E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 28040, Weak Under 28025

December E-mini Dow Jones Industrial Average futures are inching higher early Tuesday after posting a steep decline the previous session. The move represents disappointment in Washington lawmakers’ inability to reach an agreement on coronavirus stimulus ahead of a Tuesday deadline that would make a relief package possible ahead of the November 3 elections.

At 05:33 GMT, December E-mini Dow Jones Industrial Average futures are trading 28134, up 34 or -0.12%.

Pelosi and Treasury secretary Steven Mnuchin “continued to narrow their differences” in conversations on Monday and Pelosi was hopeful that by the end of Tuesday there will be “clarity” on whether coronavirus stimulus is possible before November 3 election, according to a spokesperson for Pelosi.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 28846 will signal a resumption of the uptrend. The main trend will change to down on a move through 26407. This is highly unlikely but there is room for a normal 50% to 61.8% retracement of its current short-term rally.

The minor trend is also up. A trade through 28025 will change the minor trend to down. This will also shift momentum to the downside.

The new minor range is 28846 to 28025. Its 50% level or pivot at 28436 is potential resistance.

The intermediate range is 29050 to 26407. Its retracement zone at 28040 to 27729 is the next potential target zone. This area is actually controlling the near-term direction of the Dow.

The short-term range is 26407 to 28846. Its retracement zone at 27627 to 27339 is another potential downside target and possible support zone.

Short-Term Outlook

Based on Monday’s price action, the direction of the December E-mini Dow Jones Industrial Average futures contract on Tuesday is likely to be determined by trader reaction to the Fibonacci level at 28040.

Bullish Scenario

A sustained move over 28040 will indicate the presence of buyers. This could create the upside momentum needed to challenge the minor pivot at 28436. This level is a potential trigger point for an acceleration into 28732 to 28846.

Bearish Scenario

A sustained move under 28040 will signal the presence of sellers. This should lead to a quick test of the minor bottom at 28025. This price is a potential trigger point for an acceleration into a pair of 50% levels at 27729 and 27627.

Since the main trend is up, buyers could come in on a test of 27729 – 27627. If the latter fails as support then look for the selling to possibly extend into 27339.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Overview – Stocks Slide Driven Lower by Communications on Stimulus Fears

 

US stocks moved lower on Monday as concerns that a stimulus deal would need to wait until after the November general election weighed on shares. House Speak Nancy Pelosi has given the White House a 48-hour timeline to move forward with a deal. The spread of COVID-19 has accelerated which is reducing the chance of a V-shaped recovery.

Over the past 2-weeks, the stock market has been starting higher and ending lower, which is not a good sign. All sectors in the S&P 500 index were lower, led down by communications and energy, utilities were the best performing sector in a down tape. The VIX volatility index surged higher rising 2-points and recapturing the 29% level. The US home building index released by the FAHB surged to the high level on record but the gain was not strong enough to buoy housing sector stocks on Monday.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings.

The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74. Builders are struggling to ramp up production, and while housing starts and building permits are rising they are not even close to meeting demand.

Anticipation Builds Ahead Of Microsoft Earnings

Dow component Microsoft Corp. (MSFT) reports fiscal Q1 2021 earnings on Oct. 27, with analysts expecting a profit of $1.36 per-share on $35.8 billion in revenue. The stock sold off more than 6% after the Q4 release in July, despite beating top and bottom line estimates. Market watchers blamed the sell-the-news reaction on overly-high expectations for the cloud and commercial products divisions. The stock recovered those losses into August and posted an all-time high in early September.

Microsoft And TikTok

Buying pressure resumed after Mr. Softee threw its hat into the ring in the TikTok drama, seeking to acquire the company while jumping through political hoops in China and the United States. Oracle Inc. (ORCL) eventually won the coveted prize but continued conflict between nations suggests that Microsoft was lucky to walk away empty-handed and redirect attention to core services and the Nov. 10 release of the next-generation Xbox console.

