 Morning, welcome to CMC Markets on Friday the 20th of May and this quick look at the week ahead beginning the 23rd of May. Before we do that, however, let's have a look at the events of the last few days because I think they've certainly been interesting to say the least. There's been a lot of irritable rollercoaster, if you like, for markets in general. And I think one thing that I have taken away from this week's markets volatility is that sentiment has become an awful lot more fragile. Increasingly bearish with the moves that we're seeing in bond yields in particular reflecting concern that we are heading for a gross slowdown. That could well be exacerbated by central banks who may be erring on the side of over tightening rather than falling short. And I think that perception is in no better way illustrated by the comments from Fed Chair Jay Powell earlier this week when he suggested that inflation is the number one priority for the central bank, and that any adjustment of monetary policy to tackle inflation was likely to be painful. So I think through that prism sentiment has shifted. We've seen profit warnings from biggest US retailers Walmart, Target, and Coles, and that has prompted a similar, similar weakness in consumer staples more globally. We are seeing a rebound today on the back of the big falls that we saw in US markets over the course of the past two days. But what's interesting I think about the volatility that we've seen this week and this is no better borne out by this S&P 500 chart is that we didn't take out the lows from last week. And I think that's important. It's important in the wider context of the fact that while markets are bearish at the moment the key support areas are remaining intact. And that being said, we could we'll see a further rebound over the course of the next week or so. The big test for me, and I said it last week was the we really need to get back above these areas of resistance here which also coincided with this low level here so 4100 on the S&P 500. If we look at the way markets have behaved since the end of March, we can see that the lows are getting lower. And sorry, the lows are getting lower and the highs are getting lower. So you've got these highs here, lower, these lows here, lower. This is the first instance I think where we haven't taken out the previous low. So in essence, that is slightly encouraging. It doesn't mean that we won't do it. It just means that the momentum to put in a lower low is starting to decline. NASDAQ 100 being a case in point. We hit 18 month lows last week. We've matched those lows this week, managed to rebound off them and in the pre market for the NASDAQ we've rebounded off the 61.8 Fibonacci retracement level from the lows back in 2020 to the highs that we saw the record highs back in November. So we're getting close to a tipping point for US equity markets in terms of key support levels. What I've also noted over the course of the past few days is some evidence and it's not confirmed yet. So let's not jump the gun here. Some evidence of a potential reversal in US Treasury yields. We can see that with this chart here. This is obviously the 3.2% peak that we saw back in back at the beginning of this month. We tried to get back above 3% in the wake of those comments from Powell. Subsequently, we fell quite sharply in the wake of the profit morning from profit warning profit morning profit warning from Walmart, which prompted significant growth concerns. And that is why after peaking at just above 3%, we rolled over very, very rapidly and are now trading lower. So that does raise questions as to whether or not we're getting the potential for a head and shoulders reversal on the US 10 year Treasury yield. Now, what does that mean? Does that mean that the Fed is going to pull back? Is the market losing faith in the Fed narrative? Because the Fed has become increasingly more hawkish. Well, certainly that's my impression. My impression is that the only thing that the Fed is concerned about now is inflation. It's less concerned about unemployment simply because it's a multi-year lows and there's vacancy rates of 11.2 million people. So there's jobs to spare. So I think the perception is the Fed thinks it's got slack to allow unemployment to rise in its efforts to contain inflationary pressure. Now, as we look ahead to the week next week, we've obviously got the latest Fed minutes, which will be slightly staler now, given recent comments from Fed officials. But we also have PCE deflator from core deflator, which is obviously the Fed's, that is the Fed's key inflation targeting mechanism. It's a key metric. And looking at the numbers for that, there is an expectation that the core deflator could well decline from the levels that we saw in March. Where it was at 5.2% and fall back to 4.9% in April. Certainly there does appear to be some evidence of softening numbers on the CPI measure in the US, even if that's not being reflected in PPI. US CPI fell back from 8.5% to 8.3%. And I think there is that concern about inflation being much more persistent over the course of the rest of the year that's prompted concerns amongst Fed officials that they need to go a little bit harder and a little bit faster. They raise rates by 50 basis points in March. They're going to do 50 in June. Now there's potential to do 50 in July as well. And then go 25 in September, October and December. So, certainly the market's surprising in all or afraid of the Fed going an awful lot faster and tipping the US economy into recession and certainly we are starting to see the effects of higher costs on company operating margins. There was some numbers out from Cisco. Cisco systems earlier this week where they downgraded their profit forecast for the year. And that's largely on the back of certainly not just higher costs but also supply chain disruption because of the slowdown in China. So you've got that to add into the mix as well. And while markets are up today, because the Chinese cut their prime lending rate by five basis points, that doesn't necessarily mean that the Chinese economy