 Good morning. Welcome to CMC markets and Friday the 21st of May in this quick look ahead at the week beginning the 24th of May with me, Michael Houston. Before we get on to that, I think it's probably going to be instructive to look back at the events of the last few days because we've seen a significant ratcheting up in volatility without really, I think, getting an overall idea of where the next move higher or lower is going to come from because I think one of the things that we can take away from the events of the last few days is the fact that we've seen an awful lot of choppiness, an awful lot of volatility, but we haven't seen an awful lot of what I would call direction and there have been a number of narratives that have been driving the price action this week. Obviously, one of which is concerns about inflation, they haven't gone away, albeit I think markets have started to become slightly more comfortable with the idea of slightly higher levels of inflation. Certainly this week's Fed Minutes didn't really add anything to the overall debate for all the discussions that you saw on financial TV. Ultimately the bottom line for those Fed Minutes was that they came before the disappointing payrolls numbers, they came before the disappointing retail sales numbers and as such are very dated and one of the key takeaways from those minutes was the fact that Fed officials were looking for a sustained economic recovery out of the U.S. economy and certainly those two numbers from payrolls to retail sales have really I think delayed the prospect of that. So I think any prospect of a taper in the short to medium term has been put back which means that it's unlikely that the Fed is going to tighten monetary policy either by way of reducing their $100 billion asset purchase programs or raising interest rates anytime soon. And I think that has given rise to a wider concern that perhaps the Fed's apparent lack of urgency over inflation could mean that they might be too late in the event prices suddenly start to turn or run away to the upside. So in essence the Fed can't win. They're sort of stuck between two schools of thought. For me it's not really worth thinking about to be quite honest. At the moment you're always going to get these debates in financial markets. I think for me the most important benchmark of where the market risk is is in the U.S. 10-year yield and at that moment that's that's fairly steady at around 1.65 percent. It hasn't gone back anywhere near close to the highs that we saw in March around about 1.77 percent and it's well off the lows at 1.45 in the wake of that disappointing payrolls number. So I think for me the debate will inflation will go on. Obviously we saw a little bit of a sell-off earlier this week on the back of increased regulatory interventions in cryptocurrencies which prompted a massive slide in Bitcoin and Ethereum and at one point Ethereum had dropped 40 percent but I think if you actually look at it from a technical point of view while we've broken out on Bitcoin from this upward channel here what we haven't done is broken below the 200-day moving average on this chart here and that's held the uptrend for pretty much most of the last few weeks and months and I think until such times as such times as we get a significant push below that 200-day moving average or this 30,000 level which also happens to coincides with these series of lows through here then I think the bias still remains very much towards the upside. Whatever you think about the fundamentals whatever you think about how credible an asset Bitcoin is ultimately it still has to abide by the technicals and for me the technicals are probably the most important thing when it comes to analyzing any given market. You can have all the fundamentals that you like at your fingertips but it's very very difficult to really sort of look at all of the fundamentals in the round and say well that particular fundamental is more important than this particular fundamental item. To strip all of that away that's why I generally tend to place much greater emphasis on the technicals simply on the basis that the fundamentals should be reflected in the price all of them everything and you know as a consequence of that we've seen a little bit of a stabilization over the course of the past few days or past couple of days but we haven't as yet been able to get much above 42,000 42 and a half thousand which are the highs from the last two days here coincidentally it's also coincides roughly to this peak that we saw in early January so I think there is an element of a little bit of resistance in around 42,000 so it's certainly worth keeping an eye on in terms of the overall direction for Bitcoin whatever your views on it whether you're a Bitcoin skeptic you know you're a Bitcoin fanboy or girl. The thing for me the most important part of it is the fact that it is really the fundamentals. So the big sell off in Bitcoin prompted I think a little bit of liquidation in equity markets but overall within the context of the uptrend that we've been in over the course of the past few months we've got a very sharp spike down after a move higher on Monday we got a sharp two-day move lower we managed to hold above this trend line that I drew in last week through here we've gone slightly below it but what's important