Morgan Stanley analyst Keith Weiss discussed the revenue boost expected from the Xbox release earlier this month, stating, “The fiscal year 2021 console cycle and the addition of Bethesda highlight incremental growth opportunities for Microsoft’s gaming franchise, w/ a potential ~$80 billion value for the gaming subscription biz alone. Our bottom up work suggests the console cycle should not derail a broader margin expansion story. Overweight.”

Wall Street And Technical Outlook

Wall Street has been bullish on the big tech powerhouse for years, with a current ‘Moderate Buy’ consensus based upon 23 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines at this time. Price targets currently range from a low of $208 to a Street-high $260 while the stock is set to open Monday’s U.S. session about $16 below the median target. There’s plenty of potential upside after a strong strong quarterly report, given this humble placement.

Microsoft broke out above the first quarter high at 190.65 in June and added more than 40 points into the September peak. It then sold off with broad benchmarks, testing the 50-day moving average for more than 5 weeks before surging off a small base earlier this month. Accumulation readings are hovering near new highs, supporting continued upside, but monthly cycles are flashing overbought technical readings. This conflict suggests two-sided action through most or all of the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Caterpillar Testing the 2018 All-Time High

Dow component Caterpillar Inc. (CAT) rallied more than 2% in Friday’s U.S. session after Wells-Fargo pounded the table, upgrading the heavy equipment manufacturer to ‘Overweight’. The rally stretched within 5 points of January 2018’s all-time high at 173.24, initiating a test that could eventually trigger a major breakout. However, market players may need to tread lightly because this level marks resistance while accumulation has failed to keep up with bullish price action.

Caterpillar Slumping 2020 Profits

The company reports Q3 2020 earnings on Oct. 27, with analysts expecting the company to report a profit of $1.15 per-share on $9.78 billion in revenue. That EPS performance would mark a 57% decline compared to the same quarter in 2019, raising doubts about the sustainability of a breakout. The stock is also trading nearly 40 points higher now than it was during the Q3 2019 earnings release, suggesting that short sellers will reload positions, given the right catalyst.

Well Fargo analyst Andy Casey outlined three reasons for higher Caterpillar prices, as follows:

  1. Revenue growth from global growth acceleration, with signs that key markets critical to the bear case are beginning to bottom, with likely growth by mid-2021 and the absence of 2020 inventory reduction actions.
  2. Expected margin improvement due to higher revenue generation across improved cost structure, although still below 2021 Investor Day target and in-line for 2022.
  3. Anticipated higher cash flow that could be allocated to enhance growth.

Wall Street And Technical Outlook

Wall Street consensus remains mixed despite the upgrade, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’, 7 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $120 to a Street-high $220 while the stock ended Friday’s session more than $14 above the median $155 target. The company may need to fire on all cylinders in next week’s earnings report in order to sustain this elevated placement.

Caterpillar is a cyclical play near an all-time high in the 11th year of a bull market that many believe is growing ‘long-in-the-tooth’. Traditionally, their performance tracks economic boom and bust periods, as well as developments in BRIC countries where heavy earth movers are needed for industrialization. 2020 China growth is stronger than expected after pandemic shutdowns but North America and Europe are posting sub-par numbers, adding risk for breakout buyers.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – U.S Politics, COVID-19, Brexit, and Private Sector PMIs in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 23rd October. In the week prior, 56 stats had been in focus.

For the Dollar:

It’s a relatively quiet week ahead on the economic data front.

On Tuesday, Wednesday, and Thursday, housing sector figures for September are in focus.

With mortgage rates hovering close to historic lows, the numbers are unlikely to have a material impact on the Dollar.

On Thursday, however, U.S jobless claims figures will influence ahead of private sector PMIs on Friday.

October’s prelim services, manufacturing, and composite PMIs are due out at the end of the week.

Expect the Services PMI to be the key driver. The markets will be looking for a pickup in service sector activity…

Away from the economic calendar, we are just over 2-weeks away from the U.S Presidential Election. Wednesday’s final live televised Presidential debate will garner plenty of attention as will chatter from Capitol Hill. We can also expect increased interest in the Senate Election polls.

