A blockbuster week of earnings ahead, headlined by technology giants, coming on the heels of semiconductor earnings with demand/revenue issues, Oil overheating, and the 10-year U.S. Treasury yield nearing its danger line ~3%, says Ziad Jasani in videos and commentary.

Ziad’s market strategy videos recorded Monday:

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Recorded: April 23, 11 am-12 pm
Duration: 1:13:09

Will Q1 earnings coupled with Q1 U.S. GDP and a dovish statement from the ECB & BOJ keep Global Equity Markets bouncing?

Or will we see disappointments from Technology earnings, a roll over on Oil, and the Global Bond-Market destabilizing Equities?

We enter the week with 1/3rd long-swing trading positions looking to build them further if we get a bounce off 2,645 (S&P 500) that pushes us back above the 50-day average (2,687).

Projected flow for the week follows below

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3 scenarios for the week ahead

(Note: Above flow is Scenario A or B, not C)
• (A) BULLISH ↑: Signal à S&P 500 directly rises and holds above 2,687 (50-day average)
• (B) INDECISION ↔: Signal à S&P 500 < 2,687 but > 2,645 with swing-low formation
• (C) BEARISH ↓: Signal à S&P 500 < 2,620 and/or breaks 200-day average (2,605) and stays below heading to 2,417 (late summer 2017 lows).

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In the case of Scenario A or B presenting the following spaces and decisions are viable on a swing-trading-basis:

• US EQUITIES: S&P 500 (SPY), Nasdaq (QQQ), Dow Jones Industrials (DIA): Hold-To-Buy if S&P 500 > 2,645, 2nd Buy if S&P 500 > 2,663. If the levels break de-risk, target bounce again up off 2,620
• OIL: Longs Hold if Oil > $68 |Hold-To-Buy if Oil > $69.50 (USO, HOU-T) |if < $66.89 Sell
• GOLD: Hold-To-Buy if Gold > $1,331 to play to $1,355; 2nd Buy > $1,365 | Sell < $1,331
• BONDS: Hold if 10yr US Treasury < 3.05%; if > 3.15% Sell | if < 2.7% Buy
• USD (UUP): Hold if UUP > $23.50; if >$23.75 Buy, if 15,410 (50-day average), 2nd Buy if TSX > 15,614 | Short-Term Sell if TSX < 15,410 | Long-Term Sell if TSX 1.279 or $12.76 (DLR) | DLR-T HOLD > $12.66

In the case of Scenario C presenting the following decisions are suggested:

• if the S&P 500 < 2,645: Buy SH, RWM, PSQ, DOG, HXD-T | 2nd Entry S&P 500 < 2,620
• if the S&P 500 < 2,605 (200-day average) it would signal the 3rd leg of short/inverse trades
• if the TSX breaks below 15,410 (50-day average): Hold-To-Buy HXD-T
• if the TSX breaks below 15,295 it would signal the 2nd leg of short/inverse trades
• if the S&P 500 breaks below Feb. 9 lows (2,533) and remains below & longer-term investors would reduce long-side exposure by 33% to 50%
• if the TSX breaks below Feb. 9 lows (14,786 and remains below, longer-term investors would reduce long-side exposure by 50% to 70%.

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Global Risk Sentiment

Looking at the third column to the right we see a comparison of higher risk asset classes and defensive asset classes back to the S&P 500 (SPY) on an annual basis.
When we see more green above the SPY-Line (middle line) and more red below we have a general “Risk-On” signal; and vice-versa (red above, green below would be “Risk-Off”).

Currently, we have a very weak risk-on posture better characterized as mixed, with Defensives expensive to very-expensive and Higher-Risk polarized with the TSX (XIC), Russell 2000 (IWM) and Eurozone (EFA, FEZ, EUFN) presenting as very expensive while the rest presents neutral to cheap.

This implies there is room for the current macro market swing-low (forming since March 23) to advance in the week ahead, pending technology earnings (signal would be the S&P 500 staying above 2,663 and getting above 50-day average 2,687), but it is likely short-lived (maximum 1-2 weeks).

With Defensives presenting as very expensive we must keep an eye on any data that stokes the “inflation-fire” this week (ECB Presser April 26, U.S. GDP April 27), as if Bonds/Defensive break-down it could de-stabilize Equities.

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