US Market Technicals Ahead (29 Mar – 2 Apr 2021)Focus on the upcoming week will be on US employment report that due to release on Good Day (a market holiday), with forecast slated on signs of a further gradual job recovery. Market will also be watching on President Joe Biden’s infrastructure plan, which he is expected to unveil in Pittsburgh on Wednesday, along with OPEC+ meeting which could offer guidance into the coalition’s production plan from May.
Continued push and pull of the market rotation that favors cyclicals over growth and tech stocks is expected to continue into the next quarter.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) maintained its resilience by closing +1.67% (+65.3 points) for the week. It is important to note that $SPX averted from further losses on Thursday, after a technical rebound at 3,860 level which was highlighted last week.
With $SPX remaining above its 20DMA & 50DMA and at a higher low trend formation, there are substantial traction for the index to breach 4,000 all time high level this week. The immediate support to watch for $SPX remains at 3,860 level, a break on the pivoted level from recent Thursday. Resistance to watch for $SPX is at 3,989 level, a continuation to break its all time high level.
US Employment Report (March)
The March jobs report is scheduled for a morning when the stock market is closed for the Good Friday holiday, but bonds will trade half a day, ending at noon. The labor market is expected to show signs of recovery following the approval of President Biden’s relief package and as several states ease coronavirus-induced restrictions amid the rapid pace of vaccination.
Infrastructure Plan
President Joe Biden is expected to unveil details of his $3 trillion to $4 trillion infrastructure plan on Wednesday in Pittsburgh, but strategists say it is too soon to say what form the plan could take or how large it will be in its final form.
The plan is expected to span multiple years, and Democrats are expected to seek tax hikes to pay for it.
Rotation
The rotation into cyclicals and value stocks is expected to continue into the next quarter. For the first quarter so far, energy and financials were the best performers, up about 33% and 16.5% respectively. Tech was up 1.7%, but it remains a better performer than utilities and consumer staples.
Spxbull
US Market Technicals Ahead (22 Mar – 26 Mar 2021)For this upcoming week, Investors will be watching the scheduled testimony by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on Tuesday and Wednesday before Congress, as 10-year bond yield reached its highest in 14 months. Personal consumption expenditures inflation data will also be released at the end of the week.
Before his joint testimony to Congress with Yellen, Jerome Powell is scheduled to speak Monday at the start of a four-day conference organized by the Bank for International Settlements on innovation in the digital age.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) traded the week to a all time high of 3,989, before returning all its gain with a weekly loss of -0.77% (-30.2 points) for the week. Optimism about the prospects for the economic recovery has accelerated a shift into bank and other value stocks, powering the $SPX to record levels during the week.
With $SPX remaining above its 20DMA & 50DMA and at a higher low trend formation, the immediate support to watch for $SPX is at 3,860 level, a break on the convergence of both major moving averages. Resistance to watch for $SPX is at 3,989 level, a continuation to break its all time high level.
Powell, Yellen testimony
Powell and Yellen testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday where they will discuss the health of the U.S. economy and the importance of fiscal and monetary stimulus in the recovery from the pandemic.
Financial markets have diverged from the Fed on the possible future outlook for monetary policy, sending yields on U.S. Treasuries to their highest in more than a year.
Investors are pricing in a first rate hike sooner than the Fed currently expects, amid fears that the economy could overheat as it recovers from the pandemic given President Joe Biden’s massive stimulus package combined with the Fed’s easy money policy.
U.S. economic data
On the data front, durable goods orders and the personal income and spending reports are set to be the highlights of the week, along with figures on new and existing home sales.
The housing data together with the personal income and spending figures, which includes the PCE deflator, the Fed’s preferred inflation measure, will probably show weakness, due to the impact of severe winter storms on economic activity in February. However, economists expect the slump to be short-lived.
The U.S. is also to publish the latest revision of fourth quarter 2020 GDP, which was last reported at an annualized 4.1%.
