Our market will follow the strength of US markets, with our futures pointing to a resistance level around 5,300 index points. There is some resistance around this level, but if we do close higher today, we will be breaking the initial downtrend line that has formed since the start of the coronavirus selling. If we break above 5,300, there is a further level of resistance around 5,500-5,530. We are yet to see any leading or present indicators from our own economy that will let us know how our economy is going; so there is still a lot of uncertainty moving forwards.
US stocks continued to rally as record jobless claims were muted by the passing of the massive $US2 Trn stimulus plan. The Dow closed 1351.62 points higher (6.38%) and the S&P 500 was up 154.51 points (6.24%). European markets rose strongly as well, but Asian markets closed lower yesterday.
US jobless claims rose to the highest number ever seen overnight, but this wasn’t enough to topple markets, with literally trillions of dollars in fiscal stimulus being delivered primarily to businesses. This led the market to continue its rally, with the DOW JONES index now technically back in a bull-market – rising the requisite 20 percent off its lows. That doesn’t necessarily mean that the selling is over, with the US economy only expected to worsen in the coming months. However, technically US indices are starting to look quite bullish. The S&P 500 index is pushing up towards the next level of resistance, which sits at a previous support level at 2,750 index points. If that level breaks, the index should see further gains. If that level holds, there is some support around 2,500.
XJO Implied Volatility fell -13.61% and closed at 38.494. The US volatility fell -4.84% and closed at 61%.
US oil fell strongly again overnight, prices remain depressed. We will see an oil rig count tonight that is likely to influence oil prices.
Gold rose strongly again overnight, prices in Australian dollar terms (given the fall in the AUD) remain ludicrous.
Iron ore fell slightly overnight. Prices remain strong considering the economic situation.
The Aussie dollar bounced strongly against the US dollar overnight, prices remain fairly weak however.
Our market will rise again today, but its unlikely that we have seen the end of the selling. While massive stimulus will help the economy in the long-term, it won’t immediately fix problems in the short-term. How markets move from here will likely depend on the progression of the virus, with the US poised to overtake China as the country with the largest number of infected. This weekend will provide a bit more clarity around the spread of the virus here and in the US, which could lead to further large movements across the next week.
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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