Image Source: Pexels
 

Stocks Rallying Following JP Morgan / First Republic Deal 

Despite European traders being away from their desks yesterday for the May Day Bank Holiday, it was a mostly positive start for markets. Traders appear encouraged by news over the weekend that JP Morgan will acquire First Republic Bank which was forcibly shut by regulators over liquidity issues. The failure of FRC, which marks the second-largest bank failure in US history, raises fears over the health of the wider banking sector and the prospect of further such failures occurring. However, with JP Morgan stepping in to take on the business, allowing clients to continue accessing their money, a catastrophe has been avoided near-term.

Looking ahead this week, focus will shift away from regional banks and back to central banks with the Fed and ECB both due to make rate decisions in the coming days. Traders are looking for the Fed to hike rates by a further .25% tomorrow though the bigger focus will be on the bank’s forward guidance. With recession risks growing and given recent developments in the banking sector, the Fed is expected to strike a more reserved tone on rates going forward. If seen, this should help keep stocks supported near-term. The ECB too is expected to hike by .25% with risks that the bank strikes a more hawkish tone in its outlook depending on how today’s flash eurozone CPI data prints.
 

Technical Views

DAX

(Click on image to enlarge)

The outlook remains bullish for now. While the initial break above 15642.76 was seen losing steam last week, the retest of the level has seen it holding as support with the index now moving higher once again. While within the bull channel, the focus is on a test of the 16278.35 level next.

S&P 500

(Click on image to enlarge)

The index continues to hover around the 4153.50 level following the rally off 3910 lows. With momentum studies climbing, the focus is on a continuation higher and an eventual test of the 4305 level next. To the downside, 3910 remains the next support to note.

FTSE

(Click on image to enlarge)

Following the stalled breakout above the 7834.7 level, the subsequent retest of the level from above has seen it holding as support for now. With momentum studies still bullish, the outlook remains bullish while price holds above this level keeping the focus on a test of the 8023.5 level next.

Dow Jones

(Click on image to enlarge)

The retest of the 33576.05 level has seen demand kicking in, turning the index higher once again. Price is now approaching a test of the 34523.58 level which is a major resistance area for the index. A break higher here will be firmly bullish, putting focus on 35503.24 thereafter. 

More By This Author: