March 2021 is about to end today, and with it, so does the first quarter. As this is Easter weekend and so there is a bank holiday in much of the developed world next Friday and the upcoming Monday, the markets are likely to continue moving in the same direction. 

The stock markets had a good month, led by the U.S. indices. Despite the weak close in February, the indices recovered, and the Dow Jones made several all-time highs in March. It is hard to argue against such bullishness, considering that no index corrected more than 20% from the highs, the minimum retracement needed for a bearish market.

March, therefore, remains in history as a good month for the U.S. stocks, but not only. European stocks also traded with a bid tone, with the clearer breakout seen on the German Dax index. Volkswagen AG, the automaker, announced its plans to expand its electric vehicles fleet and even renamed its U.S. operations suggestively – Volkswagen. The announcement triggered a massive rally in the company’s share price that pushed the Dax index higher as well.

March 2021 will also be known as the month when a ship blocked the Suez Canal for a few days, triggering severe financial losses to logistic companies and disrupting the global supply chain. The oil market reacted, and the crude oil price gained two dollars on the news, although it consolidated around the all-important $60 level.

The ECB and the Fed, the two main central banks that oversee the monetary policy in the largest economic blocs in the world, have maintained their accommodative measures. The ECB even announced an increase in the pace of its bond-buying under its PEPP program, and the euro traded in retreat ever since.

Finally, higher U.S. real rates led to a stronger dollar, especially against the JPY and CHF. As a consequence, the USDJPY traded over 110 toward the end of a month, as the bullish momentum continued.

Daily Analysis

The day ahead is marked by the ADP (private payrolls) in the United States and the crude oil inventories. However, both pieces of economic data will likely be ignored by market participants because of what is about to follow in the days ahead.

Tomorrow starts the OPEC+ meeting, and on Friday, the U.S. Non-Farm Payrolls will reveal the jobs created in March. That is the most important event because there is a bank holiday in the United States due to the Good Friday holiday.

As such, whatever the market reaction will be to today’s private payroll numbers, traders will take it with a grain of salt and would rather wait for the NFP to confirm the report. The forecast is that the private payrolls will add 557k, but the risk is that more jobs were created due to the ongoing economic recovery taking place in the United States and the fiscal stimulus released this month.

Markets to Watch

Dow Jones, AUDUSD, S&P 500 – markets in focus today.

Dow Jones

Dow Jones has spent the last four months in a rising wedge, a reversal pattern typically forming at the end of bullish trends. However, there is one other situation where a rising wedge acts as a continuation and not like a reversal pattern – a running triangle.

According to the Elliott Waves theory, a running triangle forms ahead of the longest wave in a five-wave sequence. More precisely, a running triangle typically appears as the third wave in an impulsive structure.

Because of the fact that the price action looks like a rising wedge, the pattern attracts short interest. This is what makes the price action in the opposite direction to be extremely violent, tripping stops.

Dow Jones is reluctant here, and the news that President Biden is about to announce a new stimulus package designed to improve the American infrastructure can only help the equity market.

AUDUSD

One month ago, just a few days ahead of the end of February, the Nasdaq100 index corrected and triggered a move higher in the dollar. The AUDUSD pair was especially hit, dropping from 0.80.

On its way lower, the pair broke out of a rising wedge pattern; it retested it twice and then went for the first target – the 38.2% retracement. Since then, it did nothing else but consolidated in what appears to be a continuation pattern. Unless the market reverses back above 0.7750, the bias remains bearish, with the 50% retracement level the next logical target to watch.

S&P500

If there is one market that supports the theory of a higher Dow Jones despite the reversal pattern, that market is the S&P 500 index. It forms an ascending triangle pattern at all-time highs – a bullish pattern with a measured move that points to a minimum of 4,200 in the days/week ahead

The S&P 500 is considered the benchmark for the overall equity market in the United States, and the price action suggests that the horizontal resistance will eventually give way. If that is the case, the minimum distance the market should travel is the length of the triangle’s longest segment projected from the horizontal resistance.

Winners and Losers

In March, the U.S. dollar gained across the board, especially against JPY and CHF. The rise in the U.S. real rates pushed the traditional safe-haven currencies lower, while the dollar benefited from the rise in the yields and confidence. With stocks at the highs, we must include the American stock market indices as one of the top performers in the month.