Where to from here? The US is pretty much back to where it began in February. Coronavirus numbers are still increasing heavily, which could risk the timing of a reopening of economies. But underpinning all this is infinite FED QE and other stimulus measures. The likelihood of a strong rebound in economies once lock down measures are removed is extremely high.
For now though, it feels like the US markets have somewhat priced in everything we know. So, without some new news it is likely markets could just consolidate for a little while. US reporting season is likely to be the next catalyst as it will give us an insight into how good or bad things are out there.
At the end of the day, the FED and RBA are extremely accommodative, which almost always leads to higher markets. So, keep an eye on any stimulus news, as markets will remain extremely sensitive on any stimulus announcement.
Low earnings sentiment continues to be the theme as we edge closer and closer to US reporting season in July. The market is generally expecting low earnings this year, so we will be looking at reports through a different lens. We will be looking to see if companies will report better or worse than expectation. Reporting season as always can be volatile for individual companies so keep an eye on the reporting dates.
With the U.S tracking sideways in their session Friday, and strong negative leads from their futures this morning, our market should fall back to 5900 on open today. Markets continue to track sideways with little indication of a move in either direction at this stage.
We are still trading in an uptrend alongside the U.S market, so there is hope that the consolidation will still lead to further bullish movement eventually. If we see a move down to roughly 5750 or lower then a lower peak will have been created which can be an early sign of a downtrend beginning. From there we would need a break of local support at roughly 5700 to start worrying of a change in trend. What is more likely is a continued move with he underlying uptrend back towards resistance around 6200.
US stocks pushed lower on Friday and their futures have subsequently fallen further this morning, notionally due to the continued spread of COVID-19 throughout the world. The Chinese government also released details of its proposed national security law over the weekend, which would allow the mainland to directly prosecute Hong Kong residents, something which has also been of concern for equity markets. Most major sectors closed in the red for the US session, with only Healthcare recording gains on average. Every other sector closed lower, with utilities stocks the weakest performers. It was a little surprising to see Oil & Gas stocks fall, as we saw a really low oil rig count on Friday, which pushed oil back to its $40 US/barrel resistance level.