Sell In May And Go Away? Macro Review And intraday Technical Charts

All right, very good morning. It's Tuesday the 4th of May. Hope you had a great long weekend if you're based in the UK. I'm just having a quick look around the markets this morning. I'm going to talk about the close on Wall Street, some data comments from Powell, as well as looking at some vaccine and COVID restriction news. Then we're going to talk a little bit as well about this idea and concept of sell in May and go away, whether or not that actually carries any validity in today's market environment. But having a look at the cross-asset mix this morning, and the dollar's had a bit of a bounce after its weakening that was seen in yesterday's session. So the DXY is trading up about a quarter percent. That is weighing a little bit on both major pairs. So both EURUSD and Cable in the top left are down about 30 pips on the session at the moment. In terms of Cable, This is looking at the last kind of several trading sessions and quite a nice respect there of the trend line on the fourth test with that horizontal area from the high on the 26th, the support of the period of consolidation seen towards the 28th on the eventual break on the 90th. A nice, uh, respect of that technical zone at 139.34 yesterday and quite a nice rejection after that big recovery that we saw early in that session to get the week underway yesterday. And EURUSD, fairly similar setup, it's just been drifting south in the overnight session on some of the reversal in the US dollar. And we trade down, as I said, 34 cents there. Otherwise, um, looking at some of the other charts in the metal space, yeah, really nice run-ups that we saw in the likes of silver, gold yesterday. So in the precious space, uh, just having a bit of rejection here of the recent top end of the range. Looking at gold, which also coincides roughly with around the 1800 psychological level but the area that's been restricting, going back to that double top that was originally printed on the, uh, 21st, 22nd of April. So at the moment, as far as gold is concerned, it's had a bit of a pullback on some profit taking after initial test on that level. Uh, we've drifted back south down towards 1783, which has been a relative level, uh, of some technical relevance throughout, um, the last kind of several weeks, but just residing at pivot in the futures for the time being. Otherwise, in the US equity market, we did close mixed on Wall Street last night. The S&P was up about a quarter percent, the Dow outperforming, up 0.7% compared to the NASDAQ, which was down about 0.4%. Economy-sensitive cyclical S&P 500 sectors, so consumer staples, energy, materials, outperformed the likes of housing growth stocks, including technology communication services. So if anything, the, the sector movement would be representative of a kind of reopening trade idea. So some of those growth tech, um, momentum-based stocks just coming out of those— so the likes of Tesla were down quite heavy yesterday, Amazon was also lower. Looking on a technical perspective at the S&P 500, and, you know, without getting too chopped up in the intraday noise, Um, important technical level here just being respected going back over the course of the last 3 weeks or so is around 4167 in the S&P 500 future. You can see here that's defined really the bottom end of the period of consolidation that we're in at the moment, having moved up to the recent record all-time highs. That area though has been a good level throughout kind of mid-late April through May early May thus far. And so we continue to keep an eye on that as we go through the rest of this week. Didn't really get down close to it yesterday, not quite that low. We actually saw a low print in the overnight Asia-Pac session of 4172. And that area today, looking on the daily pivots, you've got that, that good defined area of technical support at 4167. As you can see there with that green line, you've got the um, that coinciding roughly with the S2 as well on the daily pivot. So we are eyeing that up as a strong level of support today's session. If we come back down, be interested to see how the market respects it around that point. Otherwise though, as you can see, I mean, moving back on up, if we continue to rally from here, uh, just have a look at a horizontal area probably around 81.75 if we continue to put in a bit of recovery here. Be interested to see how we respond and around this previous level of support and resistance, and then above there push up towards pivot. Not pivot, not a great deal of relevance in near-term price respects over the course of the last, uh, session or so, but just psychologically got pivot, and then the push up towards the R1 would mark that peak that we saw going into the latter hours of US trading session yesterday. Um, so around 1.4197, uh, as an upside target there on that side. Otherwise, elsewhere, if you're looking at WTI crude, I was just looking at this chart over the course of the weekend, and we obviously had that really big rally going in from the 26th when we had the recent low all the way up to the high that we've printed at 65.46 area back on the 29th. And on the reversal that we saw towards the back end of