Draghi appreciated the euro

The euro has appreciated, and US bonds have fallen, as ECB chief Mario Draghi has hinted that inflationary deterrents are temporary. This was accepted by market participants as a serious hint of the forthcoming normalization of the ECB's interest rate policy.
Interest rates on 10-year bonds rose by 3.7 percentage points to 2.175 percent. Bonds on two-year bonds added 2.4 basis points to 1.377%, while 30-year-olds rose by 3.3 basis points to 2.731%.
Draghi said a series of factors delayed the inflationary process, but they are generally temporary and should not cause inflation to deviate from the medium-term.
Market participants, however, read in Draghi's comment a signal for normalizing interest and monetary policy. Monetary incentives in the euro area are scheduled to end in December. It is entirely possible that they will not be prolonged beyond that period.
Interest rates on European government bonds also increased. 10-year German bonds rose by 6.4 basis points to 0.311 percent, while 10-year French bonds rose by 7.7 basis points to 0.684 percent.

Japanese stocks close to a two-year peak

Japanese stocks headed for a two-year high on the second day of the week after exporting companies benefited from the dollar's appreciation against the yen. The Japanese Nikkei added 0.3% to 20 213.62 points.
An increase in the index above 20,318 points would take it to a new highest value for the indicator since August 2015.
To a large extent, the rise of the index was the appreciation of the dollar against the yen. Green money was traded at levels of about 111.90 after instantly reaching the highest value of 112,075.
Meanwhile, the US indexes ended mixed yesterday after trading for much of the day for a far greater plus.
Technological Nasdaq ended in a minus dragged by companies like Amazon, whose shares lost nearly 1% of their value.
Oil reported yesterday its fourth consecutive daily appreciation, with US crude oil traded at more than $43 a barrel.
After registering two consecutive historical records, the Korean KOSPI declined by at least 0.1%. The Australian Main Index also reported a loss of 0.3%.

Chances to raise interest rates in Canada is decreasing

The Canadian dollar declined on Friday against the US dollar after weaker than expected inflation figures in Canada. This reduces, according to market participants, the chances of raising interest rates next month.
Inflation climbed to 1.3% in May, which was below analysts' average expectations of 1.5% and far below the target of the Canadian central bank of 2%.
Food and fuel prices have been the main source of slowdown in consumer price growth in Canada.
According to market observers, the Canadian central bank will find it very difficult to raise interest rates next month, given the data.
Chances to raise interest rates in July declined to just 20%, compared with 33% before the data was published.
According to statements by Canadian central bank's officials this week, the moderate monetary policy of the Canadian central bank has played its role, and the bank is expected to assess whether interest rates should remain at their current record lows.
Interest on two-year Canadian bonds fell by 3 basis points below US ones, or the spread between the two instruments was -43.8 basis points. On Thursday of last week, this spread fell to its lowest value in four months - at -40.8 basis points.

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Traders do not trust the Fed

The Fed raised the interest rate this month by continuing to claim to raise it once more during the year. It seems, however, that traders do not really believe the Fed, at least judged by one graphics.
Interest rates on two-year bonds are traditionally those that respond quickly to the Fed's decisions and expectations of future interest rates.
Although the Fed signaled a further rise in interest rates this year, interest on 2-year bonds did not make any changes. That means, that investors do not believe that we will see any such action from the reserve.
Here is what happens on the graphics provided by Societe General:

Or as we see - absolutely nothing.

"50 Cent" again with a mass market bet for market volatility

The trader, nicknamed 50 Cent, again made a serious market volatility bet in the next two months.
He has spent $3.8 million to hedge against potential sales on the market.
The stake is, of course, the volatility index VIX, with options based on it.
This time, the deal includes 74,300 call options of VIX with a strike of 21 and with a pay date in August, with the options being bought at a price of 51 cents.
The stake is very similar to that earlier this month month when 75,000 call options were bought, with a strike of $18 and a pay date in July.
It is already clear where the trader's nickname comes from - namely, by traditionally buying call options based on VIX, with a price of about 50 cents each.
The trader has gained popularity in recent months, in an environment where the volatility index is traded at a record low.
Market observers comment that the trader's new bet is largely related to the expiration of the June options that were part of his portfolio.

FANG companies will continue to dominate the market

Companies in the FANG group dominate the markets at the moment. However, according to some analysts, investors are unlikely to expect that they are soon will start losing momentum, although they are becoming more and more expensive.
According to the Canaccord Genuity, although technology companies look expensive, compared to three years ago, they are still fairly valued in terms of historical standards, especially compared to the "technology bubble."
However, companies in the FANG group are difficult to be avoided by investors. Among the 21 major technology companies, with an expected sales growth of over 15% this year, four are the companies of that group.
The next year's elite group is expected to decline to just 12 companies, with the four companies re-entering it in terms of potential sales growth of 15%.
The four companies are expected to continue to benefit from four key areas of growth - digital regulation, digital video, e-commerce and cloud services, experts say.

