It's been one of the best starts to a year ever for stock markets but it's not what it appears. The week ahead is all about the start of US earnings season, with important data from flash PMIs in the Eurozone, China Q1 GDP and US industrial production and retail sales. GBP currently leads currencies since the stat of a thinly traded Asian ession. Flagging signals as to whethet to square some longs or open shorts.

The temptation is to chalk up the rally in equities this year to better growth but it's been just the opposite. Growth almost everywhere has disappointed.

Instead, this is a rally entirely predicated on the Fed going to the sidelines and China stimulating. No surprise that on Friday, indices in most developed world markets rallied to their best levels of the year after March new Chinese loans rose 1.69 trillion yuan compared to 1.2 trillion expected.

Markets are increasingly betting on two things: 1) An end to the US-China trade war, and 2) PBOC, Fed and other central bank efforts working to spur growth in the second half. The looming problem is that their actions will help in Q3 or Q4, but we're facing Q1 earnings season.

Gauging Earnings Season

There is considerable risk for disappointment for revenues and earnings, but guidance will hold more sway. The week ahead is focused on financials, which do not reflect an accurate view at consumers or underlying economic conditions. But there could be clues from Netflix, Pepsi, Alcoa and Las Vegas Sands this week. Make sure to distinguish beteween forecasts for revenues, profits and profit margins. And when you read the term "earnings recession", that means overall forecasts for profit growth will be negative for two quarters in a row.

One spot we've been following closely is signaling a positive outcome. On Friday, AUD/JPY rose to the highest levels of the year. It had been trading in a tight, well-defined 3% range since the flash crash at the start of the year. The rally on Friday argues that central banks may have done enough to keep risk trades rising. On the same token, check out Ashraf's take on the topic in Friday's IMT here.

CFTC Commitments of Traders

Speculative net futures trader positions as of last Tuesday's close. Net short denoted by - long by +. This week's report was delayed because of the US holiday.

EUR -102K vs -99K prior GBP -7K vs -10K prior JPY -72K vs -63K prior CHF -28K vs -26K prior CAD -43K vs -44K prior AUD -54K vs -56K prior NZD -1K vs 0K prior

The euro rallied last week despite Draghi's decidedly dovish press conference. The net short is the largest since late-2016 and the pair is basing from a double bottom at 1.1180. If EUR/USD can keep the momentum going, shorts will start to get nervous.

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