last week, saw a really nice respect, and we have done yesterday as well, around the 50% fib of that move, the low on the 26th to the high on the 29th. And at the moment, in terms of near-term price, we're finding a bit of resistance in that session as well, um, yesterday and in the overnight Asia Pacific session at 6469, which is also around the high that we saw um, in the morning of last Friday and last week. So we continue to eye that as potential resistance there. Interesting on the upside beyond then, 65, a couple of areas there. You've got the previous high seen in that overnight session Thursday into Friday last week, which coincides around the 65. Then above there you've got the R1 65.15, uh, with which also ties up nicely with that previous high that we had on Thursday night as upside levels of technical resistance to push up then to that recent high of 65.46. $66. On the flip side, I'd be looking for some nice resistance or support around the $64 handle pivot, but also those previous high on the 3rd and the lows on the 29th. And then, as I said, that $63 handle with 50% fib on that move would also be an area of support that I'd keep an eye on as well for the time being. At the moment, as far as like oil or equities are concerned, I don't really have too much of a bullish or bearish view if anything, prefer, prefer to see the technical respect to some of these areas. So gold on that high, equities on the range low, oil respecting the range high, and for the market to remain in the degree of consolidation for the moment at least would be the way I prefer to kind of look at things for the time being. Um, but let's just take a quick recap then of what happened yesterday. As I said, relatively mixed in terms of the, the actual close. The underperformance was in the NASDAQ. One thing to be aware of over the weekend that might have helped that reopening trade kind of philosophy in terms of the sector individual stock movement is the fact that confirmed coronavirus cases in the US rose at the slowest pace since the pandemic began in the week ended on Sunday. So further positive developments there. It led to New York and neighboring states New Jersey and Connecticut will lift most coronavirus-related restrictions on businesses by the middle of this month. Elsewhere as well in mainland Europe, one of the other bigger countries was Germany. They plan to exempt fully vaccinated people from pandemic restrictions by, by next week, in fact. This all in contrast to what we're seeing still in the likes of India, where daily deaths hit a record of just shy of 3,700 on Sunday, but the number of cases has slowed. Thankfully, to a certain degree. On the vaccine side of things, one thing that has come out, yeah, is just so you're aware, the US FDA, they are set to authorize the use of Pfizer-BioNTech vaccine to children 12 to 15 years of age as early as next week. If the authorization is granted, the CDC Prevention Vaccine Advisory Panel will meet the following day in order to review that data and pass judgment and make their recommendations. Um, the other thing for yesterday, two things really, were some comments out of the Fed Chair Jerome Powell and some data. So starting off with Powell, um, himself and New York Fed President Williams stuck to the script, basically acknowledging decent progress has been made in the economy, which we've kind of heard before in that recent Fed meeting. General, um, mild case for optimism at this point, but without then getting too hawkish suggesting that they're not out of the woods yet, as he so said, and not quite to the point where the Fed can withdraw support. So nothing really too surprising there. You did have some data yesterday. US ISM Manufacturing PMI came in at 60.7, quite a bit weaker than anticipated, 65. But activity growing at a slower pace in April was apparently restrained by shortages of inputs as rising vaccinations against COVID and massive fiscal stimulus unleashed pent-up demand. Prices paid in particular on the inflation side, 89.6 above the expected 86.1. And for the employment component, which is watched obviously ahead of the labor report, which we'll get on Friday, non-farm, that actually fell to 55.1 from 59.6 and was below the expected 61.5. And again, this comes in context with a lot of people looking for a fairly big number towards the 1 million marker when we get payrolls on Friday as the economies have continued to reopen. A few other things then. Overnight we did have the RBA meeting. The actual movement that we've seen in the Aussie dollar really was fairly muted. I don't think any of this comes as a great deal of surprise, much as that we're seeing with other central banks at the moment. What we're going to see for the Bank of England as well later on this week, they've upgraded their economic outlook. they will review whether to roll over its yield target bond, uh, it's your target for the bonds, or undertake further quantitative easing in July while maintaining that interest rates will remain at emergency levels until at least 2024. So again, it's this idea of at the moment this is quite uniform, I guess, for central banks in general. Things are getting better, they're going to improve the kind of