The Dollar Spot Index ended the week up by 0.67% to 93.682.

For the EUR:

It’s also a relatively busy week ahead on the economic data front.

On Tuesday, German wholesale inflation figures are due out ahead of a busier 2nd half of the week.

On Thursday, Germany is back in focus, with November consumer climate figures due out.

Prelim October private sector PMIs from France, Germany, and the Eurozone will be the key drivers on Friday, however.

We can expect plenty of sensitivity to the numbers. A new spike in new COVID-19 cases in France and other parts of the EU may have impacted activity at the start of the quarter.

Away from the economic calendar, Brexit and COVID-19 will need monitoring throughout the week.

The EUR/USD ended the week down by 0.91% to $1.1718.

For the Pound:

It’s a busy week ahead on the economic calendar.

The markets will have to wait until Wednesday, however, for the first set of numbers.

Inflation figures for September are due out ahead of CBI industrial trend orders on Thursday.

We would expect the Pound to be sensitive to the inflation figures ahead of a busy end to the week.

On Friday, retail sales figures for September and prelim October private sector PMIs will provide direction.

With the BoE open to negative rates, dire numbers will test support for the Pound.

Of greater influence in the week, however, will be Brexit and COVID-19 news.

The GBP/USD ended the week down by 0.93% to $1.2915.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

At the start of the week, wholesale sales figures for August are in focus on Monday.

We don’t expect too much influence from the numbers, however.

On Wednesday, September inflation and August retail sales figures will provide direction.

From elsewhere, expect GDP numbers from China and prelim private sector PMIs from the Eurozone and the U.S to also influence.

Away from the economic calendar, risk appetite will likely be dictated by COVID-19 and the U.S Presidential Election polls. There’s also the final presidential debate to consider on Wednesday.

The Loonie ended the week down by 0.52% to C$1.3189 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of Australia to provide the Aussie with direction.

The lack of stats will leave the Aussie Dollar firmly in the hands of market risk sentiment in the week.

Expect China’s GDP numbers and prelim PMIs from the Eurozone and the U.S to influence

On the monetary policy front, the RBA meeting minutes at the start of the week will garner interest. There has been the talk of an RBA move next month, the minutes could reveal what is on the cards…

The Aussie Dollar ended the week down by 2.20% to $0.7081.

For the Kiwi Dollar:

It’s also a relatively busy week ahead on the economic calendar.

In the 1st half of the week, 3rd quarter business confidence figures are due out. A pickup in confidence would provide support to the Kiwi ahead of a busy Friday.

Trade data for May and 3rd quarter inflation figures will influence at the end of the week.

While the stats will provide direction, however, economic data from China and COVID-19 will likely be the key drivers.

The Kiwi Dollar ended the week down by 0.96% to $0.6602.

For the Japanese Yen:

It is a relatively quiet week on the economic calendar.

Trade data for September will draw interest at the start of the week ahead of inflation at the end of the week.

We don’t expect the numbers to have too much influence on the Yen, however.

The key driver for the Japanese Yen, however, will be COVID-19 news and U.S politics.

The Japanese Yen ended the week up by 0.21% to ¥105.40 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic data front.

3rd quarter GDP numbers due out on Monday will be the key driver for the Yuan and market risk sentiment.

September’s industrial production, retail sales, and unemployment figures will also influence.

Barring particularly dire numbers, the fixed asset investment numbers should have a muted impact.

On the monetary policy front, the PBoC is in action on Tuesday. The markets are expecting the PBoC to leave loan prime rates unchanged. Any unexpected rate cut could spook the markets…

The Chinese Yuan ended the week down by 0.04% to CNY6.6976 against the U.S Dollar.

Geo-Politics

UK Politics:

On Friday, Boris Johnson announced that Brexit negotiations were over. Downing Street added the EU chief negotiator Barnier does not need to return to London in the week ahead.

