Stocks, risky currencies and crude oil are up on improving risk sentiment

Risk sentiment improved last summer as Europe and the Western world emerged from winter/spring coronavirus restrictions and most sectors of the economy boomed. As we headed into winter, the Omicron variant erupted, which hurt sentiment, especially as restrictions returned to China. But, now this variant is confirmed to be quite soft, which means sentiment has improved again and the global economy is picking up momentum in some sectors.

Risky assets pulled back in late 2021 and January this year, but now that sentiment has improved again, they have resumed the uptrend. Apple Inc. broke below the 20 SMA (grey) on the weekly chart, but over the past three weeks it has reversed higher, after finding support at the 50 SMA (yellow). The rebound was quite strong, suggesting strong post-retirement buying pressure and soon AAPL shares will hit all-time highs.

Weekly chart analysis of Apple stocks

AAPL bouncing off the daily 50 SMA

The S&P stock index is currently trading down around 46 points at 4567.41. This is an increase of about 1.03%. The highest price reached 4575.85. In the process, the price briefly traded above its 100 daily moving average of 4571.74. Recalling last week, the high price extended up to 4595.31 points and closed at 4589.37 on Wednesday.

This close was above the daily moving average of 100 at the time. However, the very next day, the price opened below this key moving average, and the price retested its 200-day moving average during Friday’s trade. The buyers leaned against this level and pushed the price higher, so the 200 SMA is now acting as support.

S&P500 Daily Chart Analysis

S&P will fully resume the uptrend when it pushes above all MAs

US WTI Crude Oil Daily Chart Analysis

Crude oil doesn’t seem to be stopping. it has been on the strongest uptrend in history for almost two years now, rising from -$37.50 to $93.20 at the end of last week, after the OEPC+ meeting failed not produce much, apart from a very small increase in production.

US Oil WTI received another boost from the result and jumped higher, but has since retreated. However, the 50 SMA (yellow) and previous resistance at $89 appear to have turned into support. We decided to open a buy signal 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, ending massive QE stimulus programs and already starting to raise interest rates. The Bank of England’s chief economist made hawkish comments, after the BOE had already hiked interest rates twice in the past two meetings.

Comments from the BOE Pill Chief Economist

  • Unusually large steps can validate the market narrative that it’s either “foot down” on the throttle or “foot down” on the brakes
  • If energy prices were to fall steadily in line with futures prices rather than stabilize as they assume, then lower rates could be maintained
  • If we see evidence of second-round effects in the evolution of wages and costs, a stricter policy than otherwise may be necessary
  • We have signaled that more is to come in the coming months if the path outlined in our February forecast materializes.
  • He says he won’t give any specific opinion on what the yield curve should look like
  • Financial markets are now expecting plenty of indications from central banks about where rates will go
  • The reason central banks got their inflation forecasts wrong last year is because energy prices are very hard to predict.
  • 1% discount rate is not a trigger, it is a point to consider
  • Do not assume that if we reach 1% in the coming months, the BOE will automatically sell the gilts
  • I can not give indications on the progress of the sales of gildings
  • The key question is to what extent labor market turnover drives people into more productive jobs
  • We need a rebalancing of monetary policy and the BOE is at the forefront of this

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