is we haven't taken out the 50-day moving average so for me all of this volatility aside we're still within the overall trend higher and while we remain within the overall trend higher and above 68.05 then for me it's very much a case of by the dip on the FTSE 100 that has to be your overall strategy it is struggling at the moment to sustain a move above 7000 but nonetheless it's not coming crashing off the lack of a rebound back above these previous highs would be a concern over the course of the next few days which does suggest that maybe momentum is starting to wane but that could just be a simply a case of the summer doldrums or if you believe in the narrative sell and may and go away which I don't sometimes it works sometimes it doesn't ultimately the price action is king as far as I'm concerned and the same pretty much goes for the S&P 500 which again similar sort of play out here in terms of the overall trend line over the course of the past few weeks and months we are still above this nice little trend line that I've drawn in here and that for me keeps the bias very much towards the upsides even if you set aside this bearish reversal here if we quickly look at the weekly chart what we can also see from the weekly chart is these long lower shadows on the weekly candle and that tells me that irrespective of the selling pressure that we're getting on a week to week basis the sellers or the bears don't feel confident enough to push the market down and hold it near its lows and that suggests to me that while bearish sentiment is starting to come in it's not yet strong enough to sustain a break lower until it does it remains very much a case in terms of the daily chart by the dip that still remains the overriding strategy going forward it's the same on the Germany 30 or the or the DAX we can see that here similar sort of story we have seen intraday spikes below the 50 day moving average in this trend line that I've drawn through here and nonetheless we still remain broadly above the trend lines that have been in place pretty much over the course of the past two to three months just quickly have a look at the NASDAQ this I mean I think that I think that's the one concern that I do have but what I would say is we've broken below the 50 day moving average but if we look at the way the rebound of the lows is played out I think there's a decent probability we could well get a retest of this 13,700 level given the fact that we weren't able on this move lower to take out that low there so looking at that this does feel like it wants to go back to this resistance level and that red line that I've drawn in there so those those I think those are really the key indices and obviously Bitcoin as well and any crypto fallout could will also play a little bit of a part in the way equity markets are playing out but I'm still of the fervent opinion at the moment that we remain very much in a by the mentality when it comes to equity markets more broadly which brings me I think neatly on to the upcoming week the 24th of May and I should also point out that there will not be a video next week I've got I'm taking some time out I'm taking a few days off having a bit of a break over the course of the next 10 days so there won't be a video next week so although there will be a week ahead summary it'll be a slightly shorter version but nonetheless the key items that I've got my eye out for this week are US first quarter GDP that's going to be a second iteration so it's not really going to tell us anything we don't already know or and we've also got US personal spending and income for April where we could well see post-march hangover in the same way that we saw a bit of a post-march stimulus hangover in April retail sales when they came in flat was very disappointing there I would expect to see a similar slowdown in personal spending and a big drop in personal income as I say I wouldn't be overly concerned about that because what that's doing is evening out the big spike higher in personal income that we saw in March more importantly and I think this really sort of feeds into the inflation narrative you know we've heard an awful lot over the course of the past few days and weeks about whether or not the US is likely to either taper the Federal Reserve is likely to taper its bond buying program as we head into the end of the year I think it's inevitable that they will start tapering I think if the economy continues to improve and yes some of the improvements that we're seeing are uneven and it's likely to be slower in terms of hiring trends simply on the basis that it pays an awful lot of people to actually claim benefits and it does to actually work and that will slow down the rebound in the labor market I think there is a case for withdrawing some of those benefits to try and hasten the move back into the US labor force but they're going to be ending in September anyway so I think we're going to get that it just could be a little bit delayed but more importantly I think in terms of the inflation narrative the Federal Reserve doesn't look at CPI or doesn't use CPI and it doesn't use PPI in terms of its dual mandate it uses the core PCE deflator as its inflation benchmark and now that's not to say that we won't see a strong rebound in the core PCE deflator for April we will but it won't be 