Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Opening Bell: Stocks Retreat From Records On New Inflation Worries; USD Gains

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewApr 12, 2021 08:04AM ET
www.investing.com/analysis/opening-bell-stocks-retreat-from-records-on-new-inflation-worries-usd-gains-200572482
Opening Bell: Stocks Retreat From Records On New Inflation Worries; USD Gains
By Investing.com (Pinchas Cohen/Investing.com)   |  Apr 12, 2021 08:04AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • WHO warns of inequality between rich and poor nations in vaccine distribution
  • An uneven global recovery would exacerbate inflation

Key Events

Investor cashed out of futures on the Dow, S&P, NASDAQ and Russell 2000 as well as European stocks on Monday as inflation worries resurfaced amid concerns about an uneven global recovery.

The dollar continued to move higher while gold slipped.

Global Financial Affairs

Today’s market narrative demonstrates the fickle nature of markets. On Friday, US stocks posted fresh records because traders were no longer concerned about inflation after a fresh dose of Fed coaxing, but were instead—due to the explicit direction of Federal Reserve Chair Jerome Powell—focusing on robust US economic growth.

However, after the weekend, traders are nervous that there will be a lopsided economic recovery, since richer countries have received the lion’s share of vaccines which the World Health Organization has said is a "shocking imbalance." More than three quarters of the half a billion vaccines that have been administered thus far have been in the world's richest countries. As well, they have more policy tools at their disposal to effectively stimulate their domestic economies.

To be clear, the idea that the global recovery will not be balanced is nothing new. But, an economic recovery could also bring inflation, and inflationary pressures may be exacerbated further if investors also reroute their capital to the countries with the fastest rate of recovery, thus putting additional upward pressure on prices. Despite investors' concerns, we think the current uptrend is bullish until proven bearish.

On Monday, as all four US contracts were trading in the red, futures on the Russell 2000 were underperforming at almost three times the rate of NASDAQ contracts, showing that even in retreat, the reflation trade resumed its reversal.

This rotation back from value into growth was also seen in European shares this morning. The STOXX 600 Index fell with banks and miners—two sectors that do well amid a recovery. In line with US futures, the retreat in European stocks followed three straight weeks of gains, including records.

Stocks have held a close negative correlation with Treasuries this year, including the 10-year note.

10-year Treasuries Daily
10-year Treasuries Daily

Sure enough, yields on Treasury notes were falling today, along a potential top.

The dollar edged higher for the second day, bouncing off the extended neckline of a bottom and the lower edge of a rising channel, but found resistance by the 200 DMA.

Dollar Index Daily
Dollar Index Daily

Traders will watch with interest whether the RSI can climb back above its uptrend line. We consider the retreat since Mar. 31 as a return move before a continued rally.

Gold moved in the complete opposite direction of the dollar, testing its own flag.

Gold Daily
Gold Daily

Its RSI already managed to return below its support, the mirror image of the dollar.

Bitcoin advanced for the fifth straight day—its longest since March—putting the cryptocurrency back above the $60,000 level, as it retests its Mar. 13 record close, at $61,207, which is only 0.75% higher.

Bitcoin Daily
Bitcoin Daily

We are concerned however, of a negative divergence by the RSI, which has been developing a falling wedge in contrast to the price’s rising wedge. A topside breakout of the RSI would signal that momentum was picking up, increasing the odds we’re going to see a push into unfamiliar territory.

Oil edged higher, having rebounded from an earlier slide, as investors weigh the rotation between value and growth and the risk that the virus may interfere with an economic recovery. There are also concerns among oil traders that oil demand could also be dented by President Joseph Biden's green initiatives.

Oil Daily
Oil Daily

Meanwhile, today’s rebound didn’t help drive momentum upward. The RSI remained below its range, suggesting the same may happen to the price, which has been forming a smaller rising flag within the larger one, itself making up the right shoulder of a H&S bottom that bumped its head on the long-term downtrend line since the 2008 top.

Up Ahead

Market Moves

Stocks

Currencies

  • The Dollar Index increased 0.1%.
  • The euro sank 0.2% to $1.1877.
  • The British pound gained 0.1% to $1.3726.
  • The onshore yuan was little changed at 6.554 per dollar.
  • The Japanese yen strengthened 0.2% to 109.49 per dollar.

Bonds

  • The yield on 10-year Treasuries sank two basis points to 1.64%.
  • The yield on two-yearTreasuries decreased less than one basis point to 0.15%.
  • Germany’s 10-year yield dipped two basis points to -0.33%.
  • Japan’s 10-year yield dipped one basis point to 0.105%.
  • Britain’s 10-year yield declined one basis point to 0.76%.

Commodities

  • West Texas Intermediate crude fell 0.9% to $58.81 a barrel.
  • Brent crude fell 0.7% to $62.50 a barrel.
  • Gold weakened 0.3% to $1,739.40 an ounce.
Opening Bell: Stocks Retreat From Records On New Inflation Worries; USD Gains
 

Related Articles

Opening Bell: Stocks Retreat From Records On New Inflation Worries; USD Gains

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
David Smith
David Smith Apr 12, 2021 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Impressive resilience from the dollar to say the least.
Amie Inconnue
Amie Inconnue Apr 12, 2021 9:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you, Pinchas! Now that gold broke out of the falling channel, do you think the trend is changing?
Pinchas Cohen
Pinchas Cohen Apr 12, 2021 9:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You're welcome, Arnie. For as long as the flag maintains resistance I'm bearish.
Amie Inconnue
Amie Inconnue Apr 12, 2021 9:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you!
Joe Ramella
Joe Ramella Apr 12, 2021 8:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Who pays you for your opion?
Joe Ramella
Joe Ramella Apr 12, 2021 8:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Who pays you for your opion?
John Laci
John Laci Apr 12, 2021 7:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think inflation is not going be as crazy as most think. Our GDP is going surge like no other time it should balance each other out.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email