Following the EU’s attempts to leave the ball in Britain’s court, with Fisheries a key issue, it now rests with the EU to compromise. Johnson has been clear that it would not leave fishing access unchanged, despite Macron’s attempts to strong-arm Britain into yielding.

For French fishermen, it would ultimately mean no access to UK fisheries should Britain leave without a deal…

Also at the start of the week, the British Prime Minister is due to announce more containment measures. With the number of new COVID-19 cases continuing to rise, further restrictions would be Pound negative.

U.S Politics

After last week’s individual town hall sessions, the final live televised debate will take place on Wednesday.

It will be a chance for Trump to narrow the gap ahead of the 3rd November Election.

If past performance is any indicator of future performance, however, it could just give Biden a greater edge.

As the markets begin to write-off a Trump victory, the focus will likely shift to the Senate Elections.

A blue wave is expected that would support further stimulus in the New Year.

The Weekly Wrap – Brexit, COVID-19, and U.S Politics Drive the Majors

The Stats

It was a busier week on the economic calendar, in the week ending 16th October.

A total of 56 stats were monitored, following 43 stats from the week prior.

Of the 56 stats, 24 came in ahead of forecasts, with 21 economic indicators came up short of forecasts. 11 stats were in line with forecasts in the week.

Looking at the numbers, 20 of the stats also reflected an upward trend from previous figures. Of the remaining 36 stats, 27 reflected a deterioration from previous.

For the Greenback, it was back into the green after 2 consecutive weeks in the red. The Dollar Spot Index rose by 0.67% to 93.682. In the week ending 9th October, the Dollar Spot Index had fallen by 0.87% to 93.057.

Market risk appetite waned in the week. There were a number of factors driving demand for the Dollar. A lack of progress towards a U.S stimulus bill and a spike in COVID-19 cases were front and center in the week.

Disappointing economic data and Brexit woes also supported the demand for the safety of the Dollar.

Out of the U.S

It was a relatively busy week on the economic data front.

Inflation figures drew interest early in the week. In the 2nd half of the week, however, jobless claims and retail sales figures were the key drivers. Prelim October consumer sentiment figures were also in focus late on Friday.

In the week ending 9th October, initial jobless claims stood at 898k, which was up from 845k from the week prior. The numbers reinforced the view that the labor market recovery had stalled.

A combination of dire labor market conditions, rising new COVID-19 cases, and a lack of further stimulus was a bad combination.

At the end of the week, retail sales impressed, however. In September, retail sales rose by 1.9%, with core retail sales rising by 1.5%. Economists had forecasted increases of 0.5% and 0.7% respectively.

Aligned with the retail sales figures was a further pickup in consumer sentiment. The Michigan Consumer Sentiment Index rose from 80.4 to 81.2 in October, according to prelim figures. The Expectations Index increased from 75.6 to 78.8.

The only negative on the day was an unexpected 0.6% fall in industrial production.

In the equity markets, the NASDAQ rose by 0.79%, with the Dow and S&P500 gaining 0.07% and 0.19% respectively.

Out of the UK

It was a relatively busy week on the economic data front.

Key stats included August unemployment rate and employment change and September claimant count figures.

While claimant counts came in lower than expected, employment fell by more than expected over the 3-months to August.

A 153k fall in employment led to an increase in the unemployment rate from 4.1% to 4.5%.

While the stats provided direction, it was ultimately Brexit and COVID-19 that sank the Pound in the week.

A continued rise in new COVID-19 cases and a new round of containment measures were Pound negative.

More significantly, however, was a lack of progress towards a Brexit agreement, with the EU pushing for more talks next week.

On Friday, Boris Johnson announced that it was time to prepare for a no-trade deal Brexit unless the EU changed its stance. Downing Street also stated that there was no point in EU negotiator Michel Barnier returning to London in the week ahead.

In the week, the Pound fell by 0.93% to $1.2915. In the week prior, the Pound had risen by 0.78% to $1.3036.

