Markets overnight started very strong being led by the tech sector once again but didn’t last. The cause of the pullback isn’t clear as yet, but it could be people taking some risk off the table before reporting. The SP500 did test a key level of resistance, but we also heard from the OPEC group which is indicating they will start increasing production again. Crude only closed slightly lower at 39.80.
Further talks of stimulus in the US is helping the overall mood in markets, as the FED also continues to support markets. Locally we are also waiting for further news on extensions to Keepers and Seekers allowances.
This week the focus will be on Earnings which will kick off in a big way on Wednesday. In particular, we will have an eye on the big financials in the US which could lead our banks locally. We will be seeing the big names like Citigroup, Wells Fargo & Co, JPMorgan Chase & Co on Wednesday, and then both Goldman Sachs Group and Bank of New York on Thursday.
With negative leads from the U.S overnight our market is set to open around 5950. We have bounced off the psychological key level of 6000, a resistance and support level that our market has favored historically and in the past few months. U.S futures have pushed into the green this morning which should help stem falls during our session today if they remain strong.
The uptrend line for our market is still in play. It will hopefully help keep our market buoyed from too heavy a fall. There is also some support around 5900 giving the uptrend line some assistance.
Overall, its good to be reminded that the market is still trading in a clearly defined uptrend, with no early signs of a change in trend. The market has had much of its bullish sentiment removed, with our market tracking sideward over the past month. It is getting to crunch time: our market is trading in an ascending triangle and we are nearing the point of the triangle. We should expect a break over the next month or so.
This falls in line with the current reporting season in the U.S and ours in August. This can be a wakeup call for markets which are currently disconnected from the real economy. In closer proximity, U.S – China relationships are eroding to the point they are in the worst state in 30 years. The feud (which are a part of) between the two largest superpowers will continue to spook markets. The U.S delaying reopens is also weighing on markets, but this may just be a short-term issue.
Ultimately, the combined power of the Central Banks and Governments have resulted in a big enough hose to quench any real infernos, but the fight continues.
US shares pushed lower overnight, with fresh coronavirus concerns and a weakening of Chinese-US relations being blamed for the selling. US stocks are about to start reporting in a major way, with tonight a potential catalyst for strong movement. We will see several major banks report earnings for Q2 2020, with JP Morgan, Citigroup, Wells Fargo and others reporting. We did see Pepsi report overnight, with their earnings better than expected. We also saw a report that showed the US Federal Government budget deficit was greater than expected in June.