Pre-Market: Stocks Extend Gains as Worries Take Back Seat

After last week’s hectic trading, financial markets are calm and dominantly bullish today, although with notably divergences among the major asset classes. The Italian political crisis that shook Europe is “solved”, for now, and bond markets which were the most affected show that fears of an immediate turmoil subsided.

EUR/USD, 4-Hour Chart Analysis

The Euro rebounded off last week’s lows, while the Dollar is substantially lower across the board, even as Treasury yields are higher once again. With the economic calendar being very light on releases this week, all eyes will likely remain on US rates, as investors try to figure out the next move of the Fed.

US 2-Year Treasury Yield, 4-Hour Chart Analysis

The central bank will decide on its benchmark rate next week, and while the recent turmoil pushed rate hike odds lower, after the better than expected Employment Report, the consensus is again on the side of a tightening move.

S&P 500 Futures, 4-Hour Chart Analysis

While safe-haven assets, like the Japanese Yen and gold are under pressure, weakening together with the Dollar, risk assets are generally higher. US stock futures are showing optimism, taking out Friday’s highs, as the Nasdaq continues to lead the way higher.

Unicredit (UCG), 4-Hour Chart Analysis

The main European indices are lagging, as the Euro’s strength is keeping a lid on equities. The German DAX index remains in a short-term downtrend, and the financial segment is still a major drag throughout the Old Continent. Looking at the technical setup in the market of Italy’s Unicredit, the recent rally still looks like a dead cat bounce, and the less exposed banks in Europe are also signaling distress.

Oil Continues Lower, Down 10% Form Cycle High

WTI Crude, 4-Hour Chart Analysis

The WTI crude oil contract is still under strong selling pressure, with the crucial commodity now trading with a $65 per barrel handle, the lowest since mid-April. Oil is in a clear short-term downtrend after the brief bounce last week, but should the risk-on sentiment persist, a stronger correction could be ahead.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.