4.2% and it won't be 6% which is what the PPI numbers it will be lower but it will be it will also show a very significant jump from what we saw in March when it came in at 1.8% now the level of 1.8% that we saw in March was the highest level since February 2020 pre-pandemic with the measure slipping to a low of 0.9% back in June last year so I think if you look at the core PCE deflator and you look where it was in June last year at 0.9% you're going to get a significant rebound in the April core PCE deflator now part of that will be as a result of base effects we've talked about them in previous weeks video so you should be familiar with that concept now but if you're not I will quickly reiterate the fact that when prices dropped a year ago they're always when the economies went into lockdown there was a significant deflationary bias to headline inflation that is now being reversed with a significant rebound so you will have a knee jerk reaction we saw that in UK retail sales with the April ones that came out on Friday today the annual number for UK retail sales was 42.4% but that needs to be put in the context of the mark the April lockdown of last year when retail sales activity declined quite sharply so you have an equalization effect you have an averaging effect which basically prompts a significant rebound so going back to the PCE deflator we're expecting to see a sharp rise to 2.9% now obviously if you look at that on a historical basis that's huge it will be the highest PCE deflator number since the early 1990s but you also have to look at it in the context of what happened a year ago as well so there needs to be some form of smoothing effect when you talk about headline inflation and that's what central bankers are essentially banking on now that's not to say an awful lot of the price rises they're currently seeing are likely to be less than transitory some of them will be some of them won't be there is upward pressure on prices the big question is is it as high as the headline number suggested is and I would argue that at the moment it isn't and we won't know for several months so looking at the way the US dollar index on the CMC dollar index is behaving it is starting to find a little bit of a base in and around these levels here on this chart around about 938 935 so for the purposes of this I would probably say there's decent support in and around 938 and we're likely to continue to get push pull in terms of what euro dollars doing what cable is doing and what pretty much every other currency pair is doing at the moment you can see the push pull being played out quite nicely over the course of the last three days euro dollar strongly higher on Tuesday strongly lower on Wednesday strongly higher on Thursday near the highs today interestingly enough we haven't as yet taken out the 122 50 level all these peaks that we saw back in February so that's the next key obstacle to a move back to these peaks here overall the trend on euro dollar remains upward we've got higher lows and higher highs and that would suggest that we are probably going to see a retest of this chart of this of these peaks here but we need to get a foothold above 122 and a half and it's likely it's likely to be a very choppy move higher it's a similar sort of story when we talk about cable and the only the only numbers of notes that we have are next week UK public finances for April which are due out on the 25th now we've just come off the biggest annual post-war deficit last year so over 300 billion pounds the the the the government borrowed to support the pandemic recovery and I think it's important to note while that seems an awful lot of money 12 months ago the numbers were basically being penciled in to come in an awful lot higher got an awful lot of businesses repaying their furlough money which means that I think even though we've seen an awful lot of upfront spend that number could still come down as more companies decide that actually they don't need that furlough money and can afford to repair all their business rates relief whatever certainly I think the economic hit in terms of businesses is probably not going to be anywhere near as bad as maybe from an awful lot of people first feared it would be that's not to say it hasn't been you know there haven't been casualties there have and and you know and that's that's really disappointing local local businesses local pubs local restaurants that haven't been able to stay open and there is going to be a significant transition period as we get used to what is a new normal if you like as restrictions continue to slowly get eased whether or not we get a full blown easing in June is looking increasingly doubtful but certainly I think there is going to be an element of a more normal economy in the summer than was probably going to be the case three months ago so April public sector borrowing expected to rise I've got a number of about 20 billion 20 billion pounds but I think the numbers I think largely irrelevant when you look at it in the overall scheme of things but certainly I think the fact that a lot more people are coming off furlough as businesses reopen should mean the borrowing numbers should start to come down as we head into July and then into September but the bias here for cable still remains towards the upside need to see if I