 Right, so this week is shaping up to be one of those rare moments where pretty much everything that matters lands at once. First, a Quick Nod to Last Week I’ll be honest — I didn’t think we’d see the NASDAQ make a new ATH at 27k so quickly. The Iran ceasefire narrative did some serious heavy lifting, and when you combine that with short-covering and better-than-expected early earnings, you get a rally that moves faster than most people are positioned for. The NDX essentially reclaimed its 52-week high in under a month. Impressive stuff. But here’s the thing — the easy money from that relief rally is largely done. From here, the market needs *fundamental* justification, and that’s exactly what this week is going to provide or deny. The Mag 7 Moment This week is dominated by the Magnificent 7. Wednesday the 29th is the big one — Microsoft, Alphabet, Amazon and Meta all reporting after the close. Then Apple follows on Thursday. With Tesla already in the rear-view, only NVIDIA is left to report later in the calendar. Let me give you my read on each of the big names: Alphabet (GOOGL) — This is probably the most interesting setup of the lot. The stock has roughly doubled over the past year and leads the Mag 7 year-to-date, but here’s the twist: EPS is actually expected *down* about 6% year-on-year. The stock is priced for perfection. Cloud revenue accelerated from +34% to +48% last quarter and the market wants to see that continue. If it does, great. If cloud even slightly misses, the premium comes off fast. Watch search revenue too — they’ve been running at around +17% growth and any deceleration will raise the AI disruption questions all over again. Meta (META) — In my view, this is the highest binary risk of the week. Revenue is expected around $55.5 billion, up roughly 31% year-on-year, and the core advertising machine is still printing money. But the real question — as framed well by Saxo’s earnings preview — is whether the market continues to forgive the spending. Meta’s 2026 capex guidance is sitting between $115-$135 billion. Investors have largely been okay with that because the underlying business is so strong. But another step-up in that guidance, or vague commentary about returns on AI investment, and the mood shifts quickly. The layoffs (8,000 of them) are already priced in. What isn’t priced in is capex surprise to the upside. Amazon (AMZN) — AWS is everything here. The stock is trading at around 23x forward earnings, which is a premium that needs defending. Saxo put it well: if AWS growth meets or exceeds elevated expectations with healthy margins, Amazon justifies that premium. If AWS comes in merely in-line while capex stays at $200 billion, the market starts asking harder questions about investing like a winner but reporting like a laggard. Worth noting — Amazon recently committed an additional $5 billion to Anthropic, with potential for $20 billion more. That’s a signal of where enterprise AI demand is heading. Microsoft (MSFT) — EPS expected around $4.04, up about 17% year-on-year on $81 billion revenue. Microsoft is on track to spend close to $146 billion on AI and cloud infrastructure this year. The market will want reassurance that demand is keeping pace with that level of investment. Azure growth commentary will be the key number traders focus on. Apple (AAPL) — EPS expected around $1.96, up 18%, on $109 billion revenue. Apple’s wildcard this quarter is China. With geopolitical tensions still elevated around the Iran situation and its ripple effects on global trade, any iPhone demand weakness or supply chain commentary for Q2 will get scrutinised heavily. ----- The Fed Twist Nobody Should Overlook Here’s what makes Wednesday genuinely unusual — the FOMC decision lands at 2pm ET on the same day as four Mag 7 reports after the close. Traders will be processing Powell’s press conference at 2:30pm before the earnings even hit. This particular meeting has no dot plot, no updated Summary of Economic Projections — which means every word in the statement carries more interpretive weight than usual. The context, as Kraken’s economic brief laid out, is loaded: headline inflation has risen on energy, core PCE remains above target, and Q4 2025 GDP was revised all the way down to just 0.5%. The big question Powell has to answer is whether the Fed treats the inflation overshoot as temporary, or as a reason to hold rates higher for longer into the second half of 2026. Markets are pricing a hold as the overwhelmingly likely outcome. The decision isn’t the focus — the language is. ----- Thursday Adds More Fuel If you thought Wednesday was enough, Thursday brings Apple’s earnings plus the first advance estimate of Q1 2026 GDP from the Bureau of Economic Analysis, plus PCE data. Traders will be interpreting all three through whatever framework Powell established the afternoon before. Q4 2025 GDP was revised down to 0.5% on the third estimate — significantly lower than the 1.4% advance read. If Q1 comes in soft as well, the narrative around rate cuts accelerates. If it comes in stronger than expected, the higher for longer camp gets ammunition. ----- What It Means for Broader Markets For equity traders, Wednesday evening is the single most important trigger point of 2026 so far. A clean sweep — beats across the Mag 7 with solid guidance and a relatively neutral Fed — likely pushes NASD toward 28k in the days that follow. That would require the stars to align though. FOMC, four major earnings, GDP, and PCE all need to cooperate. For crypto traders, the risk correlation is real. A strong Mag 7 night typically lifts risk sentiment broadly and BTC/alts tend to follow. A disappointment — especially on AI capex guidance — weighs on the whole risk complex. One more name worth flagging: Strategy (formerly MicroStrategy) reports May 5. With roughly 713,000 BTC on its balance sheet and fair-value accounting, quarterly Bitcoin price movements flow directly through to reported earnings. Any change to their accumulation intent or commentary on the fair-value accounting will be notable. ----- Bottom Line This week doesn’t have a clear directional lean — it has enormous potential energy in both directions. The bulls have momentum and a strong earnings season behind them (roughly 77-85% of S&P 500 companies that have reported so far have beaten estimates). But the levels we’re trading at carry expectation, and expectation is fragile when five macro events land in 48 hours. I’ll be watching Wednesday’s close like a hawk. You should be too. ----- As always, none of this is financial advice — just one trader sharing his thinking with other traders. Do your own research, manage your risk, and trade what you see not what you think.
