S&P 500 and USD/CAD Testing Techs

The S&P 500 closed at a record closing high on Monday but it hasn't broken the intraday record. The US dollar was the laggard on the day with risk appetite improving but a turnaround can't be ruled out. Japanese markets re-opened after a holiday and employment numbers are due. A new set of Premium Insights will be issued on Tuesday.

The S&P closed fractionally higher than on April 11 to set a new high but fell short of the 1597 intraday high and the important psychological barrier at 1600. The April gains in stocks come despite some troubling economic data in the month.

April is historically the best month for US stocks but the May-October period is traditionally weak. With a nearly 10% year-to-date gain, the best days of the year may be in the past.

The Canadian dollar has been highly correlated with stocks over the past month and USD/CAD is pressing against the mid-April low of 1.0084. Look for CAD and the S&P 500 to confirm the direction of the next move in risk assets together.

One bright spot in the US remains housing and pending home sales jumped 1.5% in March, better than the 1.0% rise expected. Personal spending numbers were also a touch strong at +0.2% in the month compared to the 0.1% consensus.

A WSJ article on Sunday raised fears about disinflation and a flat core PCE price index compared to +0.1% added to the case.

Japanese markets are thin because of Golden Week but desks are likely to be fully staffed with several major releases on the schedule. At 2330 GMT, the unemployment rate is expected to remain at 4.3%. Twenty minutes later watch for data on industrial production and retail sales for the first signs of the effects of the weaker yen.