Investors brace for an eventful week in Fed activity and geopolitics, pulling back U.S stocks

Major index averages have pulled back as investors are turning attention to central banking activity. The Federal Reserve is expected to increase interest rates this week at the conclusion of their two-day meeting on Wednesday.  In some asset markets considered to be over-saturated, analysts are concerned about a rapid sell off following a market-moving event or shift in economic fundamentals as investors will rush to reduce risk. The recent sell-off in the crude oil market can be pointed to as an example.

Investors are continuing to keep an eye on geopolitics this week, particularly in Europe and the Netherlands. The recent rise of far-right populism in EU member nations is highlighting a concurrent rise in ‘euroscepticism’. Many of these rising political parties come packaged with a call for a referendum on the euro, or an exit from the trading bloc.  

British Prime Minister Theresa May is signalling next steps for Brexit by triggering a provision of its treaty with the EU called Article 50. Markets seem to be surprisingly complacent with the move, but many analysts are wary of too much optimism at the moment.

The DJIA is currently down 0.18% at 20,865.34. The Nasdaq-100 is up 0.13% at 5,869.52 and the S&P 500 is currently trading at 2,370.91 which is down 0.07% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows strong signals for downward momentum. Negative vector figures climb from -0.23% today to -1.23% in the next four trading sessions. Today’s support and resistance is 2,353.20 (± 3.56) and 2,372.60 (± 3.59), respectively. The predicted close today is 2,365.   

Upcoming Events & Reports

The Fed will be concluding its two-day meeting this Wednesday with an expected decision to raise interest rates. Concurrently, the Bank of Japan, Bank of England and the Swiss National Bank will also be holding meetings this week.

Investors will be watching Dutch polls this week to gauge the country’s political climate. The Freedom Party, a far-right anti-establishment party led by controversial political Geert Wilders has been making gains. Their poll performance this week will serve as a bellwether.    

Oil

Crude oil markets are trading choppy today after a tumultuous week of sell-offs. This was caused by the consistent increase in U.S domestic production and rising rig counts that had countered OPEC’s global production cap agreement. This dynamic had kept prices in the mid-50’s range, but is now weighing on some OPEC nations’ willingness to extend their accord. West Texas Intermediate for April delivery has dropped below the $50 mark, and is currently priced at $48.39 per barrel, down 0.21% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows relatively strong negative signals. Vector figures show -1.75% for today, followed by an downward move past -2.5%. All vector figures are based on today’s market conditions. The fund is currently trading at 10.26, which is down 0.24% from the open. Today’s prediction sees support at 10.04 (± 0.06) and resistance at 10.41 (± 0.06). The predicted close for today is 10.11.  

Gold

Gold for April delivery is up 0.33%, or $4.00 today at $1,205.50 a troy ounce. The perceived safe-haven asset is serving as a temporary position as investors look toward a particularly eventful week for trading.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows strong downward momentum for gold prices. Relative to today’s conditions, the negative vector values climb toward  -4% within seven trading sessions.  The gold proxy is currently trading at 114.87, up 0.13%. Today’s predicted low is 113.40 (± 0.29) and the predicted high is 114.72 (± 0.30). The predicted close today is 114.29 with a vector value of -0.20%.  

Treasuries

Yields on treasury bonds are up and bond prices are down ahead of Wednesday’s Fed meeting results. It is expected that short-term interest rates will be raised, and we may see up to three more hikes this year. The yield on the 10-year Treasury note is currently just under 2.6%, up 0.02% from the open at 2.5986%. Bond prices slide when yields increase because the newer, higher-yielding bonds devalue the older, lower-yielding ones.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see solid negative signals in our 10-day prediction window. Relative to today’s conditions, we see vector figures oscillating between -1.2% and -2%.  The ETF is currently priced at $116.93- down 0.27% from the open. The predicted close today is $117.15 with a low and high of 116.79 (± 0.37) and 117.25 (± 0.37), respectively.  

Volatility

The CBOE Volatility Index (VIX) is currently up 0.77% at 11.75. Stocks have taken a hit as investors are mostly concerned with Fed activity and pending news events this week. Relative to today’s conditions, the 10-day prediction window shows strong downward movement. The predicted close today is 11.57 with a negative vector of -1.68%. Today’s predicted lows and highs are 11.06 (± 0.22) and 12.10 (± 0.24), respectively.

Other News

Intel has announced a $15 billion acquisition deal with chipmaker Mobileye in a significant move toward investing in the future of self-driving car technology. Intel saw its shares fall 1.8%, while shares of Mobileye jumped 30%.