US markets closed higher again on Friday with the Dow closing into all-time highs, the SP500 is flirting with all-time highs whilst the Nasdaq closed slightly lower. The Value/Recovery space was favoured on Friday as long-term Bond yields continued to rise after a week of sideways movement.
Bonds could continue to rise into Wednesday nights FED meeting as many expect the FED to take no action. There will be a lot of uncertainty coming into this meeting as FED Chair Powell spiked a sell-off a few weeks back when he suggested a temporary spike of inflation is coming. So, we could see some selling back in the Growth / Tech space for a few days if Bond yields continue to rise.
Otherwise, the approval of Bidens $US1.9 trillion Stimulus is seeing US markets push higher overall. The moves in the Bond markets of recent though have people a little nervous. Remove that fear and the US market will likely continue to uptrend strongly across the board.
News over the weekend that the AstraZeneca Vaccine could be causing Blood clots could also affect sentiment. European authorities paused the rollout of the AstraZeneca vaccine after a small number of people developed blood clots. Many are saying this is an “overreaction”. Locally CSL is manufacturing this vaccine which makes up a large amount of Australia’s Vaccination plans. At this stage, this is probably not going to affect our market much, but if there is any further proof over the next few weeks then it could see the market pullback.
The market is expected to open flat this morning. This follows similar moves from the U.S on Friday. U.S futures sit in the green, and if they remain so during our session today expect our market to move higher.
Broadly, we continue to trade in the pennant. At this stage it looks likely we are going to test the countertrend line today, which comes in at roughly 6800, though it is unlikely we see any significant break of it.
In order to head back towards our post-pandemic highs of roughly 6950, it is looking likely that we need to see the U.S make fresh all-time highs. Fortunately, despite the shifts in tech, volatility, and yields, markets and analysts seem to be broadly remaining positive.
US shares were mixed on Friday, The Dow continues to create further all-time highs as Value and Infrastructure stocks continue to push up after President Biden signs in the 1.9 trillion relief bill. The SP500 continues to flirt with the all-time high level, but the Nasdaq pull back a little.
Longer-term bond yields pushed higher again as investors continue to price in higher inflation. The more Central banks and Governments inject money into the system the more likely we will see inflation go back up. All in all, though it only becomes a major issue when inflation rises above central banks targets of around 2.5%. This is not yet the case, so what we will likely see here is the market has small corrections if bonds yield continues to move as they have recently.
So, it will be all eyes on the FED Wednesday night to see if they send the market any hints on further yield control. It will likely be inevitable to see more yield control if Bonds continue to sell off strongly.
Technically, the S&P 500 is still trading inside an ascending triangle testing the all-time high resistance created back in February. Thursday last week we saw this level break intraday but pull back to close right on the resistance. A break of this level will see the index into all-time highs. The industrial heavy Dow has pushed into all-time highs 3 days in a row as it does not have Tech weighing it down. If Bonds continue to rise here Tech and overbought Growth will likely continue to weigh on US markets.