The news that an experimental vaccine created by U.S. biotechnology company Moderna saw markets push to key resistance levels yesterday, but it wasn’t enough to confirm a breakout, or will it? It is common to see a pullback straight after a gap higher. Our market and others are still holding the medium-term uptrend so it does still seem likely markets can break higher.
At this stage markets have what they need to remain stable.
- Hopes of a vaccine
- Low interest rates with the view they are going lower
- Bond buying, to keep the Credit markets ticking along
- Increased unemployment benefits and programs to help keep staff employed that would have lost their jobs otherwise
- Hints of further stimulus on the way.
Earnings sentiment is still exceptionally low with many analysts downgrading expectations. If sentiment continues to increase around lockdown relief, we could see a shift here later in the year. But for now, things are expected to be negative through the July – August reporting seasons.
The XJO is poised to have a small fall on open this morning. The U.S last night stalling at the resistance at the top of their channel will likely prompt us to do the same thing, at this stage.
Once again, there probably is not really any major piece of news that is dictating the market one way or the other with so much out there – despite what major publications suggest. In fact, broadly speaking, the mix of positive and negative news is likely why we are trading in a channel.
US markets fell overnight, after three days of strong gains. Talking heads blamed the insufficient levels of data in the vaccine study done by Moderna, which yesterday they credited for the gains. The reality is that markets go up and down, and after three strong days of gains it was ready for a pullback.
The NASDAQ is also set to unveil a change in listing rules shortly, that will likely make it more difficult for Chinese stocks to list on the exchange.
We also saw Fed Chair Jerome Powell state during a senate hearing that the Fed is ready to use all of its available tools to help the economy through the virus; some have interpreted this as his strongest indication yet that a negative funds rate is a possibility.