is going to rebound strongly simply because they are now starting to ease lockdown restrictions in Shanghai, but they're not dropping them completely. And Beijing case counts are starting to rise. So certainly the outlook for the Chinese economy, given this week's retail sales number is not particularly rosy. So, you know, it's important not to get too hung up on, you know, the Chinese economy suddenly starting to fire back to life, particularly quickly given the zero COVID policy that Chinese policymakers are looking to implement. Now, coming back to this chart, there was a bearish reversal here on the daily. We've rolled over, we've come back down. We can potentially draw a nice little line in here. This is the left shoulder. This is the head. This could be a right shoulder forming. But what I'm particularly interested with respect to this 10 year yield chart is what the two year weekly is telling me. And there's a bearish reversal on the weekly as well. So, what this is telling me is that we could well have topped out when it comes to 10 year treasury yields. Now, the reason for that, to be quite honest, I don't care whether it's because markets are starting to price in a recession, whether they're starting to price in the fact the Fed is not going to go hard, harder as perhaps their rhetoric dictates. Ultimately, what the price action is telling me here is that potentially we could have seen a top in US 10 year treasuries. If we also look at the dollar index, this is a weekly candle chart. We're potentially seeing a bit of a reversal here on the dollar index. So if the dollar does appear to be showing signs of topping out, does that mean that the haven trade that has been driving the dollar higher is coming to an end? And maybe we could well see a rebound in equity markets. You know, what is this telling me? It's very, very difficult to extrapolate it from what we're hearing with respect to the markets and what was hearing with respect to the volatility. But what has been particularly significant, I think, particularly for markets in the US is we've held those lows from last week. So that's the first bit of positive news. We're also seeing potential for reversal of the dollar. We're also seeing the potential for reversal in yields, US 10 year treasury yields. And if we take that and move it over to what we're seeing in say, for example, Euro dollar chart, I've been talking for a move towards parity for a while now. And I still maintain that as my base case. But we are starting to see some evidence of a short term base forming on Euro dollar around about 10340. So that suggests that we could be in for a little bit of a short squeeze. If we look at the weekly chart on Euro dollar, we are starting to form a bullish weekly reversal. Obviously we haven't closed the week yet. So depending on where Euro dollar finishes today, that candle is likely to change. But ultimately we found we do appear to be finding a bit of a short term base on the Euro dollar chart, which could prompt to squeeze back to 10850 or these sorts of levels here. We'd still be in the downtrend that we've been in since January. So a short squeeze higher wouldn't negate my negative Euro points of view, but it would certainly delay any move towards parity while 10340 holds the downside. What we're also seeing, we're seeing a similar picture play out in cable. We've seen an awful lot of narrative this week about cable going to parity, so on and so forth. As a general rule of thumb, when the volume goes up on parity calls on cable or anything like that, usually that's the time to buy it. Now, I'm not going to start saying go all in on cable because many times I've thought along those lines and got burnt for it. And we do appear to be finding a bit of a barrier above 12520. So there is a bit of resistance in 12520. But if we also look at the weekly chart, we've also got a very nice bullish reversal there. And we also have come a long way in a fairly short space of time. Over the past 12 months, cable is down 9% against the dollar. Well, that suggests to me that this move is very overextended. And we really need to see a little bit of a counter move back to certainly 128 and potentially even 130. We're still in the downtrend, but we've become very overextended on the downside. And certainly the data that we started to see out of the UK economy with respect to inflation does suggest the Bank of England might need to be slightly more aggressive when it comes to its interest rate policy going forward. Retail sales today came in at 1.4% for April. That is a surprise to me. I mean, you know, I think it was a surprise to most people. I was expecting another decline, given the fact that inflation hit a record high on the CPI measure of 9% earlier this week. So 1.4% rebound in retail sales for April is certainly very welcome and certainly doesn't tie in with consumer confidence levels that are near at and are now at record lows. But I think the thing with consumer confidence, it's almost like a, it's almost like a state of mind. You're listening to the media narrative from the mainstream media and it's all doom and gloom and oh my goodness gracious me. I mean, you know, to be quite honest, it's the sort of stuff that makes you want to binge on booze and fags. And that was certainly I think one of the things that prompted the big rebound in retail sales in April supermarket sales of alcohol and cigarettes were the biggest contributor to the retail sales rebound. So I think I'm more inclined to basically look at the data in terms of what people are buying rather than the sentiment data because it's very easy to be gloomy. When all that happens is you're just fed a tide of negative headlines from the mainstream media. Look at the data and see what actually consumers are doing. Yes, they are struggling and yes, inflation is high. And certainly I think money is tighter than it was before. But ultimately it's really about what consumers do rather than what they feel because ultimately people are always slightly more negative. If they're asked a particular question, then what they