The most important down trendline broken

Here we go! Yesterday, S&P 500 broke the most watched line in the trading world right now – a down trendline connecting lower lows since the end of December 2021. With this, naturally, the index made new yearly highs for 2023. In theory, that is a strong buy signal and ends the year-long downtrend, starting a new uptrend. Time to celebrate, I guess…

Interestingly enough, other indices do not follow this optimism. DAX and Dow Jones still haven’t made new yearly highs. I guess someone has to lead the way and others will follow, right?

On the currency market, we saw a continuation of the weakness in the Japanese Yen yesterday, which was in line with the January trend. Today, however, Yen is undergoing a correction, being the strongest currency in the pack so far. This makes sense, but it is only a correction and more Yen weakness should occur in the following days and weeks.

A lot is happening in the commodities, where gold is currently making new, long-term highs, trading in the area last seen in the second half of April. The same goes with Brent oil who made new yearly highs yesterday, additionally breaking the long-term down trendline. On oil, we also have an inverse head and shoulders pattern and all of this combined gives us a proper signal to buy.

Today’s calendar is filled with PMI data from various economies. The vast majority of them is expected to come below the magical barrier of 50, pointing at the negative sentiment and contraction. Let’s see if some of them surprise us and aim to the upside or not. The day will finish with the inflation data from New Zealand, where we are expecting 1.3% q/q. This would be a nice drop from the previously reported 2.2%.