Sell in May and go away is a popular theme when it comes to the stock market. However, traders did quite the opposite on the first trading of May as the US stock indices posted some strong gains yesterday.
Having said that, US stock futures are trading flat today, but traders are still a lot more optimistic, commented Naeem Aslam, chief market analyst at Avatrade, this morning.
“There are a number of reasons behind their optimism, and that is economy re-opening and easing of coronavirus restriction,” Aslam said.
“Yesterday, we had a lot of positive news on this front, such as Europe easing off travel restrictions for those already vaccinated, and in the UK, the public will not need to use the mask outdoors,” he added.
However, not everything is rosy as the coronavirus situation continues to worsen in India, and Indians have openly started to criticize Modi’s administration, and they are asking for his resignation.
“There is no doubt that the situation is a lot worse in India, and the government is to blame for its large part. The question for investors is if Modi actually resigns, the chances are very little as the opposition isn’t that strong,” Aslam continued.
Overall, investors are very much worried about the influence of the Covid situation in India on the global economy.
“Right now, we do not see much of an impact on the global stock market; however, the signs of weakness are there, and one just needs to focus on things more closely—for instance, the weakness in oil prices,” he noted.
Oil traders are already worried about the coronavirus situation on oil demand, and they believe that it is going to have a profound influence on oil demand.
In the commodity space, gold prices are off their eight weeks highs as traders digest fresh comments from the Federal Reserve Chairman. Jerome Powell, the Fed Chairman, once again sent a very mixed message to the markets yesterday by saying that the economy is doing better, but the US economy is still not out of the woods yet.
“Dollar bulls took this as an opportunity, and they have started to bid the dollar higher, resulting in the gold prices moving lower,” Aslam said.
However, the sell-off in the gold prices could be an opportunity for many as the US Manufacturing data released yesterday confirmed that things “aren’t running too hot yet,” he added.
“The number was underwhelming in comparison to the forecast, and this is again a reminder for investors that the US economy still has a long way to go,” Aslam noted.
As for Bitcoin, the crypto king is struggling to break above the 60K price level, which is immensely critical.
” So far, we see more consolidation for Bitcoin, and the price is really struggling to stay above the 50-day simple moving average on the daily time frame. If Bitcoin fails to win this war, the likely chances are that the price may re-visit the 51K to 50K support zone,” Aslam said.
Ethereum, on the other hand, is certainly on fire, and it continues to make new highs, he added.
“Traders believe that the next realistic stop for Ethereum could be near the 5K price level, and the break of this is going to open the doors towards its next resistance of 10K,” Aslam concluded.