US Market Technicals Ahead (01 Mar – 05 Mar 2021)Even after President Biden’s $1.9 trillion pandemic aid bill narrowly passed the House in the early hours of Saturday, the shakeup in stocks prompted by the rapid run up in Treasury yields looks set to continue to be a major focus for markets in the coming week. Investors will be focusing on Friday’s employment report, which is expected to show that virus restrictions kept a lid on jobs growth in February. Appearances by several Federal Reserve speakers, including Chairman Jerome Powell will also be closely watched. Meanwhile, earnings season is wrapping up, but retailers will still be reporting, with Target ($TGT), Kohl’s ($KSS) and Nordstrom ($JWN) due to publish figures on Tuesday, followed by Costco ($COST) on Thursday.
Here’s what you need to know to start your week.
S&P500 (US Market)
The S&P 500 Index ($SPX) remains in red for the week, furthering its correction by -2.37%. The selling of individual equities was most felt on two separate occasion; on Monday 22nd February ($SPX: -0.56%), and Thursday 25th February ($SPX: -2.60%).
It is important to note there were several technical structure being broken on the highlighted Thursday itself;
Price Action breakdown on 20DMA (3rd Attempt in last 3 months)
Price Action breakdown on 50DMA (2nd Attempt in last 2 months)
Price Action breakdown on 4 months Trend Channel (2nd Attempt in last 4 months)
Breakdown of immediate support at 3,870 with volume exceeding past 50 trading sessions average by +87%.
Increasing implied volatility on the week of selloff.
On the flip side, every attempted breakdown on the confluence of above technical structure is accompanied with an immediate, and substantial recovery on $SPX (ie. 1st February to 5th February $SPX: +5.35%).
At the current junction, $SPX remains bullish at a higher low. Further signs of weakness in this correction will require $SPX to breach its next classical support level at 3,700, for the first significant lower low to be established since September 2020. It remains wise to capitalize on the potential investment opportunities with a prudent risk level.
Immediate resistance for $SPX is currently at 3,830, a support turned resistance level.
Tug of war between stocks, rising bond yields
The shift into energy, financial and other stocks set to benefit from the economic reopening has accelerated, while rapidly climbing Treasury yields are pressuring tech stocks that have led market gains for years.
Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings, which are discounted more deeply when interest rates go up.
A dovish sounding Fed together with expectations for more stimulus have propelled yields higher and fueled concerns about inflation and the two-track market looks set to continue, at least in the short team.
February jobs report
With President Joe Biden’s $1.9 trillion coronavirus relief package advancing to the Senate Friday’s nonfarm payrolls report for February will show how the recovery in the labor market is faring.
Government data late last week showed that initial jobless claims unexpectedly declined to their lowest in three months, indicating that the slowing infection rate is allowing the labor market to gain some traction. Retail sales also rebounded in January.
Economists are expecting the U.S. economy to have created 165,000 new jobs in February, after January’s 49,000 increase. But the winter storms that swept across the South may complicate the picture.
Powell speech
With the rapid climb in Treasury yields roiling the stock market investors may be hoping for Fed officials to address the selloff in Treasuries.
Fed Chair Jerome Powell is set to speak about the economy at an online event hosted by the Wall Street Journal on Thursday. So far there has been little sign of anxiety among Fed officials about higher Treasury yields.
Last week Powell said the move higher was the result of a stronger economy but added that the rate of economic recovery has slowed in recent months and reiterated that monetary policy will remain easy for some time to come.
US Market Technicals Ahead (1 Feb – 5 Feb 2021)A big week for earnings, including reports from Amazon ($AMZN), Alphabet ($GOOGL), Exxon Mobil ($XOM) and Pfizer ($PFE). Stimulus negotiations in Washington and the first jobs report of 2021 (January) will all be major events to watch in the coming week, but they are likely to be overshadowed by the standoff between retail investors and Wall Street hedge funds. Investors will be watching closely to see if the short squeezes driven by retail investors continue in what could be a bumpy week for stocks.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) ended the January flat, with a weekly loss of -3.47%. The correction have breached the multi-month long Trend Channel, along with 20SMA support convincingly, with the month’s highest transactional volume witnessed on 28th January. Additionally 50SMA was also breached on Friday session. This pullback affirms the technical Bearish Divergence between price rally and volume decline highlighted last week.
