Markets are very mixed as investors regain confidence. The Nasdaq broke the downtrend overnight, The Dow has broken into all-time highs and the S&P500 closed on all-time high resistance overnight. There is a battle between Tech and Value, but most value stocks continue to hold trend whilst Tech rebounds.
This is a strong bullish sign, if Tech/Growth recovers and Value also rises, we will see a strong movement in the US markets. In the meantime locally, our market has somewhat disconnected and is stuck sideways. Part of this could be that our stimulus measures for Covid are tapering off as the US has got its foot firm on the gas pedal. Biden’s 1.9 trillion stimulus package should help most sectors.
The market is starting to get what it wants, Bond yields are cooling off, Stimulus is coming and CPI in the US missed expectations earlier in the week. The mini sell-off in commodities did not last long with most Metals and Crude oil rebounding. Iron Ore is pushing higher after falling 10%.
If commodities continue to edge higher, Miners and Energy stocks could easily push up after the recent sell down. The move lower in BHP, RIO and FMG seem a bit overdone. The move lower now has BHP at a forward PE of 13, FMG 6.27 and RIO 8.70. The forward PE is based on expected earnings coming into August reporting. But timing is the key, look for signals off a trend line or key support.
The XJO is expected to rally on open this morning, following strong leads from the U.S overnight. Our open has us near 6750, but U.S futures sit flat to in the red, so holding onto these gains may prove difficult once again. Indeed, this entire past week has seen positive opens, but disappointment by close of day. Iron Ore tanking has weighed heavily on some of our key miners, offset by a weaker AUD. Last night saw a rebound in both Iron ore and the AUD. Overall, it is likely the market switched to a risk off attitude as the U.S got its act together with stimulus, bond yields, and in the tech space. With a move back to all time highs last night in the U.S, hopefully confidence can return, and more importantly, stay in our market.
Technically, the market must first deal with the countertrend, which comes in just below 6800, before it can set its eyes on our own post-pandemic highs near 6900. Overall though, our market continues to grind sidewards to higher.
US shares pushed higher again overnight, with President Biden set to sign the latest stimulus package into law. The index rose to an all-time high close, with tech stocks, which had languished recently, joining in the rally.
Helping the optimism, was better than expected US jobs data, with jobless claims and other jobs data coming in better than expected. It was a broad-based rally overnight, with tech stocks by far the strongest performers. Basic materials and Healthcare stocks also saw large gains, while Telecoms fell a fair degree after a large debt issue from Verizon; most other sectors finished flat.