In the short term, we can see markets have pulled off resistance, we are still uncertain if we have found support here or not. The big positive that keeps the light at the end of the tunnel is the UK vaccine which we saw trials paused last week. Over the weekend news emerged showing trials are back on.
The Tech led selloff is just profit-taking, nothing fundamentally has changed in that space other than it ran too hard and it was a great time to lock some profit in. The question now is where will those profits flow? Will investors pile back into the same companies again or will we see some value stocks come back into favor?
We still believe this is a buying opportunity, but as usual, timing is a day by day proposition. We are looking for the right technicals to line up before jumping in. Also, it is great to see Victorian’s daily numbers decrease which is a big positive to taking Vic and the rest of the country back to betting COVID normal.
Material stocks will likely take a rebound this week with Iron Ore back near this year’s highs, Copper and other base metals holding up well, and Crude also climbing back up to the high 30’s.
U.S trading was flat on Friday night, not giving much lead for our market’s opening this morning. Instead, we look to their strong futures which should help us rise if they remain so during our session today.
Our market, like the U.S, is clearly holding key support. For us, it is the bottom of the channel we have been trading in for the past couple of months. The pressure has shifted to the downside with our market trading in a mini descending triangle, but with the downtrend not really validated it is hard to say which is going to hold. Regardless, it is likely that if the U.S holds support, we will too.
In addition, the stochastic are in the oversold area and shallowing out. The 100 Day Ma is also acting as support. These help confirm the strength of the support we are trading at.
US shares closed slightly higher on Friday, but they did close well below their intra-day highs; US futures have since risen upon reopen this morning. We will see a Federal Reserve interest rate meeting this week, where they are expected to maintain their dovish stance, which could provide support to US share prices. On Friday we did see US CPI come in stronger than expected, but this is unlikely to affect the Fed’s decision too much. Tech stocks were again the weakest performers on Friday and tech was the only major sector to close lower. Every other major sector closed higher, with basic materials stocks rallying the strongest.