Markets are a little overheated and a move back to trend is healthy at this stage. There is still a high chance we could see buying into the weakness. All eyes will be on the FED tonight which could be the next short-term catalyst for markets.
Sentiment is very much tied to stimulus at the moment. Markets will want to see central banks of the world either hold current stance or cut to zero. Re-confirmation from the FED that QE infinity and low-interest rates will continue can help markets continue on their current path.
All-time highs for the SP500 and the XJO could very much be a reality this year if we continue to see world economies get back up and running. This coupled with current stimulus levels should keep the sellers on the sidelines.
Earnings sentiment for companies remain low, indicating weak reporting is expected for July and August, however, that was priced in with the falls. Because we already expect bad reporting this season, rather than looking for growth we will be looking to see how bad the report is compared to expectations. Then we need to look at forwarding expectations as compared to price action and look at forward PE ratios.
With a small pull back in the U.S last night our market is expected to follow suit on the open this morning. U.S futures are in the green as of writing which should help stem the fall. If we seem them push harder into the green during our session today, expect our market to retrace some of any losses we experience.
It has been a miracle run that has many analysts perplexed to the severity and speed of it. The breather we expect to see today is only natural. We still have the uptrend in play and the acceleration to hold us up. We could see a short-term consolidation as the markets weigh up where we go to from here.
US stocks fell overnight, with shares taking a breather after two strong days of gains. Prices were down a fair bit early in the session, but recovered to close only a bit lower. US investors now look to the Federal Reserve meeting tonight for an indication of the future direction of monetary policy, which will give them more information to make their next moves. We will also see the OECD’s economic outlook released tonight, which will give us some clue into how the global economy is faring with COVID-19 and how an economic recovery might progress. Many in the US market are now expecting a period of consolidation, after months of strong gains.