, it is difficult to imagine an adequate price for black gold, but what is important now is that the oil price in the current situation is formed only on the market supply and demand. WTI oil has reached an important level of $40 per barrel and correction from this level is inevitable.
The situation on the gold market is ambiguous. We thought that the trillions that entered the U.S. economy would allow the price of gold to reach $1800 and even $1900 per ounce, but it turned out to be not so. It was necessary to share with the stock market, which sharply decided to show its growth opportunity. Investors in the American stock market were so optimistic that now the S&P500 index is trading only 7% below its value since the beginning of the year. Of course, gold cannot resist under such pressure. Let’s look at the development of the situation in the near future and determine the direction. On Friday, gold closes at $1684 per ounce.
What’s waiting for us today?
01.50 Japanese GDP.
08.00 Volume of industrial production in Germany.
14.30 Volume of construction of new houses in Canada for May
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.