actually go and do with that money. So I think it's important to sort of try and draw that distinction. Anyway, so we do appear to be finding a little bit of a base in cable and Euro dollar. And certainly I think that is encouraging and does sort of feed in to my perception that maybe the dollar is starting to show signs of a little bit of waiting momentum in the short to medium term. If we look at the FTSE 100 we can see once again, it's still pretty much chopping in that range between 7200 and 7600. So I don't think there's really that much to see there. Very, very choppy. But overall, we are starting we continue to hold in the range. Now, the DAX did something very strange this week. It popped above my trend line and then came straight back below it. So I'm going to leave it in there. For me that's still intact. The bigger resistance for the DAX is this level here around about 14,380. And this series of highs all the way through here. So we're still very much in a range for the DAX. The bottom of that range is back down here around about 13,300. But for all this week's volatility, we haven't really moved that much in the wider scheme of things. It's really all the movements really been in US equity markets. So that's a quick praise of what I'm thinking at the moment with respect to where markets are potentially going. An awful lot of chop. But I think if we can hold above those key support levels on the S&P and the NASDAQ, then there's certainly potential for a decent rebound. If on the other hand we break below them, and it's important to underline that, then we could well go to 10,500 on the NASDAQ before rebounding. I still think there's potential for that to happen. But while we're above the support levels, then I think you really have to play. You have to play it in terms of selling the rip back to this resistance level here, 12,700 on the NASDAQ, and obviously 4,100 on the S&P 500. So I briefly mentioned the Fed minutes coming up this week. As I say, there'll be an account of the decision to raise rates by 50 basis points, which pushed the upper bound of the Fed funds rate to 1%. Now there were some talk, there've been some talk in the lead up to that meeting that some on the committee were keen on a 75 basis points move. And Paul pretty much ruled that out at his press conference. But obviously since then the data's changed, there's a perception that inflation is likely to be an awful lot more sticky. And I think in the context, I'm more interested in the discussion that they had around the balance sheet runoff balance sheet reduction program. It starts in June with $47.5 billion rising to $95 billion a month after three months in September. Now that was construed, I think, because it's slightly dovish, because I think all the narrative and the lead up to that had been they were just going to start off at $95 and just go $95, $95, $95. In fact, they started slowly with a with a with a view to sort of changing up changing through the gears up to $95 billion suggested that they're a little bit concerned about the effect going all in studs up if you like, would have on sentiment more broadly. That's going to be a disco. I think that could be an interesting discussion. Certainly recent comments from x Richmond Fed President Jeffrey Lacker suggests the cope suggests scope. The further financial markets volatility and we've certainly seen that Patrick Harker or of the Philly Fed has also sort of gone moved into the power camp, saying that it's probably prudent to act. More aggressively sooner rather than later in an attempt to basically drive headline inflation rates down. So it'll be interesting to see how the discussion evolved with respect to balance sheet reduction when those minutes are released. We've also got first quarter GDP second iteration from the US. Now that sort of contraction of 1.4% in the first quarter against an expectation of a 1% expansion. That sort of begs the question as to how the markets got it so wrong. Looking at the wider numbers net trade contributed to a 3.2% drag. An inventory saw a minus 0.8% decline on the back of supply chain disruption. I think it's also important to remember that in q for think there was an awful lot of pull forward of inventory because of concerns about supply chain disruptions, which obviously then wasn't reflected in the q one So you've got a little bit of a fallback simply because companies simply had too much inventory. And certainly I think that was reflected in the numbers that we saw from Walmart and Target. They had inventory that they couldn't shift and it was costing them money. So hence the fact that we saw a big sell off in both those two earlier this week. We've also got cord deflator talk to I touched upon that a little bit earlier. I mean headline CPI has fallen back. Will we see a similarly negative fallback in terms of the PC core deflator, which, as I said, rose to 5.2% in March and is expected to slip back to 4.9. The other measure, the deflator measure is 6.6 and that's expected to fall back to 6.3. So certainly in terms of the inflation story next week is likely to be a fairly important one in terms of of the core deflator the Fed minutes, but also I think in in the overall scheme of things in terms of the growth story for the US economy as well. We've also got flash PMIs for may from Germany, France, UK and US. I'm not really going to cover those in too much detail I think that there's a danger of them not becoming they're not being particularly relevant. And I think the reason why I say that is because all of the readings are in the mid to high 50s, which suggests really strong economic expansion really strong economic activity, and that we know from the official numbers that is certainly not the case. So, not really sure how much value the flash PMIs offer in the wider scheme of things. And that's why while they're important. They tend to be much, they make they tend to be much less reliable, perhaps than the raw industrial production data manufacturing production data factory orders data the ISMs manufacturing and non manufacturing. So, as I