Sentiment in the Australian market has been mixed coming into the end of 2020. This is mainly caused by the risks of another Covid-19 wave as we see NSW cases spread into VIC. The Vic government is aiming for zero cases by the end of the week. This will be a good proof of concept to see if contact tracing is effective.
The Australian market closed sharply lower to finish 2020, but US markets closed into all-time highs. Given the strong leads from the US markets, Crypto Currencies, and Commodities markets, investors still have a risk-on appetite. So, we do not expect our market to continue to sell down this week.
Now that the US stimulus is finally past focus for market sentiment will be on the following-
• US senate runoff elections
• Covid-19 Cases vs Vaccine roll out
• US company reporting
• China relations
• What actions will Joe Biden take after Jan 20
• Any more Central bank spending or Government stimulus
The XJO is drifting sideways at the moment, with resistance around 6,750 and support around 6,580; should the market break below 6,580, the market could come back to the next key level at 6,500. Otherwise, we would expect continued sideways to bullish movement. There is little indication of how we will start our first trading day of the year; but the lead from the US stocks and commodities markets was mostly positive.
Our market has been on a strong uptrend across the second half of 2020 but has found some strong resistance at 6,800. The longer term trend is still up, but the market is definitely being held back by our strong AUD and our dollar continued higher again over the past week. There has also been little volume in our market last week, but volumes will likely start improving today.
There are always opportunities in the market and 2021 could be a great year for certain beaten down sectors should life return to normal. Stocks in the energy, travel, or tourism space could definitely benefit from a COVID-19 vaccine, especially if we start seeing international borders reopen.
US shares rose to fresh all-time highs on Thursday, with prices rallying further on the last trading day of the year. US economic data during the session was mostly positive, with jobless claims lower than expected and with a bigger drawdown in crude oil inventories than expected.
Almost all major US sectors closed higher, with Utilities, Financials and Telecoms the strongest sectors, while Oil & Gas was the only sector to close lower.