At the current junction, $SPX remains trading above 3,660 level, a classical support level established at the start of 2021. The breach of this support will see S&P500 trades at a cumulative loss for 2021.
1. The big squeeze
Last week saw retail investors using Robinhood and other apps drive a frenzied rally in shares of GameStop ($GME), AMC ($AMC) and other companies championed on social media platforms including Reddit’s WallStreetBets, that had been heavily shorted by hedge funds.
U.S. stock indexes suffered their biggest weekly fall since late October as the short squeezes saw hedge funds sell stocks to cover their losses, despite positive earnings results from market heavyweights like Apple ($AAPL) and Microsoft ($MSFT).
Some market watchers are concerned that the wild rally may be a fresh sign of overexuberance that could foreshadow volatility for the broader stock market, while others believe it is more of a sideshow.
2. Earnings
With quarterly earnings season in full swing, market participants are looking at whether companies can justify high valuations.
“By and large the surprises have been positive, even more so than typical and by and large companies are showing positive operating leverage where they are able to grow earnings a little bit faster than they are able to grow revenue,” said Ellen Hazen, portfolio manager at F.L.Putnam Investment Management in Wellesley, Massachusetts.
Tech giants Alphabet ($GOOGL) and Amazon ($AMZN) are both due to report after the market close on Tuesday, followed by Qualcomm ($QCOM), Snap ($SNAP) and Pinterest ($PINS) later in the week.
Some big names in the closely watched healthcare sector are also to report, including Pfizer ($PFE), GlaxoSmithKline ($GSK), AbbVie ($ABBV), Biogen ($BIIB), Gilead Sciences ($GILD), Merck ($MRK) and Bristol-Myers Squibb ($BMY).
3. January jobs report
The January nonfarm payrolls report will give markets the first look at the health of the labor market inherited by U.S. President Joe Biden.
The report is expected to show a slight uptick in hiring after the economy shed 140,000 jobs in December (mostly from restaurants and bars), but more substantial improvements are unlikely to come until there is a broader re-opening of the economy. The unemployment rate is expected to remain unchanged at 6.7% – almost twice the level that it was just prior to the pandemic.
Federal Reserve Chairman Jerome Powell last week said that the economic recovery hinges on the progress of the vaccination rollout. “There’s nothing more important to the economy than people getting vaccinated,” Powell said.
US Market Technicals Ahead (25 Jan – 29 Jan 2021)As we enter into the last market week of January, investors will have lots to focus on in the week ahead with a series of major U.S. companies including Apple ($AAPL), Microsoft ($MSFT), Facebook ($FB), and Tesla ($TSLA) all reporting earnings. The Federal Reserve is to meet, and markets will get their first look at fresh GDP growth figures in the final quarter of pandemic ravaged 2020. Elsewhere, the IMF is set to release its World Economic Outlook and growth figures from Germany, Mexico and Hong Kong will also be in the spotlight.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) recovered from the earlier week of losses, posting a weekly gain of +2.23%. The rebound have reaffirm the significance of 20DMA supporting the rally since 4th November 2020. The significance of 20DMA towards $SPX daily current price action is also observed in the various rebound highlighted in the chart (arrow), particularly thrice in December 2020 and once in January 2021.
As $SPX continues to creep up with a higher high at every bi-weekly swing, it is observed that volume is diminishing at every of this top establishment – essentially plotting out a technical bearish divergence between price rally with volume decline.
At the current junction, the $SPX remains firmly within the congested 3 months trend channel. The immediate support to watch for any further weaknesses is at 3,660 level. This level would see $SPX breaking down the highlighted trend channel convincingly, along with the first break of a minor classical support established on the opening week of 2021.
1. Earnings heat up
After leading markets higher for most of 2020, tech stocks took a backseat late last year amid a rotation into value stocks which were boosted by hopes for the economic recovery promised by vaccines.
That shift has stalled in recent days as investors weighed lackluster outlooks from big banks and a blockbuster quarterly report from Netflix ($NFLX) that saw shares climb 17%.
Microsoft ($MSFT) reports after the close on Tuesday, followed by Apple ($AAPL), Facebook ($FB) and Tesla ($TSLA), which recently joined the S&P 500, a day later.