want to see a move through 142 and a half and then we can start looking back at the highs that we saw all the way back here in 2018 143 85 and the highs are still getting higher the lows are still getting higher we are still very much on track to move towards that 145 level going forward euro sterling euro sterling is a tough one it's in a range at the moment and I think you know we're probably due for a little bit of a consolidation there's still decent resistance at 87 30 I haven't changed my mind on that for me the buyer still remains for a lower euro and a higher pound and the recent price action really hasn't changed my mind on that at all so we've also got first quarter Germany GDP on the 25th that's expected to confirm a contraction of 1.7 percent in the first quarter and we've also got the latest German IFO survey which is expected to show a significant improvement in business confidence so those those are the key economic announcements there's a sound just really going to circle back to the US personal spending number and income number because that is likely to take probably some of the gloss of what could be a very high PC deflator number both those numbers come out the same day on the 28th of May so in terms of personal income we're expecting to see a decline of 15 percent and that's significantly that's a significant reversal from the 21.1 percent rise that we saw in the previous month in terms of personal spending only going to expecting to see a modest uptick of 0.4 percent in April given the fact that retail sales in April came in flat there is a there is a possibility that that could come in negative and as and we'll probably feed into the narrative that while inflation is high or looks high in the US a rebound in pent up demand remains something you know a little bit less than a sure thing that an awful lot of people were penciling in two or three months ago so that is likely to keep I think that's likely to keep markets guessing as we look ahead to June because obviously this will bring my last video for May and my next video will be some time in June so in terms of the earnings let's have a quick look at three or four that I've got got my eye out for this upcoming week before we look at that we're going to have a quick look at Brent, Brent Crude because at the moment we've seen three successive days of gains and it looks like we're going to finish the week lower and the overriding story for this week has been these Iran nuclear deal talks and the fact that they there appears to be some I think very positive mood music about Iranian crude being allowed back on to the international market and sanctions being loosened and on the part of the US I think irrespective of your views on where crude oil is going and we've seen a number of bullish forecasts from 80 to 90 dollars a barrel we're not going anywhere much higher until such times as we take out this resistance level here so 70 dollars 71 dollars a barrel that's the line in sand for me while we're below that then the bias for crude oil prices remains lower not higher on a technical basis so you know if you're reading all these research notes about how crude oil is going to rebound and head towards 80 90 dollars a barrel may I remind you about two words that could undermine that scenario and it's called demand destruction and the last thing I think the global economy wants right now crude oil prices above 80 dollars a barrel and certainly I think OPEC wouldn't want that either because it would certainly kill demand for their product as well it suits OPEC to slowly release oil onto the market as demand picks up and keep prices stable so that for me suggests that we're in the range between 60 and 70 dollars a barrel and the longer we stay there I think the more likely it is that inflation expectations will continue to fall and I think that's the key thing here commodity prices are showing signs in the short term of topping out if you look at some of the recent moves that we've seen in metals prices as well copper has started to slip back as well so that's good for inflation expectations if we start to see a stabilization in commodity prices that should take some of the heat out of forward inflation expectations so in terms of earnings I've got my eye on a couple obviously retail is a big topic at the moment Marks and Spencer's case in point is reporting its full year numbers on 26 now when M&S reported its first half numbers back in November last year it was notable that it was the first time that M&S had posted a loss in its 94 year history there's only a minor loss 71.6 million pounds but nonetheless it was notable for a 15.8 percent slide in sales to 4.1 billion although its food division came to the rescue due to the recent deal that it signed with Ocado so I think with respect to the full year numbers hopefully the company won't post a loss but the share price the share price movements over the course of the past month or so they've been fairly stable they've been stable within a range 164 on the on the upside and fairly decent supporter around about 144 I would be surprised if the numbers were bad enough to send the shares back down below these lows they're going to be a beneficiary of the reopening trade obviously their food division has probably going to significantly contribute to revenues in