The FTSE100 ended the week down by 1.61%, partially reversing a 1.94% gain from the previous week.

Out of the Eurozone

It was a relatively busy week on the economic data front.

Early in the week, key stats included ZEW Economic Sentiment figures for the Eurozone and Germany.

The indicators flashed red for October. Germany’s Economic Sentiment Indicator fell from 77.4 to 56.1, with the Eurozone’s falling from 73.9 to 52.3. A lack of progress on Brexit and jitters over the U.S Presidential Election weighed in October.

Mid-week, industrial production figures for the Eurozone came up short of expectations, rising by just 0.7%. In July, production had jumped by 5.0%.

In the 2nd half of the week, Eurozone trade data and finalized inflation figures for September were in focus.

Inflation figures reaffirmed market concern over deflationary pressures. Trade data also failed to impress, with the Eurozone’s trade surplus narrowing from €27.9bn to €14.7bn in August.

While the stats provided direction, a marked increase in new COVID-19 cases weighed on the EUR in the week. France and other member states were forced to reintroduce containment measures amidst the 2nd wave.

For the week, the EUR fell by 0.91% to $1.1718. In the week prior, the EUR had risen by 0.94% to $1.1826.

For the European major indexes, it was a bearish week. The CAC40 and EuroStoxx600 fell by 0.22% and by 0.77% respectively, with the DAX30 declining by 1.09%.

For the Loonie

It was a quiet week on the economic data front.

Key stats included August’s foreign security purchases and manufacturing sales figures.

Neither set of numbers had an impact, however, as the fresh spike in new COVID-19 cases weighed on market risk sentiment.

The threat of a reintroduction of lockdown measures pegged back crude oil prices in the week.

In the week ending 16th October, the Loonie fell by 0.52% to end the week at C$1.3189. In the week prior, the Loonie had risen by 0.87%.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 16th October, the Aussie Dollar slid by 2.20% to $0.7081. The Kiwi Dollar ended the week down by a more modest 0.96% to $0.6602.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats consumer confidence and employment figures.

It was a mixed bag for the Aussie Dollar. While consumer confidence continued to improve, employment figures were somewhat disappointing.

The unemployment rate rose from 6.8% to 6.9%, driven by a 29.5k fall in employment.

For the Aussie Dollar, it was ultimately market sentiment towards monetary policy and risk aversion that did the damage. There is the talk of an RBA next month…

For the Kiwi Dollar

It was a relatively quiet week on the economic calendar.

Key stats included electronic card retail sales figures and business PMI numbers.

The stats were Kiwi Dollar positive, with retail sales up by 5.4% and the PMI rising from 50.7 to 54.0.

While positive, however, market risk aversion pegged the Kiwi Dollar back in the week.

For the Japanese Yen

It was also a relatively quiet week on the economic calendar.

August’s core machinery orders and finalized industrial production figures were in focus.

The stats were skewed to the negative in the week. Core machinery orders rose by just 0.2%, following a 6.3% jump in July. Industrial production was revised down from 1.7% to 1.0%.

Ultimately, however, it was market risk sentiment that delivered the support for the Yen.

The Japanese Yen rose by 0.21% to ¥105.4 against the U.S Dollar. In the week prior, the Yen had fallen by 0.31%.

Out of China

It was a relatively busy week on the economic data front following last week’s holiday.

Key stats included September’s trade data and inflation figures, which were skewed to the negative.

China’s U.S Dollar trade surplus narrowed from $58.93bn to $37.00bn, driven by a 13.2% jump in imports. Exports rose by a more modest 9.9%.

Inflationary pressures also softened at the end of the quarter. China’s annual rate of inflation softened from 2.4% to 1.7% in September. Wholesale deflationary pressures picked up marginally. The producer price index fell by 2.1%, following a 2.0% decline in August.

In the week ending 16th October, the Chinese Yuan slipped by 0.04% to CNY6.6976. In the week prior, the Yuan had risen by 1.42%.

