In a report prepared by eToro analyst Javier Molina, it is explained how the narratives of the Central Banks and the reality of the financial and stock markets do not go hand in hand.
The analyst says that this week Investors will be data-focused with ISM Manufacturing, ISM Services and Unemployment data scheduled to be revealed. The market expects a number close to 240,000 in a labor market that shows no signs of weakness, despite the 475 basis point increase in rates in the last year.
However, the narratives presented by the Central Banks and the markets differ significantly. While the Fed estimates an equilibrium rate at 5.25%, which indicates a possible upward adjustment of 25 bps in the May meeting, the markets discount that the rate ceiling has already been seen and that inflation is beginning to be controlled.
Regarding the analysis, the report indicates that “the goal of 4080 points that we set was exceeded in last Friday’s session. This opens the possibility of looking for levels of 4160-4170 points once that overcoming is confirmed. To do this, we must confirm another close above 4080 before thinking about attacking the indicated references. If prices go back below 4080, initial target at 4000 points first and 3940 points”.
S&P Price Evolution – Source: eToro
The second instrument mentioned in the report to explain the divergence of narratives is the IBEX-35In this sense, he explains that:beyond 9,000 points, the outlook changes significantly for the better in the index. Now located at that level as support that should not be lost to continue giving an opinion on new annual maximums, the initial resistance is at 9250 points. Above, 9300 first and 9500 as the great granite wall to overcome. If prices do not exceed 9,250, we can move to a consolidation period delimited by 9,000 – 9,250. Losing 9,000 would open the way to seeking 8,750”.
IBEX-35 price evolution – Source: eToro
To finish the analysis, Javier Molina indicates that bitcoin has tried to break above 28,500, but has been unable toin this sense indicates that “this reference is acting as a true short-term wall that coincides with certain bearish divergences such as those marked by the RSI. If prices are able to break above $28,500, immediate target at $31,000. Below that, $26,300-26,000 should not be missed. Yeah they do, next stop at 25 grand”.
Bitcoin price in the last 6 months – Source: eToro
The report indicates that, As for bonds, the inversion of the curve informs of the coming recession, which could generate a stronger recession than what the stock markets and Central Banks expect. If there is a drop in rates in August, it would be a sign of a bad economic situation and it could be acting in the scenario of a stronger than expected recession.
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