say they've tended to I've become less I've become more skeptical about their reliability over the course of the past few months in terms of earnings numbers it's going to be another big week for retail. We've got marks and Spencer's four year numbers and certainly retail has been a sector that's been absolutely clobbered since we since the start of the year. If we look at marks and Spencer's shares in particular they hit 21 month highs in January. Certainly, there does appear to be evidence that Steve row, the CEO Steve row has done a pretty good job in turning the business around the deal with the Cardo has certainly reaped dividends. The overall bearish sentiment about retail in general has really hit those shares and we've come back to the levels that we were in July last year. It's important to note that they haven't taken out those July lows. But certainly I think going forward there is I think way too much pessimism around this particular brand their food division has done very very well. When M&S reported in January, food sales were up 10%. But more importantly, it's general merchandise division saw clothing and home sales increased by 3.2%, which for a division that's under performed for the past 10 or 15 years is a pretty good outcome. And if you actually look at the M&S website and you will find an awful lot of boutique third party retailers selling their wares on their fat face white stuff who offer their products online under the brand section. And I think that's helped to generate help to improve the general rate of turnover through the digital channels. Now, at the time M&S said they expected annual profits before tax of at least 500 million pounds. So that will be particularly interesting in terms of whether or not they meet that. And certainly I'll also be paying particular attention to costs costs are going up for retailers. Chairman Archie Norman warned earlier this year that even being partially hedged on energy costs, prices of food and clothing were likely to increase in the coming months. So not only energy costs, but higher freight costs, container costs and wage costs. So four year numbers on the 25th of May, I think will be a key bell, whether in terms of whether or not we see a break below those lows of 129.70 or whether we get a decent rebound. The outlook for retail is likely to be one of squeezed margins. So we could well see a return back to the levels that we saw back in 2020. But overall, if you look at the way the business has turned around, it's been a fairly decent performance helped in no small part by the Ocado deal. Now Kingfisher, B&Q owner, Kingfisher. Earlier this week, we saw Home Depot, the US, post some fairly, some pretty decent numbers. And initially the shares rebounded quite strongly, but ultimately irrespective of how good the numbers were or are, even Home Depot fell victim to the sell off in US retail. Certainly higher mortgage rates could well discourage people from moving house and perhaps encourage them to spend more on home improvement. And the garden so that could well be a positive thing for first quarter update for Kingfisher. When they reported at the end of last year, there was certainly evidence that sales were slowing in Q2, Q3 and Q4 despite the fact that they saw a 33% rise in statutory pre-tax profits, just over a billion pounds. And sales rose 6.8%, the 13.18 billion pounds. But what was particularly notable about those Kingfisher numbers when they reported at the end of the last fiscal year was most of the heavy lifting was done in the first quarter of that fiscal year. Subsequent quarters saw a significant slowdown as a consequence of that. And the reason the heavy lifting was done in the first quarter is because people were stuck at home. So they basically spent money improving their houses and doing up their gardens. And once lockdown restrictions were eased, obviously, people were able to go out and about more and as such spend a lot less money on home improvements on what have you. On a two year basis. Sorry, as we look as we look to this week's Q1 numbers expectations are for an 8% decline from last year's numbers in terms of like the like sales so the can comparisons here will be tough. On a two year basis, the picture is expected to be better with a rise of 16%, a 16% rise. So, main growth areas are expected to be in the growth screw fix division, but also in Poland, they expected to do fairly well in Poland, whether that's as a consequence of obviously events with respect to Ukraine, Ukrainian refugee refugees. So that that could that could factor into the numbers for Kingfisher there. We've also got Ted Baker, another UK retailer that's seen better days but has started to see a rebound. In terms of tech in video. This is a particularly interesting chart because we do appear to have broken down from this trend line here from the 2020 lows. Particularly interesting though is we've managed to rebound off the 61.8 Fibonacci retracement level of that entire up move. It's certainly been a very sharp fall from grace for Nvidia shares when they hit record highs back in November. Obviously they've walked away from the arm deal. Nvidia's biggest business and saw 37% growth in its Q4 numbers. This these will be its Q1 numbers 2023 $3.42 billion in revenue in the last quarter. Data business though is playing catch up that saw a 70% rise in fourth quarter revenue growth to $3.26 billion. So it's guidance to Q1 for this week's numbers, which are on the 25th is for revenues of $8.1 billion, which was obviously 900 million above consensus when they opted to offer that guidance at the end of Q4. We'll hire costs way on those numbers or way on profits in the same way as they have on other tech companies. Certainly $8.1 billion is a high bar. The big question is what will their guidance be for Q2, Q3 and the rest of the year. Okay, so I mean that's pretty much it for this week. Ladies and gentlemen, once again, thanks very much for listening. Hope you all have a great weekend and speech all same time, same place next week. Thanks for listening and have a great weekend.