The results could push the combined market cap of the FAANGs – Facebook, Amazon ($AMZN), Apple, Netflix and Google-parent Alphabet ($GOOGL)- back above their all-time peak of $6.16 trillion.
2. Fed meeting
Fed policymakers will hold their first meeting since Democrats last week took control of the Senate, which has increased the likelihood that new President Joe Biden’s proposed $1.9 trillion stimulus package could be passed.
The Fed is not expected to make any policy changes at the conclusion of its two-day policy meeting on Wednesday and is likely to reiterate that the economy is still far from its goals of full employment and 2% inflation.
There is some speculation among investors that increased government spending to boost the recovery could prompt the Fed to begin tapering its massive bond-buying program as soon as the end of this year.
But Fed Chair Jerome Powell said earlier this month that “now is not the time to be talking about exit.”
3. U.S. GDP data
Market participants will get their first look at how the U.S. economy performed in the fourth quarter from Thursday’s figures on gross domestic product after already weaker consumer spending numbers and falling employment in December.
After a record 33.4% annualized rate of growth in the third quarter, economists are forecasting growth of 4.0% in the final three months of the year. The economy is expected to have contracted by 3.5% for the full year.
The economic calendar also features data on durable goods orders on Wednesday, initial jobless claims numbers on Thursday and personal income and spending data on Friday.
US Market Technicals Ahead (19 Jan – 22 Jan 2021)The holiday shortened week will see Joe Biden inauguration as the 46th president of the United States on Wednesday with investors waiting to see how his plans for stimulus relief and tackling the pandemic will roll out. Janet Yellen’s confirmation hearing as the U.S.’s first female Treasury secretary is set to take place on Tuesday.
The fourth-quarter earnings season continues next week, with companies such as IBM ($IBM), Netflix ($NFLX), Intel ($INTC) and P&G ($PG) reporting their results. The European Central Bank is to hold its latest policy meeting against a background of renewed lockdowns to contain the pandemic.
Meanwhile, a raft of PMI data from the U.S, Eurozone, Japan, and the UK on Friday will lay bare the state of the global economy at the start of 2021. Fourth quarter and full year GDP data out of China on Monday could show that it was the only major world economy to have expanded in 2020. Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) underwent a correction of -1.98% (-76 points), with majority of the losses experienced on Friday after market missing the estimates of US. Retail Sales for December (-0.7% MoM vs 0%. MoM). With the above, the highlighted Bearish Hanging Man candlestick pattern last week is currently in play.
At the current junction, the $SPX remains firmly within the congested 2 months trend channel, with 20DMA supporting the rally since 4th November 2020. The significance of 20DMA towards $SPX daily current price action is also observed in the various rebound highlighted in the chart (arrow), particularly thrice in December 2020 and once in January 2021.
The immediate support to watch for any further weaknesses is at 3,660 level. This level would see $SPX breaking down the highlighted trend channel convincingly, along with the first break of a minor classical support established on the opening week of 2021.
1. Biden bump?
Joe Biden will be inaugurated as the 46th U.S. president Wednesday, taking over the leadership of a country ravaged by the pandemic and facing deep socio-economic divisions.
Biden has announced a $1.9 trillion stimulus package, which includes $1,400 stimulus checks but this may prove a double-edged sword for investors, bolstering optimism over the outlook for the economic recovery while raising worries over how the U.S. will afford it.
The S&P 500 has risen in the first 100 calendar days of eight out of the last 10 presidential terms, but Biden’s first 100 days may be more fraught than those of his predecessors. He needs to stimulate the economy quickly, but the narrow Democrat majority in Congress means the size and timing of the package remain uncertain.
2. Earnings
Investors will be anxious to see whether upcoming earnings results validate expectations for a strong rebound in 2021.
U.S. stocks are at record highs, boosted largely by optimism that the vaccine rollout will allow for a recovery, while hopes of more fiscal stimulus have also underpinned gains.
