US markets gave us strong leads overnight, but nothing changed to indicate it will be maintained. We expect the US markets to continue to whip around, which means that it could continue to push higher this week but will not get back to all-time highs.
Looking back in history markets do tend to get very whippy before a US election, and with the hold up in US fiscal stimulus, there is nothing to fuel a move higher. Tech, communication services, and discretionary stocks all drove the move higher. Which were the sectors that got the US this high to start with. So, it seems investors are bracing for another round of stick lockdowns?
Virus numbers in the many countries throughout Europe are seeing a jump, this is likely to lead to a fresh round of restrictions. Some states in the US are still in lockdowns and another wave will keep them that way for some time.
So, for the US markets to go back into all-time highs we will need to see a catalyst to drive it. Whether it be a large US fiscal stimulus package, a Vaccine, or the FED to further intervene.
Locally, things are going in a better direction, numbers in Vic are going down and we are seeing the first signs of states reopening with QLD allowing people from ACT to travel but only by plane. Most states have pretty much eliminated the virus, there are 768 active cases and 620 of those cases are in Vic. SA, TAS, NT, and ACT have had no new cases in the past 11 days. NSW 52, Vic 307, QLD 5, and WA had 6 new cases. Many of the new cases in NSW, WA, and QLD came from people returning home and have quarantined.
With things getting better we are hoping to see further talks around borders and Vic coming out of strict lockdowns.
With strong leads from the U.S last night, our market is set to open higher near 5840. U.S futures sit flat this morning and will need to remain so or in the green during our session if we are to hold these gains.
A push higher today will have us roughly retrace to the downtrend line, and from there we will need to see if our market goes on to create another lower peak.
Locally we are now trading in a downtrend, with early signs the U.S is forming one as well. Ultimately this means that in the short to medium term, one must assume the market is likely to drift lower to sideward until we once again see a more dominant pattern emerge. On the other hand, the U.S was reluctant in breaking their support the other day, and last night’s rally gives hope that it wants to hold. Regardless, proceed with caution as the market weighs up the upcoming U.S election, the virus, and probably most importantly, further stimulus spending which at this stage looks unlikely to get through congress before their election.
Our Materials sector (one of our largest) is trading at support, and with a lower dollar once again overnight, we should see strength return here. The Financials sector (also one of our largest), lead by the Big Four, is largely responsible for the weakness of our market since arguably June.
The banks have fallen off over the past month, and though their underlying troubles remain, investors are likely to see these prices as strong buying opportunities in the short term. If we can see growth in both these sectors, our market will almost certainly push higher. How long the buying will last is anyone’s guess, especially as any growth in the financials or XJO would be against the underlying downtrend.
US stocks rose overnight, ending a five day losing streak for the major S&P 500 index. The rise came despite the US reaching an unfortunate milestone overnight of 200,000 deaths to the COVID-19 coronavirus. US shares had been leading a global recovery but an expectation of further fiscal stimulus has certainly added to their gains. However, the additional fiscal stimulus now seems further an further away given the approaching presidential election and the weakening relationship between some Republicans and Democrats. Investors are still hoping that the next round of fiscal stimulus will be passed, which could certainly help shares reverse their current course and push higher.
Technically, the S&P 500 remains down trending overall despite strength overnight. The rise sent the index back towards the key support/resistance level around 3,320. Should the index rise from here, it will have to break above the potentials downtrend line that comes in around 3,350 before it will look bullish. If the index can do that, there is an additional resistance at 3,420 that will have to break before it will look likely to see further gains.