New records for US indices

US indices reached new record highs yesterday. The Dow Jones Industrial Average added 144.71 points, or by 0.68% to 21 528.99 points. This was its highest value, both in the day and in history. Since the beginning of the year, the indicator has added 8.9% to its value.
The broad S&P 500 rose by 20.31 points, or 0.8%, to a level of 2 453.46 points. Since the beginning of the year, the increase in the indicator is 9.6%.
The Nasdaq Composite Index rose by 1.4% to 6 239.01, with its daily increase being highest since November 7. The tech index is only 80 points from its historic record of June 8.
Among the companies with the most significant growth, Apple has boosted its market capitalization by 2.9%, its biggest gain since February.
The technology sector will most likely continue to be the focus of investor interest. Experts predict that it will most likely continue to weigh over the overall market, given the expectations of rising interest rates and not very good macroeconomic data lately.

The dollar rises after Dudley's comments

The dollar has appreciated against other major currencies, following comments by New York head of state, William Dudley, in support of the future policy of the reserve, on raising interest rates.
Green money rose by about 0.4 percent after Dudley said he was convinced of the economic recovery and strong performance in the labor market, which would eventually trigger inflation. Prior to the expert's statement, trading on the foreign exchange markets was relatively weak.
The statements of the official representatives of the reserve can continue to be at the heart of the investor's interest, as well as that of Stanley Fischer, in Amsterdam.
Dudley's comments come less than a week after the Fed's interest rate hike, when it hinted at another increase by the end of the year.
Meanwhile, some analysts start talking about two more Fed interest rises by the end of the year.
The dollar appreciated against all major currencies, with the highest appreciation against the African rand. To this, the US dollar rose by 1.9%.
The Canadian dollar proved to be the most stable currency against the dollar, to which the US currency appreciated by only 0.1% despite the continuing decline in oil prices.
The election victory of Emmanuel Makron's party has failed to support the euro seriously. The single currency fell to levels of 1.1143 against the dollar.

Macron with full domination in France

President Emanuel Makron's party won a majority in parliamentary elections in the country, according to official data.
The Republican Party has won 341 seats in the country's 577-seat parliament, which will be enough for self-government.
Macron is expected to be able to carry out the planned pro-business reforms, which is good for the business and the French economy.
The victory of the new Macron's Party is another proof of the complete collapse of the "old political system" in the country.
By securing a majority in parliament, Macron, who is the youngest leader of France since Napoleon, has secured almost complete control over the political system.
The rise of Macron was largely predetermined by the inability of the ruling parties so far to create new jobs and accelerate the growth of the second largest European economy.
The ruling Socialist Party undoubtedly registers one of its biggest defeats in history, political observers are commenting.

The most important of the Fed's decisions

Fully expected, the Fed raised the interest rate on Wednesday by 25 basis points to 1.25%, hinting for another raise by the end of the year.
In her statement, Janet Yellon confirmed her expectations of reaching a 2% inflation rate as well as further stability in the labor market.
At 4.3%, US unemployment is below the long-term stable levels.
Perhaps the more significant news, however, has come in the direction of the plans of the reserve, on reducing the record $4.5 trillion of bond yields.
In the first place, the Fed will invest in redemption of bonds at the expiration of their date of payment if it receives more than 6 billion in interest per month. From then on, the border will be raised by $6 billion a quarter to reach 30 billion a month after one year.
Ultimately, the goal is to reach a balance well below the recent years, but greater than before the financial crisis.
This, however, is a fairly wide margin for market participants, given the fact that the balance sheet was $800 billion before the financial crisis, and is currently close to $4.5 trillion.

The dollar continues to grow against the yen after the decision of the JCB

The US dollar continued its strong appreciation against the yen. The Japanese central bank has kept its ultra-stimulation program unchanged.
The dollar index dropped by 0.1 percent to 97.461, compared to 97.48 in the US session. The index is headed for an increase of 0.2% this week.
However, the dollar's growth continued against the yen after the Japanese central bank decided to keep its stimulus policy on Friday. By voting 7 against 2, the bank continued to maintain negative interest rates of 0.1%. The dollar rose to a trading level of 111.40 yen. For comparison, on Thursday, the currency pair traded about one yen down.
The Japanese bank said it expects the Japanese economy to continue its recovery, backed by a policy of mild monetary policy.