The CSI300 rose by 2.36%, with the Hang Seng gaining 1.11%.

US Stock Indexes Mostly Flat Ahead of Retail Sales Report

The major U.S. stock indexes are treading water in the overnight session on Friday as investors await the latest retail sales data that will give investors clues about the strength of consumer spending.

Early in the session, the blue chip Dow Jones Industrial Average is down about 51 points. The benchmark S&P 500 Index and the tech-weighted NASDAQ 100 futures were both slightly lower.

Retail sales data, due Friday at 12:30 GMT, will offer an update on the recovery in consumer spending. Economists polled by Dow Jones expect retail sales to rise by 0.7% in September, following a 0.6% rebound in August. Excluding autos, sales were expected to rise by 0.4%.

Thursday Recap

On Thursday, U.S. stocks ended lower after a rise in weekly jobless claims compounded worries about a stalling economic recovery and fading hopes for more fiscal aid before the election.

The number of Americans filing new claims for jobless benefits rose to a two-month high last week, stoking fears the COVID-19 pandemic was inflicting lasting damage to the labor market.

Another report showed manufacturing activity in New York State fell more than expected in October.

In the cash market, the S&P 500 Index settled at 3483.34, down 5.33 or -0.16%. The Dow Jones Industrial Average finished at 28494.20, down 19.80 or -0.07% and the NASDAQ Composite closed at 11713.87, down 54.86 or -0.49%.

Fresh Stimulus Proposal

U.S. President Donald Trump said he is willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in Congress, but the idea was shot down by his fellow Republican, Senate Majority Leader Mitch McConnell.

The announcement helped the stock indexes recover from earlier steep losses and nearly turned them higher for the session.

Stocks and Sectors

Supporting the Dow Jones Industrial Average, Walgreen’s Boots Alliance Inc surged as the drugstore chain forecast single-digit profit growth in 2021 after reporting a better-than-expected fourth-quarter profit.

Morgan Stanley rose after it beat third-quarter profit estimates, winding up mixed results from major U.S. lenders. Recent bank earnings reports saw those focused on trading clocking big gains, while retail banks took a hit from the COVID-19 pandemic.

Shares of Vertex Pharmaceuticals Inc lost close to a fifth of their value after the drug developer discontinued its trial of a protein deficiency disorder treatment.

The S&P 500 financials index climbed, while communication services were among the worst performers. The S&P 1500 airlines index dipped after United Airlines reported a 78% drop in quarterly revenue.

Earnings Update

Traders will continue to focus on the quarterly results for corporate America, with expectations for third-quarter earnings improving to a 19% drop from 25% tumble forecast on July 1, according to Refinitiv IBES data.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 28532, Weak Under 28436

December E-mini Dow Jones Industrial Average futures finished lower on Thursday, but upbeat action toward the end of the session suggests a short-term bottom may have formed.

The market was under pressure early in the session after a rise in weekly jobless claims compounded worries about a stalling economic recovery and fading hopes for more fiscal aid before the election.

The Dow mounted a solid comeback rally, however, and nearly moved higher for the session after U.S. President Donald Trump said he is willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in Congress, but the idea was shot down by his fellow Republican, Senate Leader Mitch McConnell.

On Thursday, December E-mini Dow Jones Industrial Average futures settled at 28386, down 28 or -0.10%.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 28846 will signal a resumption of the uptrend. The market isn’t close to changing the main trend to down, but there is room for a normal 50% to 61.8% correction of the current rally.

The minor trend is also up. A trade through 27531 will change the minor trend to down. This will shift momentum to the downside.

The new minor range is 28846 to 28025. Its retracement zone at 28436 to 28532 is the primary upside target. Aggressive counter-trend sellers are likely to step in on a test of this area. They are going to try to form a potentially bearish secondary lower top. Bullish traders are going to try to take out this zone in order to challenge the top at 28846.

On the downside, the first support is a Fibonacci level at 28036. This was tested successfully on Thursday. The next two potential support levels are 50% prices at 27724 and 27627.

