US markets traded in the red early in the session but closed in the green. The buying came back in after the FED once again reconfirmed that low rates and accommodative policy are open-ended. As we know markets continue to rise on the back of more and more stimulus. As long as the mood is more stimulus is coming, markets are likely to remain strong overall.
With more stimulus on the cards, the general feeling is this market is likely to continue higher. Valuations in the US are very overdone in many areas of the market, but with so much Fiscal and Monetary policy planned for this year, the bubble is unlikely to break just yet.
US company reporting kicks off later this week. We will see some of the big US banks on Friday; JPMorgan, Wells Fargo&Co, and Citigroup. Reporting could trigger certain stocks to move largely as we get further insight into how well or bad stocks are going in this uncertain environment. Keep in mind people will be focused on future guidance more than current profitability.
The XJO is expected to edge lower on open this morning. This is despite a flat to green night in the U.S and similar futures this morning.
The weakness in our market it likely due to the AUDUSD which rallied strongly overnight following a pullback the past week or so. Besides this, we remain cautious as the U.S fluctuates at the top of the range going into their reporting season.
We sit in the middle of the channel, with the next support around 6650. It is likely we continue in this range until we see a catalyst to move us out. This could come from either singularly or in combination of a few factors, such as stimulus or tax increases from Biden, Vaccine and Virus, U.S reporting, etc. It is hard to know what will push us out but at this stage we are looking cheap compared to the U.S and probably have a bit of catching up to do so we remain hopeful yet cautious.
US shares pushed slightly higher overnight, with prices fluctuating between slightly higher and lower throughout the session. Shares were helped by a falling US dollar and strong oil prices, with oil rising towards an 11-month high.
Oil prices rose with an inventory read showing a drawdown in US inventories, increasing confidence that the pace of the economic recovery is picking up. Oil and Gas stocks were consequently the strongest performers overnight, while Basic Materials stocks also rose strongly. Financials was the only other sector to close in the green, while every other sector closed lower to some degree.