underlying numbers of those near-term forecasts and that near-term horizon. Going forward. However, interest rates are not going to rise for a long time, and in this case, not until at least 2024. And then they can have some conversations about the kind of yield curve control and other unconventional measures as time goes on in the coming months. The bank, the RBA, is due to release its quarterly update with its economic projections on Friday, just as a guideline. The other thing I wanted to have a quick chat about was this idea— now we're in May, and obviously we've had a trading day of May already yesterday, but for any UK people coming in. You might have heard of this saying before, sell in May and go away. It's this idea going back in, in recent history that bankers typically would sell in May, close out positions to enjoy the summer, and it almost becomes self-fulfilling in the olden days that then if none of the bankers were around, no real business goes on. Some central banks typically would even not have meetings purposely not in the month of August, things like that. And it was quite a uniform thing which would impact just general trading volumes and direction. Now the idea being then is you sell in May, you don't come back until kind of late September and really October. St. Leger's Day is kind of the marker for that in the middle of Sep. Now statistically speaking, there's a few things to be aware of here. This, this kind of stock market pattern through 6 months from May to October is actually seasonally, um, going back in time over the last 70 years, the worst period in terms of what a 6-month period within a year from a seasonal perspective could be. Interestingly though, over time, of course, stocks generally go higher. November-April, in fact, is the best time for investors generally on an average basis. With returns of around 7%. May to October, so this period we're referring to, is the, is the worst, 1.7%, albeit still a positive change over that period. So since the 1950s, the S&P 500 has gained 1.7% on average during those 6 months. There's a couple of things here though to, to kind of quell the idea that it's a good investment strategy to just simply sell in May and go away. And for one, the S&P 500 has closed higher during the month of May in 7 of the past 8 years. And actually, when you start looking at the numbers, perhaps it's more prudent to talk about selling June rather than selling May if you're actually looking at the month-to-month performance indicators. Stocks have gained— as you're looking at in some of these, this table now— stocks have gained 8 of the past 10 years during May to October, when April is up more than 5%, as it was obviously last year, because remember we hit that end of March low in the stock market route in the pandemic, and then we really rallied from there. So when April is up more than 5% like it was last year, the next 6 months are generally up 6.2% on average over the last 70 years, well above 1.7% seen over the more longer term. Average when you take in that consideration of the prior year. Post-election years, uh, as we are in at the moment with Joe Biden, they averaged 2.4% during those worst 6 months, so also better than the average 1.7. Then when the S&P 500 closes at a new monthly high like it did this year, the next 6 months do much better, up 5.6%. So plenty of statistical evidence has suggested that Perhaps that's not the most prudent strategy at this point in time. And that's not to forget that we've still got lots more reopening generally to happen globally, with more fiscal stimulus of a large magnitude coming out of the US as well. So albeit a lot of that's been priced in, I still think the former is the one that's still got a long way to run at the moment, the reopening trade. So I just thought I'd point some of that out. There is a full report on this that's quite interesting if you'd like to have a read. I actually tweeted it, my handle here, yesterday if you want to have a read. Quick look at the session for today. So we've already had the RBA. In terms of the UK data, 9:30, these are the final manufacturing PMI numbers, so not looking really for any market movement there. And then going into the afternoon, no major 1:30s coming out of the US. You've got the goods trade balance figure. You've also got the revisions to durables for March at 3 o'clock. So probably factory orders is the main order of the day in terms of scheduled US data. That'll be at 3 o'clock, expecting a bounce back up to a positive 1.3% from -0.8% month on month. You've got the weekly API inventory is due later on this evening. Speaker-wise, Mary Daly from the Fed, a voter, is partaking in the Q&A session at 6 PM London time. Excuse me. And then earnings-wise, Pfizer, ConocoPhillips, and Marathon Petroleum all coming out pre-market today in the US. Uh, but gonna leave it at that. Don't forget, if you're part of the Amplify Live community on the Discord channel, check out the technical chart area— intraday, medium-term, and single stock charts. I'll be updating those throughout the morning. Otherwise, welcome back, uh, good to be with you again. I'll see you in the chat room and have a good day ahead. Thanks very much, guys.