Markets remain whippy as traders wait to see if this move down recently will be the start of a wider pullback or not. We have many major market indices now sitting just above key support levels. Trump approved the Tik Tok deal in principle which could be setting a new norm for the US and China trade relationship.
Locally markets have been led back to the bottom of the range, the banks seem to be having a hard time and the volatility in Iron Ore also saw materials lower last week. Insurance stocks continue to tumble as many electricity providers with talks of a new government-owned natural gas power plant.
The big positive over the weekend is that the Vic daily Coronavirus numbers have moved sharply lower ahead of predictions. If this continues then there is a chance we can start removing some restrictions early. The quicker we get out of lockdown the quicker we can open the economy and find a new COVID normal.
What we want to hear is borders reopening locally and a plan to reopen for overseas students and immigration. This will help many of the beaten-down companies to come back to life.
The next big bit of information locally will be the federal budget next month due on the 6th of October. We are expecting to see the government detail where they will be focusing their spending to help the economy bounce back. This should give us a picture of what sectors could perform well over the next year.
Following negative leads from the U.S on Friday our market is set to open lower near 5850. U.S futures sit flat to green this morning, and if they remain positive it should help keep our market from falling too much today.
The U.S is sitting at support, and today’s open will have us retest the bottom of the channel we have been trading in for the past few months. We are also trading in a short term descending triangle.
If support breaks, not only will the market likely head lower, but it will also mark another lower trough and peak, indicating a change in trend. The next target would be near 5700. The stochastic hover near the oversold area, and the 100 Day MA is also acting as support.
Fundamentally, the media magnifying lens has put a burning sunspot on the U.S elections. This has intensified with the passing of Ruth Bader Ginsburg, a U.S supreme court judge who was perceived as the one who tipped the scales towards a more liberal system. Last time this happened, Republicans stated that the president shouldn’t choose a supreme court judge during an election year.
A sentiment the media has focused on since her passing over the weekend. Despite this rhetoric, Trump is going to name her successor soon. Whether he can get it through congress will come down to if Republicans senators want to be considered hypocrites in a season where potentially their seats are up for grabs. America remains politically divided and as the election looms, uncertainty will likely continue to have a risk-off effect for investors.
Overall, it looks less likely in the medium term that we see a return to a strong bull market. Instead, a sideward to potentially even a bear market could be in store which plenty of volatility. Regardless, continue to assume sideward to bullish movement in the short term until we see the channel break locally, and the U.S break their key support.
US shares fell again on Friday, which was the third red session in a row for the average US share. Analysts are blaming many possible sources for the selling, including high valuations, the approaching presidential election, delays on the latest US fiscal stimulus bill, and US-China tensions.
Investors are certainly hoping that US lawmakers will soon pass the next fiscal stimulus package but there is little indication on how soon this might come and it may not come at all before lawmakers break for the elections. Technology, Utilities, and Basic Materials were the worst performers on Friday, while Healthcare stocks fell the least.