the second half of the year given the deal with Ocado and I certainly think in terms of going forward they maybe need to widen the number of products that they make available via Ocado to try and push the numbers up for the general merchandise section nonetheless not really expecting any surprises from Marks and Spencer sticking with the retail theme got Ted Baker and this is a nice little chart here because what we've got is a series of previous peaks through 172 and we've got a trend line from the March lows now you know by myself here I actually like Ted Baker products you know they make very very good products unfortunately the management of the business hasn't been particularly great they're on a slow turnaround plan you know and if we can see how the fortunes of Ted Baker have really I mean that sort tells you everything that chart there I mean this is where Ted Baker was back in 2018 over 30 pounds a share yeah and now we're all the way back down here so they've fallen an awful long way they've signed some fairly decent deals in Asia and I think the Chinese business could well provide a boost we've certainly seen evidence of that in other retailers that have exposure in the Asia region Hong Kong Macau and the greater China region as well and despite the recent losses the new CEO Ted Baker Rachel Osborne has insisted that free cash flow will be positive this year inspired of the restructuring efforts and COVID-19 headwinds Ted Baker don't have a big store footprint so I think in terms of the turnaround plan even though the shares are off the highs of May as long as we stay above 172 and a half you know the uptrend that we've seen thus far you know it still it still looks on course for a fairly resilient second half of the year quickly look at Aviva in terms of support levels here it's their first quarter numbers been on a bit of a disposal spree in recent months and the share price move higher suggests that investors are fairly positive about the turnaround plan which focuses very much on the UK and Ireland businesses going forward and I think the big question that needs to be asked there is is all the good news priced in as it gets set to update the markets on its opening quarter of the new fiscal year quickly look at Snowflake at IPO'd end of towards the end of last year when Snowflake reported in March its revenues came in better than expected at 190.5 million dollars losses rose to 70 cents a share or 199 million dollars largely as a consequence of higher stock compensation so I think with respect to here it's really about revenues annual revenues rose by 120 percent at the end of last year to 553.8 million dollars and since those peaks that we saw in December as part of the tech space the share price has continued to slide back you look at the valuation on Snowflake and it's hefty it's hefty for a company that turns over less than a billion dollars or is expected to turn over less than a billion dollars a year for the current quarter the company says it expects to see revenue of 200 million dollars which would be in line with market expectations so we've got decent resistance all the way through 240 here if we look at that low there and then we look at these series of highs through here you can see there's a nice decent barrier all the way through here and as a consequence I would keep I would certainly keep an eye on that particular level for any further advance advances to try and undermine the uptrend that has been in place since those December peaks I'm going to finish up with Nvidia similar sort of story here I mean it's been a real success story for Nvidia this is this is new fiscal year the last two quarters for Nvidia have been really impressive most people know Nvidia for graphics chips however it's also been moving into high-spec CPUs for data centers and that's where the real growth has been now there is some talk that it's 40 billion dollar deal for arm holdings is currently under review and obviously that could well act as a drag but even without that the shares are only marginally down from the record highs that we saw in April and the biggest revenue earn has still come from the gaming segment where the 41 rise in revenues which accounts for 7.6 billion dollars of the 53 rise in total revenues that we saw in last year's accounts data center revenue was the big gainer in 2021 that rose 124 to 6.7 billion dollars now in the last quarter the company saw 5 billion dollars in quarterly sales for the first time ever in q3 it saw 4 billion dollars in quarterly sales so in the last quarter increased sales by a billion dollars by 20 percent big question is can they maintain that sort of growth strategy the cloud obviously is a big boon you know it's a big growth market and obviously data center chips are a key component of that so I think a key test for Nvidia is will it be able to sustain the type of revenue growth that we've seen in the last two quarters um profits are expected to come in around three dollars 27 cents a share okay so that's sort of I think neatly summarized brings me to the end of this week's weekly market update once again thank you very much for your patience um thank you very much for listening and um I will speak to you all hopefully in a couple of weeks time thanks very much and I hope you all have a great weekend thanks a lot