"Re-opening Risk On" VS "Inflation Risk Off". Have markets decided?
For several weeks we saw market volatility around our Q XOP ( 4178.25), as markets digested Q1 Earnings, Biden's Capital Gains Tax, FOMC and Fed's position on interest rate and tapering, and more recently, Inflation risks.
While it is safe to say that Inflation is here - as evident in the run up in commodity and raw material prices, talk about hyper inflation was premature as we still needed more inflation data for this to have a longer term impact on markets.
So between the 'Reopening trade' and "Inflation Risk off trade", I've maintained a bias for the former.
And PRICE seems to have 'confirmed' this bias last week.
ES Monthly
Technically, both DJIA and ES futures are trading above its Q XOP node.
ES Daily
Crucially, we have a confirmed Stop grabber on the daily chart, as price stayed above Q XOP node last friday ( briefly tested it ), and ended the week near its highs.
Intraday trends were all pointing up based on last friday's close, so in the absence of an unexpected catalyst and sudden price reversal, it is safe to say that markets have made its decision with regards to where we are going to trade from here ...
In the short term, we should move away from 'Inflation Risk off' and back towards "recovery Risk on" as investors revert back to chasing returns in this low interest rate environment.
At least this is what PRICE is telling us based on last week's action.
Despite obvious headwinds, US equities want and should trade higher - at least for the time being.
Best of trading,
Joseph AuXano
DiNapoli Trading Academy
PS. Stay tuned for a video dedicated to this 4178.25 number that wallstreet seemed to have been so fixated on.
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Author
Joseph AuXano
Author
Joseph Auxano, is an active trader with more than 13 years of market trading experience. He obtained his degree in Finance from the University of Singapore. His passion for the markets started early. He was already actively involved with the stock markets before landing his first Job as a Trader at a Commodity Trading House in Singapore. His fascination for the markets continued to drive his search for the Holy Grail of Trading, and his research on Fibonacci Techniques. This led him to discovery of DiNapoli Levels in 2007. Since his training under the tutelage of Veteran Trader Joe DiNapoli, he has since developed as a Professional Trainer and a full-time trader. It was with DiNapoli techniques, that he discovered first hand the freedom that came with trading. He has traded the markets out from Toronto, Miami, Siesta Keys, Singapore, and is now trading the markets out of Bangkok Thailand. Joseph Auxano is an Authorized DiNapoli Expert, representing DiNapoli Levels Methodology in the USA, South America and around Asia. In 2019, with the help and approval of Joe DiNapoli, Joseph developed the DiNapoli Academy Online Course, with the goal of helping aspiring traders in their journey with Dinapoli Trading Techniques.
