Overnight, US markets reversed an early sharp selloff, to close only slightly lower. Ideally, some selling here would be healthy for the overall market trend, in the short-term things are looking a bit overheated. But in saying that, considering the 5 months sideways move on the local market we should see a melt-up situation. This means the market will likely continue to slowly move higher into Christmas, but we expect the momentum of the move to soften.
Market sentiment right now is balancing towards positive despite another wave throughout the US and parts of Europe. Central banks and governments are doing a great job of timing talks around stimulus which is propping up Equities and Credit markets. In the US we saw FED members talk overnight admitting that they are supporting markets and also indicating that there is still plenty of ammunition in the stimulus barrel. Later this week we will see European leaders head into a summit where they will be talking stimulus.
The market right now is a balance between Virus, Stimulus, and Vaccine.
The XJO is expected to open flat to higher this morning, hovering around yesterday’s open at roughly 6500. This follows a lackluster night in the U.S and their flat to negative futures this morning.
It seems markets are just taking a healthy breather following the strong rally we have seen. These breathers are healthy and strengthen underlying trends, as breakneck rallies are not sustainable.
6500 may act as a magnet, but if we see a retracement the next target is 6400. Otherwise, if we sally forth the next key resistance sits at roughly 6600 to 6650. Clearly, key levels for our market are historically every 100 points or so.
Market media focus remains around the virus. Numbers continue to grow at rapid pace in the U.S, but vaccine hopes add fuel to an already booming market caused by fiscal and monetary expansionary policies. The road to recovery is long and hard as most top analysts and officials suggest, which ultimately means the market will continue to mainline stimulus.
US shares fell overnight, ending a series of higher closes for the major US indices. The financial press blamed consistently high virus cases for the selling, but the reality is that with shares at all-time highs, selling should never be unexpected. We also saw worse than expected US retail sales data overnight, although industrial production was better than expected. Oil & gas stocks were the strongest performers overnight, while every other major sector was flat to lower, utilities were the weakest performers.