Short-Term Outlook

Thursday’s close suggests buyers are going to go after the minor 50% level at 28436 early Friday. Trader reaction to this level should determine the direction of the E-mini Dow.

Bullish Scenario

A sustained move over 28436 will indicate the presence of buyers. This could trigger a surge into the minor Fibonacci level at 28532. Overtaking this level could trigger an acceleration to the upside with the next potential target the main top at 28846.

Bearish Scenario

A sustained move under 28436 will signal the presence of sellers. This could lead to an acceleration to the downside with the next target a support cluster at 28036 – 28025. Taking out 28025 could trigger a steep break into a pair of 50% levels at 27724 and 27627.

For a look at all of today’s economic events, check out our economic calendar.

US Stocks Tumble as Hope Fades for Pre-Election Stimulus Deal

The major U.S. stock indexes finished lower on Wednesday, pressured by steep losses in Amazon and Microsoft, as investors threw in the towel on hopes that a U.S. fiscal stimulus package would be approved before the November 3 presidential election.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3488.67, down 23.26 or -0.68%. The blue chip Dow Jones Industrial Average finished at 28514.00, down 165.81 or -0.59% and the tech-driven NASDAQ Composite closed at 11768.73, down 95.17 or -0.85%.

Mnuchin Dims Stimulus Hopes

Downbeat comments from Treasury Secretary Steven Mnuchin that a deal would not likely be made before the vote added to fragile sentiment following a mixed bag of quarterly earnings reports from major Wall Street lenders, Reuters reported.

“At this point getting something done before the election and executing on that would be difficult, just given where we are and the level of detail, but we’re going to try to continue to work through these issues,” Mnuchin said at  conference sponsored by the Milken Institute.

Stocks and Sectors

Amazon dropped 2.3% and Microsoft lost 0.9%, both weighing more than any other stocks on the S&P 500. Microsoft was also a drag on the NASDAQ Composite and the Dow Jones Industrial Average.

Bank of America fell 5.3% and Wells Fargo tumbled 6% after reporting disappointing quarterly results. The news helped drive the S&P 500 bank index lower by 2.4%.

UnitedHealth Group, another Dow component, dropped 2.9%, despite raising its profit forecast, as the U.S. insurer said it was difficult to predict the fallout of the pandemic on earnings.

Early Earnings Results Show Signs of Improvement

Third-quarter earnings season is getting underway, with signs of overall improvement in expectations of how badly U.S. companies have been hurt by the pandemic. Analysts expect earnings to fall 19% from a year earlier, according to Refinitiv IBES data, versus a 25% drop estimate on July 1, Reuters reported.

Markets Leaning Toward Biden Victory

The recent rally reflects growing optimism for a Joe Biden victory on Election Day. While many investors view the Democratic candidate as more likely to raise taxes, they are increasingly pointing to potential benefits of a Biden presidency, such as greater infrastructure spending and less global trade uncertainty.

The Internals

Declining issues outnumbered advancing ones on the NYSE by a 1.51-to-1 ratio; on NASDAQ, a 1.95-to-1 ration favored decliners, according to Reuters.

The S&P 500 posted 23 new 52-week highs and no new lows; the NASDAQ Composite recorded 109 new highs and 14 new lows.

Volume on U.S. exchanges was 8.2 billion shares, compared with the 9.6 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Overview – Stocks Gain Driven by Energy; Banks Continue to Show Strong Financial Results

 

US stocks were mostly higher on Wednesday rebounding from Tuesday decline. Most sectors in the S&P 500 were higher driven by gains in energy and materials, while real estate bucked the trend. US inflation on the wholesale level was hotter than expected in September according to the Labor Department. Goldman Sachs continued a streak of better than expected earnings from the large banks, driven by strong gains in trading.