0 Comments
Monday Morning Gaps: What 3+ Years of Data Says About When They CloseA study of 810 Friday-to-Monday gaps across US30, GER40, XAUUSD, EUR/USD, and USD/JPY The Setup: Strait of Hormuz, Sunday Night, and a Trader's Wrong AssumptionOver the weekend of April 11–12, 2026, news broke that the US Navy was preparing to blockade the Strait of Hormuz. By Monday morning, markets had opened with significant gaps — a sharp risk-off move of the kind that makes traders reach for their analysis notebooks. The DOW (US30) gapped down more than 500 points. The DAX (GER40) dropped over 340 points at the open. EUR/USD gapped aggressively; even USD/JPY — which gapped up as the dollar was initially bid — moved sharply. My morning analysis led me to a classic assumption: a big gap like this will correct first, then continue in the direction of the gap. In other words — expect a partial retrace toward Friday's close, then resumption of the move. Instead, every instrument simply filled the gap and kept going. No correction. No second wave. The gap was erased and price continued straight through Friday's close, leaving anyone positioned for a fill-and-bounce badly offside. Was this unusual? Or was I wrong to expect otherwise? I went back to the data. The Study: 3+ Years, 5 Instruments, 810 GapsUsing MT4 hourly (H1) data from Pepperstone for five instruments — US30, GER40, XAUUSD, EUR/USD, and USD/JPY — I identified every Friday-close-to-Monday-open gap from mid-2022 through April 2026: roughly 180–200 trading weeks per instrument. Definition: Friday's last H1 bar close vs Monday's first H1 bar open. Any non-zero difference is a gap. Closure: The first subsequent H1 bar whose high (for a bear gap) or low (for a bull gap) trades back to the Friday close level. Gap size: Expressed as a percentage of the 14-day Average Daily Range (ADR). This normalises for scale — 300 points means very different things on the DAX versus EUR/USD — and gives a measure of how meaningful a gap was relative to that instrument's typical daily movement. Finding 1: Gaps Almost Always CloseThe first and most important result: weekly opening gaps are not permanent. Across all five instruments, the closure rate is remarkably consistent.
Roughly 85–91% of all gaps close on the same day they open — and nearly 97–99.5% close eventually. The FX pairs close fastest, averaging well under one trading day. This makes structural sense: currency markets are essentially 24-hour and deeply liquid; when weekend news moves price, Monday's Asian and European sessions immediately begin resolving the imbalance. The indices carry more weight from the thin Sunday-opening period and take slightly longer — though GER40's higher average (2.29 days) and XAUUSD's (1.66 days) are both skewed by a handful of very persistent large-gap outliers. "Waiting until Friday" — gaps that take until the end of the week — does happen, but it is genuinely uncommon: only 2–4% of gaps across all instruments took three or more trading days. You'd be waiting all week on less than one gap in twenty-five. Finding 2: Size Is the Critical VariableThe aggregate numbers look reassuring, but they conceal a sharp split. When each instrument's gaps are divided into quartiles by size relative to ADR, the same cliff-edge pattern appears across all five markets. US30 (190 gaps — the most complete dataset):
Below roughly 15% of ADR, the default outcome is Monday closure: 88–100% of the time across all instruments. Cross into the top quartile — gaps above ~15–20% of ADR — and same-day closure drops to 62–74%, with average time-to-closure rising sharply, driven by a handful of outliers that can persist for weeks or months. The Spearman correlation between gap size and days to close runs from r = 0.25 (USD/JPY) to r = 0.40 (US30) — real, but not dominant. The relationship is concentrated almost entirely in the top quartile. The bottom three quartiles might as well be identical: all close on Monday. The practical upshot: gap size relative to ADR is the single most useful filter. A 3% ADR gap and a 12% ADR gap behave the same way. A 30% ADR gap is a different instrument entirely. Finding 3: Direction Matters — Especially in Trending MarketsA consistent asymmetry appears across all instruments that have been in a clear directional trend during this period:
GER40, Gold, and USD/JPY all show the same pattern: gaps in the prevailing-trend direction close in under a day on average, while counter-trend gaps take 2–6× longer. The GER40 and XAUUSD numbers are the starkest. Over this period — a broadly risk-off, equity-under-pressure, gold-in-a-bull-market environment — a bear gap on the DAX at the open finds ready buyers almost immediately. An unexpected bull gap opens against that pressure, and sellers take their time. USD/JPY tells a similar story from a different angle. This period has been characterised by JPY strength (falling USD/JPY). Bear gaps — USD/JPY opening lower, in the direction of the yen strengthening trend — close in half a day on average. Bull gaps that open against that trend take 1.84 days on average. EUR/USD and US30 show near-symmetry, consistent with a more balanced oscillating regime rather than a persistent one-directional trend. The implication: before fading a gap, check which direction it is relative to the prevailing structure. In a trending instrument, fading a counter-trend gap carries meaningfully more time risk than fading a trend-aligned one. Finding 4: The Hormuz Gaps in ContextThe gaps that opened on Monday April 13 were among the largest in the full dataset:
All five sit firmly in the top quartile — the zone where same-day closure is only expected 62–74% of the time. Yet all five filled on Monday. Note that USD/JPY gapped up (bull) on Hormuz day, while the risk assets gapped down. The dollar was initially bid — likely a combination of oil-price dynamics and flight-to-liquidity — before reversing intraday to fill the gap. So was my expectation of "fill then continue in the direction of the gap" wrong? From a probability standpoint, expecting closure was correct — even for Q4 gaps, 62–74% close on Monday. The failure was in the what happens after closure assumption. The data only measures when price returns to Friday's close level. Whether it then bounces and continues in the gap direction, or ploughs straight through (as happened on April 13), is not captured here. That is a question of trend context and market structure, not gap mechanics. The Hormuz gaps opened into an already-deteriorating market with significant overhead supply. The news accelerated a move that was already in progress; once the initial panic was absorbed, the market found the gap level was not meaningful resistance, and continuation in the direction of filling was the path of least resistance. The Outliers: When Gaps Stay Open for WeeksThe 1–3% of gaps that remain open for extended periods share a clear characteristic: they are large events (top quartile by ADR %) that occurred with the prevailing trend rather than against it. The US30's 113-day unclosed gap (October 2025, 124.7% ADR) landed in the middle of an impulsive downward move. Gold has a gap from April 6, 2026 — a bull gap of 136 points (67.1% ADR) — that remains open as of writing: gold gapped sharply higher as the initial tariff shock sent investors into safe-haven assets, and has never looked back far enough to fill it. USD/JPY's 65-day outlier coincided with a period of sustained yen strength. A gap that opens with a Wave 3 or a sustained impulse behind it is not a gap the market is in any hurry to fill — it is the market making a statement. Contrast that with the Hormuz gaps, which were a geopolitical headline into a market that had already made up its mind. The news created the gap; the existing structure resolved it. Practical Takeaways
1. Below ~10% ADR: the probability edge is firmly with gap closure on Monday. 94–98% of the time across all instruments. This is where the "gaps always fill" maxim actually holds with statistical weight.
2. 10–20% ADR: still closes same day 88–96% of the time, but give yourself until mid-week. Don't force an exit on Monday if the level hasn't been reached.
3. Above 20% ADR: closure is still the eventual base case (97–99%), but abandon assumptions about timing. Check the trend. If the gap opened with a clear impulse, respect it. If it opened into a counter-trend move or thin weekend conditions, the odds still favour Monday closure — just not as strongly.
4. The direction asymmetry is actionable. In a trending market, fading a gap in the prevailing-trend direction has a dramatically tighter expected duration than fading a counter-trend gap. Bear gaps on the DAX in a bear market close in hours, not days. Allocate your patience accordingly.
5. Gap closure is not a signal — it is an event. The moment price touches Friday's close tells you the gap filled. It tells you nothing about what happens next. The April 13 trade was a perfect illustration: the gap filled, and price kept going. Closure is the starting gun for your then what? analysis, not the finish line.
Data notes: Analysis performed on Pepperstone H1 MT4 history files. Data coverage: US30 and XAUUSD from June 2022; GER40, USD/JPY, and EUR/USD from mid-2022/2023; all to April 2026. XAUUSD recent gaps derived from M1 data resampled to H1. Gap size normalised against a 14-day rolling ADR with no look-ahead bias.
This blog post was produced with the help of AI.
|
Archives
April 2026
|
RSS Feed
|
We no longer use Twitter / X - please follow us on BlueSky
|