Earnings reports for the last quarter of 2020 will get underway in earnest with the release of results from companies including Bank of America ($BAC), Goldman Sachs ($GS), Netflix ($NFLX), Charles Schwab ($SCHW), Procter & Gamble ($PG), United Airlines ($UAL), Intel ($INTC) and IBM ($IBM).
Earnings for S&P 500 companies are expected to decline 9.5% in the final quarter of 2020 from a year ago, but are expected to rebound in 2021, with a gain of 16.4% projected for the first quarter, according to IBES data from Refinitiv.
3. ECB meeting
The ECB is to hold its first meeting of 2021 on Thursday. Policymakers announced extra stimulus in December, but the economic outlook has been clouded again by the discovery of new Covid-19 strains and the relatively slow pace of the vaccination rollout.
Cause for concern? Not so, comments from Christine Lagarde suggest. The ECB chief predicts recovery as COVID subsides, seeing the glass as half-full, not half-empty. Germany’s economy too is cause for optimism, shrinking by a less-than-expected 5% in 2020.
But prolonged lockdowns will hurt. Against this backdrop, markets will want the ECB to signal its commitment to using the full firepower of its 1.85 trillion-euro ($2.24 trillion) emergency bond-buying scheme – something on which policymakers appear to be split.
US Market Technicals Ahead (11 Jan – 15 Jan 2021)Market will likely be focusing on the prospects for a bigger stimulus package after Friday’s employment report showed the U.S. economy shed jobs for the first time in eight months in December amid a resurgence of Covid-19 infections. A further snapshot of how the economy is performing will be presented with upcoming Friday’s release of data on inflation and retail sales.
Additionally, earnings season will get underway with major US banks set to release fourth quarter earnings results on Friday.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) continued with a 3rd consecutive week of rally, closing with a modest gain of +1.83% (68.6 points) for the opening week of 2021. This rally have continued to establish a new all time high level at 3,826 points, also breaking out of a 9 weeks trend channel congestion that was highlighted over the weeks.
With plenty of eutrophic moves in highly speculative themes over the past weeks (i.e. Electric Vehicles, Bitcoin, Alternative Energy and Biotechnology), there were observation that some of the previously market-leading mega cap companies are not in participation of the week’s rally. Several of the higher profile companies, particularly the FAANG, remain either in a consolidated triangle chart pattern, or a box ranged rectangular chart pattern. Additionally, $SPX traded lower on the first two days of the year, with the month long highest sessional volume observed on Tuesday alone.
At the current junction, the 20DMA have been nicely supporting $SPX in rally since 4th November 2020. The significance of 20DMA towards $SPX daily current price action is also observed in the various rebound highlighted in the chart (arrow), particularly thrice in December 2020 and once in January 2021. There is also a significant pick up in trading volume since the start of 2021, and it is imminent for market volatility to further uptick towards a 50 points ATR14 range within the next two weeks.
The immediate support to watch for any potential weaknesses is at 3,780 level, a confirmation retracement for Friday’s Bearish Hanging Man candlestick pattern.
Top 3 things to watch this week:
1. Stimulus hopes
Stocks closed at record highs on Friday, despite data showing the U.S. economy suffered its first net loss of jobs in eight months in December, after Biden said his economic relief package will be in the trillions of dollars.
Biden said his administration’s economic package will also include unemployment insurance and rent forbearance. The package is due to be unveiled on Thursday.
2. Economic data, Fed speakers
The U.S. is due to release data on consumer price inflation on Wednesday, while retail sales figures for December are due out on Friday. Inflation is expected to tick slightly higher, but remain subdued, while retail sales are expected to have been dampened by the surging virus.
Fed Chair Jerome Powell is to speak on Thursday. The U.S. central bank has indicated that interest rates will remain on hold near zero through at least 2023 and said the path of the economy will depend significantly on the course of the virus.
3. Banks kick off earnings
Big banks will kick off the U.S. corporate earnings season in earnest with JPMorgan (NYSE: $JPM), Citigroup (NYSE :$C) and Wells Fargo (NYSE: $WFC) posting fourth-quarter results on Friday – the first S&P 500 companies to report for the last quarter of coronavirus-stricken 2020.
Some investors expect company earnings and economic data to play a greater role in moving stock prices this year.