Toptrader: Prepare for a market adjustment in the summer

Trader Peter Kosta enters the "top traders" list on the floor of the New York Stock Exchange. He is the president of Empire Executions.
And Costa has one warning to investors - "tighten your belts."
"I would say that there is a correction that we will be going through until August," the trader said in an interview with the financial magazine "The Street". "Summer will most likely be an obstacle for investors," Costa said.
According to him, the correction would be a "gradual decrease" rather than a flash crisis, as observed in August 2015. Then, the main reason for the decline in indices were concerns about China.
The decline, which, according to Costa, will not be within the traditional 10% that we are accustomed to observing historically, can be triggered by the discontinued investigations into Russia's interference in US presidential elections last year.
But Costa recalls that the adjustments are healthy, giving investors good opportunities to rebalance their portfolios.
Otherwise, in terms of so popular FANG shares, including the first letters of the Facebook, Amazon, Netflix and Google/Alphabet names, according to Costa, the shares of these companies could rise by another 50%. However, the risks faced by the technology sector make the investments in these companies at the present time unjustified.
"You have a share traded at 237 times of your profit - come on!", Commented the expert.
The ratio of Netflix is ​​214 times the profit for the last 12 months.

Theresa May with desperate actions to keep the power

After Theresa May has scored an "own goal" in calling early parliamentary elections, now that the election is a fact, she desperately tries to stay in power.
Conservatives have won 318 seats in parliament and therefore can not reach the necessary 326 seats for a majority and forming a government.
In an extraordinary turn, the Liberal Party won 263 seats in the new parliament.
UK Prime Minister Theresa May visited the Buckingham Palace on last Friday to seek permission to form a minority government despite appealing to her resignation.
Support conservatives can get from a small nationalist party, in the face of the Democratic Unionist Party of Northern Ireland, but not in a formal coalition.
May refused to resign as Prime Minister of the United Kingdom. According to her, the minority-backed new government will provide the UK with the much-needed period of stability in the light of the forthcoming Brexit talks.
The Democratic Unionist Party (DUP) party has won 10 seats in the new parliament and is ready to support the Conservatives, but not in an official coalition.

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Gold interrupted its winning streak

Gold fell sharply on Thursday after a few days of exceptionally strong performance, bringing it close to the psychological level of $1,300 per ounce.
This happened after the decision of the ECB and in light of the elections held in the UK. The testimony of the former FBI chief before the Senate also failed to lead to the growth of the yellow metal.
The most negative factor for the gold price was the appreciation of the dollar against the rest of the major currencies, as well as the rise in the index to new record highs.
Investors apparently calmed down and returned to risk assets in a world of record low interest rates.

Masters of manipulation or why is the S&P 500 not going on the road since 1987?

You've probably heard of the comparisons between the current S&P 500 blue chip index and the 1987 pre-crisis one.
The charts we are talking about look like this:

They look alike don't you think? Yes, but only at first glance ...
Taking into account the percentage change in the index, the situation looks quite different, and the similarity is not that big anymore.
Since the presidential election in the US, so far, the broad index has added about 14% to its value. It has made 22 new historical records of closure since the beginning of the year.

For comparison, from the beginning of 1987 until September of the same year, the index has added nearly 40% of its value.
In fact, for the past two and a half years, before the 87th crash, the index has risen by over 100%. For the same period to date, the US index grew by only 20%.
So experts recall that when making comparisons, it is important that they are comparable and compare apples with apples and pears with pears. Otherwise, the media love to make similar comparisons and search for sensational titles.

The decline in European indices continues

European stock exchanges continue to decline. The DAX30 closed the session at 12,672.49 points, with a loss of 0.14%. Fresenius Medical Care KGAA (-1.31%), Volkswagen AG (-1.30%) and Bayer AG (-0.97%) dropped the most.
The French index CAC40 almost remained unchanged, but closing 3.69 points lower (or by 0.07%) ranked it among the losing markets for the day and further confirmed the negative European trend. Sanofi SA with -1.99% has the worst performance.
FTSE 100 did not lag behind the continental trend in Europe and ended the day with a loss of 0.62% (closing at 7478.62). The British market will be in the focus of attention in the coming days because of parliamentary elections in the country.

Sound slap for Theresa May

Preliminary election results in the UK indicate a colossal failure of the Conservatives and Teresa May, who summoned early parliamentary elections to strengthen her parliamentary positions.
According to the initial forecasts, May's party, instead of raising seats in parliament, is about to lose 13.
At the same time, the Liberals are likely to strengthen their position in the new parliament by adding 30 new seats compared to the previous one.
Liberal Democrats also strengthen their positions, and they are expected to gain five new seats to occupy 12.
The National Party of Scotland also has serious loss, which lowers its number of seats in the new parliament by 19 - to 34.
However, no party will have a majority in the new parliament, after the seats of the conservative party are expected to be 300 and those of the liberals - 256.
Given the worst case scenario for the pound - the lack of a clear winner, the British currency has fallen over the rest of the major ones. The euro rose to 0.8780 or more than a cent against the pound, with the highest value reaching 0.8830.
The pound lost more than 2 cents against the dollar to 1.2750 after it was exchanged late yesterday at levels of nearly 1.3000.
It is expected to open its trading today with loss also the British FTSE.

