Nasdaq Gains, Russell Outperforms as AMC & GME Go Parabolic

Nasdaq gained 0.6% on Wednesday, but lagged the Russell as mid-cap stocks outperformed Another squeeze sends AMC Entertainment Holdings ($AMC) and GameStop ($GME) surging

The stock market advanced on Wednesday with all major US indices finishing in the green. The S&P 500 rose 0.2% though the Dow Jones closed practically flat. Nasdaq price action ended 0.6% higher. Gains were led by mid-cap stocks, however, with the Russell 2000 climbing nearly 2% on the session. This propelled the Russell 2000 back above its 50-day simple moving average.

RUSSELL 2000 (RUT) TO NASDAQ 100 (NDX) RATIO – CHART 1

That said, the latest bid beneath and outperformance of mid-cap stocks corresponded with a noteworthy upswing in the Russell 2000 to Nasdaq 100 ratio. Watching the RUT to NDX ratio could be worthwhile over upcoming trading sessions to see if the ‘reflation theme’ starts to gain traction again. Not to mention, we saw the yield on ten-year Treasury bonds rise for the first time in five sessions today. I would also like to point out that the Russell to Nasdaq ratio peaked this year when ten-year Treasury yields topped out around 1.75% mid-March.

Even as the Fed taper debate intensifies among market participants, Federal Reserve officials have resolutely deemed inflationary pressures as ‘largely transitory’ and conveyed their desire to keep monetary policy accommodative. This likely reflects an appetite for letting the economy – and stock market – run hot. Such stands to be supportive of the Russell 2000 and mid-cap stocks in particular as this segment of the market is arguably more prone to a Fed policy mistake that prematurely ends the economic recovery.

AMC ENTERTAINMENT HOLDINGS (AMC), GAMESTOP (GME) FERVOR RETURNS – CHART 2

Oil Price Forecast: Double Top Formation Intact Ahead of OPEC Meeting

The price of oil bounces back from the session low ($65.25) following a larger-than-expected decline in US
inventories, but the double-top formation established earlier this month remains largely intact as the
rebound from the May low ($61.56) fails to spur a test of the March high ($67.98).
Fresh data prints coming out of the US seems to be shoring up the price of oil as crude stockpiles narrow
1.662M in the week ending May 21 versus projections for a 1.05M decline.

Signs of a stronger consumption may keep the Organization of the Petroleum Exporting Countries (OPEC)on track to gradually restore production over the coming months as the “ recovery is expected to pick up speed in the second half of the year,” and the group may stick to the production adjustment table over the coming months as US production remains at its lowest level since 2018.

A deeper look at the fresh figures from the Energy Information Administration (EIA) showed weekly field output holding steady at 11,000K for the third consecutive week, and the data may encourage OPEC and its allies to uphold the current production schedule at the next Joint Ministerial Monitoring Committee (JMMC) meeting on June 1 as the most recent Monthly Oil Market Report (MOMR) forecasts world oil demand in 2021 to “increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d.”

With that said, the price of oil may consolidate ahead of the JMMC meeting with OPEC and its allies on track to gradually restore production, but the double-top formation established earlier this month remainsintact as the rebound from the May low ($61.56) unravels ahead of the March high ($67.98).

OIL PRICE DAILY CHART

US Dollar Price Outlook: Is a USD/CAD Reversal on the Horizon?

USD/CAD posted an encouraging bounce off recent lows to avoid deeper losses

That said, the pair remains near its lowest levels in nearly four years and calling a bottom at this stage could be presumptuous

USD/CAD enjoyed a bounce off of support this week as broader Dollar strength helped to propel the pair higher. Gains have accumulated to create a encouragingly weekly performance thus far as the pair looks to stem a decline that has persisted since early 2020. That said, there is much more work to be done if USD/CAD is to reverse higher in earnest and there seem to be few scheduled events that could spark such a continuation higher.

Last week we noted a slight hawkish shift from the Federal Reserve could help drive US strength and a USD/CAD rally, but follow- through off the back of this theme has been minimal thus far. Upcoming Core PCE readings from the United States could influence market sentiment surrounding the Fed’s admission if inflation comes in higher than expected, but awaiting data results is far from a sound trading strategy. With that in mind, traders may have to look to technical developments to generate bullish momentum in the interim.

US DOLLAR (USD/CAD) PRICE CHART: WEEKLY TIME FRAME (JANUARY 2015 – MAY 2021)

CANADIAN DOLLAR (USD/CAD) PRICE CHART: DAILY TIME FRAME (APRIL 2020 – MAY 2021)

To that end, a break above the descending trendline from the pair’s June 2020 low would be an encouraging start and could allow USD/CAD to take aim at subsequent resistance. Secondary resistance may be encountered along the descending trendline from the pair’s 2020 peak.The levels have influenced price numerous times throughout the last year and currently trade near 1.2184 and 1.2273 respectively.

In the bigger picture, any longer-term breakout would have to pierce the zone of resistance from 1.2618 to 1.2683 before continuing higher in earnest. Given the distance from the current spot price to the barrier, however, a breakout would need to be well underway before the level is tested and momentum at such a stage may help drive price through the longstanding barrier.

USD/CAD Client Possitioning

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