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Opening Bell: Easing Inflation Fears Boost U.S. Futures; Weigh On Dollar, Oil

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewJul 07, 2022 07:05AM ET
www.investing.com/analysis/opening-bell-easing-inflation-fears-boost-us-futures-weigh-on-dollar-oil-200626785
Opening Bell: Easing Inflation Fears Boost U.S. Futures; Weigh On Dollar, Oil
By Investing.com (Pinchas Cohen/Investing.com)   |  Jul 07, 2022 07:05AM ET
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  • Samsung earnings boost sentiment
  • Gold recovered
  • Bitcoin slipped

Key Events

Global stocks and US futures on the Dow, S&P, Nasdaq, and Russell 2000 advanced slightly on Thursday after positive earnings from electronics giant Samsung revived optimism that corporates are managing to navigate economic challenges.

A weaker dollar confirmed the argument that investors' worries about inflation are subsiding. 

Global Financial Affairs

S&P futures extended the underlying gauge's 3-day rebound, and I think there is room for the rally to continue.

S&P Hourly
S&P Hourly

Contracts completed a falling flag, which they successfully retested, as they climbed along the uptrend line. Now, S&P futures are testing yesterday's high. According to the flag, the contract will bottom out, pushing it further to retest last week's high.

Investors increased risk after Samsung (KS:005930) registered the best Q2 earnings since 2018.

The shares surged 3.19%. So is this a buying or selling opportunity?

Samsung Hourly
Samsung Hourly

If you're looking at the short term and are a risk-taker, I expect the stock could dip toward 57,000 before heading toward 59,000. The long-term trend is down.

The yield curve on the 10-year Treasury note is a leading recession indicator and a sell-off impetus.

10-Year Vs. 2-Year Treasuries Daily
10-Year Vs. 2-Year Treasuries Daily

The 10-2 year Treasury Yield Spread is inverted for the third day, but it has steepened by two basis points, which means investors are more optimistic. Note, also, that yields are rebounding.

But markets are fickle, as traders often overreact to news. Bear markets have some of the strongest rallies, but are still bear markets so stocks will likely keep heading lower.

The dollar eased which some analysts think is a sign that investors' inflation concerns are easing. However, it has only been a single-day move so it is too early to confirm. 

Dollar Index Daily
Dollar Index Daily

Technically, even if the greenback declines, it will be nothing more than a return move to retest the bullish pennant before continuing higher.

Dollar weakness enabled gold to find its footing.

Gold Daily
Gold Daily

I would like gold to rise as that would provide an even better shorting opportunity, with sellers waiting by the broken uptrend line.

Bitcoin receded somewhat from yesterday's highs, but I expect it's temporary before the cryptocurrency resumes higher—in the short term—before it syncs with the long-term downtrend.

Bitcoin Hourly
Bitcoin Hourly

The price bounced off the bottom of a short-term, hourly, rising channel within a broader hourly rising channel. The test will come below $21,000.

Oil prices are little changed, calming the market and reviving hopes that the Fed won't be forced to remain as aggressive at tightening interest rates. 

Technically, we remain bearish.

Oil Daily
Oil Daily

The price completed a bearish flag that helped it achieve a much larger triangle, whose downside breakout also turned it bearish.

Up Ahead

Opening Bell: Easing Inflation Fears Boost U.S. Futures; Weigh On Dollar, Oil
 

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Opening Bell: Easing Inflation Fears Boost U.S. Futures; Weigh On Dollar, Oil

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Comments (5)
Nitin Chopra
Nitin Chopra Jul 08, 2022 7:34AM ET
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gold is buy rate 51171 what happand
play cold
play cold Jul 07, 2022 2:11PM ET
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Thanks for the good analysis
Pinchas Cohen
Pinchas Cohen Jul 07, 2022 2:11PM ET
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You're welcome, play cold, and thank you!
Joshua Bonamy
Joshua Bonamy Jul 07, 2022 9:37AM ET
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Not convinced market selling is done. Merely a relief rally.
Amie Inconnue
Amie Inconnue Jul 07, 2022 7:58AM ET
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Thank you for the analysis! What bottom do the charts suggest for gold? Thinking long-term, it should go up at some point: when rate hikes and inflation will be over eventually, we'll still find ourselves in the world or prices that will have been reset much higher, which would imply a more expensive gold as well... Or is there a fundamental flaw in my logic?
Pinchas Cohen
Pinchas Cohen Jul 07, 2022 7:58AM ET
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Nothing flawed with your logic, but at this point it's speculation. Pundits were sure commodities will fly on inflation, but the recession outlook changed that picture! I can't call a bottom before it happens. I can attempt to gauge major supports: if 1,700 breaks -> 1,400. Happy trading!
Selfmade DC
Selfmade DC Jul 07, 2022 7:10AM ET
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Great analysis as always man been following you for years bro 👍🏽
Pinchas Cohen
Pinchas Cohen Jul 07, 2022 7:10AM ET
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Thank you, Selfmade DC!
 
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