The ECB kept interest rates, cutting its inflation forecasts

The ECB, as expected, kept the interest rate at 0%. The bank, however, has removed its comments for further interest rate cuts and said it will continue with its bond repurchase program.
In his statement, Draghi said interest rates are expected to remain at their current levels for an extended period of time, but added that he would be ready to extend the buy-back program if needed.
The speculation led to a momentous depreciation of the euro as the single currency declined to 1.1200 against the dollar after it had previously exchanged at 1.1240 levels.
Mario Draghi also said the ECB considers risks to the ECB's economy as "broadly balanced".
That he did by revising the financial institution's downward inflation expectations. The main reason for this is the cheaper oil, which will most likely continue to weigh above the growth in consumer prices.
The ECB is currently expecting an inflation rate of 1.5% this year, 1.3% next year and 1.6% in 2019. This is a decline compared to the March forecast for inflation of 1.7% this year, 1.6% in the next and 1.7% in 2019.

Preparing for a nasty June for the markets

Apparently, investors have completely ignored the old "sell in May and rest" rule. In the last days of the month, US indices show full resistance to all kinds of news and are on new records.
But will investors fail to make a serious mistake?
Traditionally, yields in June are slowing down seriously, with only 9.7% historically. Is it possible to see a "black swan" in June. Unexpected event with extremely negative impact on markets.
Such may appear in the direction of the UK election, or come from China, and why not from Canada, in the direction of the mortgage market in the country. Or, the bankruptcy of a major company - like Seadrill ...
There are many possibilities, and investors who are extremely calm at the moment, judging by the level of trading on the VIX fear index, may be surprised, somewhere they do not expect.
Fortunately for investors, July is generally a good month for them, with an average increase of 1.5% for the broad US index historically. Still, the unpredictable August and September come, which is historically the worst month for the US markets, with an average decline of 1.1%.

The S&P 500 has done something that has always been followed by an increase

US indices are at new record highs. But will we not see their further rise? The answer is YES, at least on the basis of something that happened at the S&P 500 index and was followed by a 100% increase in the index.
According to technical analyst Ryan Detrick, LPL Financial, every time the broad index has grown by more than 7.5%, it was at the end of the first 100 trading days of the year at higher values ​​from where the year began.
This condition was met on April 4th.
This trend has been in place for all 23 years, explored by Detrick. In other words, the index is likely to end the year at levels above 2 250 points. Where, however, it is not very clear.
He believes there is huge support for the broad index at 2 290 and 2 300 points, as commented by Bill Baruch, chief marketing strategist at iiTrader's. Below this level is the 200-day moving average of the S&P 500, at a current level of 2 250 points.
Experts recall that traditionally the indexes are rising at the end of the year so that even if we see a temporary correction and a fall in the index, it is likely that they will end the year at levels above 2,300 points.
Both Baruch and Gibbs, however, predict volatility may rise in the coming months.

GS lowered its oil price forecast

Goldman Sachs, the state-owned investment bank, has lowered its oil price forecast, reckoning its expectations of increased US yields that would offset the impact of OPEC's production cuts.
The bank predicts an average oil price of $55.39 per barrel, this year, against previous expectations of $56.76 per barrel.
GS also announced this year's average crude oil crude price at $52.92 a barrel, against a background of their previous forecast of $54.80 per barrel.
They believe that they are in a long-term downward trend for oil, with evidence of an increase in oil supply.
Oil fell slightly on Tuesday, with the Brent trading at levels of $51.80 when the news came out, and US crude oil at $49.50 for a barrel.
According to bank's analysts, industry focuses from long-term cycles, to short-term ones.

Gold with a one-month high

Gold rose these days, reaching a new highest value for the past one month. The noble metal added 0.1% to its value to $1,267.70 per ounce. A little earlier, it reached the highest value of $1,270.47, not seen since May 1.
The appreciation of the metal is largely determined by the risks associated with the upcoming UK elections. The latter will take place on June 8th. Meanwhile, Teresa May's party's leadership, ahead of the opposition, fell to just 6%.
Experts are beginning to worry that May's decision to call early parliamentary elections to strengthen the ruling party's position may not be a good decision.
In addition, the uncertainty is also rising from potential early elections in Italy, as well as worries related to the Greek debt.
The situation for gold may continue to improve, given the many important data that are expected to come out this week. Symptoms of slowing the growth of the global economy, in a record-breaking environment for major stock market indices, may raise the price of precious metal seriously.