Goldman Beats on the Top and Bottom Line

Goldman Sachs reported stellar Q3 financial results beat analysts’ profit estimates on stronger-than-expected results in bond trading and asset management. Goldman reported $3.62 billion in profit, or $9.68 a share, exceeding the $5.57 per share estimates. Revenue of $10.78 billion topped the estimate by more than $1 billion, driven by the trading and asset management divisions. The trading division generated $4.55 billion in revenue, a 29% increase from a year earlier. That gain was fueled by bond trading results of $2.5 billion, nearly half a billion dollars more than analysts expected. Equities trading revenue of $2.05 billion essentially matched expectations. The asset management division produced $2.77 billion in revenue, a 71% gain from a year earlier, and nearly $900 million more than the $1.91 billion estimate.

US PPI Rose More than Expected

U.S. wholesale prices increased more than expected in September, leading to the first year-on-year gain since March according to the Labor Department. The PPI index rose 0.4% in September after advancing 0.3% in August. PPI increased 0.4% year over year in September after falling 0.2% in August. Expectations had been for PPI to gain 0.2% in September on both a month over month and year over year basis. Core PPI, which excludes food, energy increased by 0.4% in September. Core PPI had increased by 0.3% for three straight months. Core PPI climbed 0.7% year over year. The core PPI rose 0.3% on a year-on-year basis in August.

IMF Sees ‘Somewhat Less Severe Though Still Deep Recession in 2020’

European stocks are drifting lower in a volatile session on Wednesday after erasing earlier gains. Coronavirus news remains at the forefront despite the start of earnings season. U.S. equity markets are also giving back earlier gains after the major averages registered their first day of losses in five trading sessions on Tuesday.

In Europe, the UK’s FTSE 100 is trading 5960.04, down 9.67 or -0.16%. Germany’s DAX is at 12994.02, down 24.97 or -0.19% and France’s CAC 40 Index is trading 4934.33, down 13.28 or -0.27%.

The pandemic remains the key concern for investors with discouraging news that a pair of coronavirus drug trials have been paused in the U.S. over safety concerns.

Futures contracts tied to the Dow Jones Industrial Average added 1 point. They were higher earlier in the overnight session. S&P 500 futures and NASDAQ 100 futures gained 0.1% each.

COVID-19 Treatment Trials Put on Hold

Eli Lilly’s antibody treatment trial has been put on hold, the company confirmed to CNBC, and Johnson & Johnson announced Monday it has paused late-stage trials of its coronavirus vaccine candidate. While brief suspensions are routine in the world of drug trials, the latest cast added uncertainty on drug development timelines.

IMF Revises its global GDP Forecast Higher, but Warns the Economy ‘Remains Prone to Setbacks’

The International Monetary Fund on Tuesday turned slightly more positive on the global economy for this year, but warned of a “long, uneven and uncertain” recovery.

The global economy is now projected to contract by 4.4% in 2020 – an upward revision from an estimate of -4.9% made in June (which has now also been revised to -5.2% due to a new methodology used by the IMF). The IMF’s forecast assumes that social distancing due to the coronavirus pandemic will continue into 2021, and that local transmission will fall everywhere by the end of 2022.

“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” the IMF’s chief economist, Gita Gopinath, said in the latest World Economic Outlook.

She added that the revision was driven by better-than-expected growth in advanced economies and China during the second quarter of the year and signs of a more rapid recovery in the third quarter.

However, the outlook warned that the coronavirus crisis is far from over.

The IMF projected “only limited progress” going forward and cut its gross domestic product growth expectations for next year to 5.2%, from an estimate of 5.4% made in June.

For a look at all of today’s economic events, check out our economic calendar.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Inside Move Suggests Trader Indecision

December E-mini Dow Jones Industrial Average futures are trading lower shortly before the close on Tuesday, putting it in a position to end its four-day winning streak. Although investors are still holding out hope for a new fiscal stimulus bill from U.S. policymakers, this news was not enough to sustain the rally due to new concerns over a coronavirus vaccine.

At 20:15 GMT, December E-mini Dow Jones Industrial Average futures are at 28590, down 208 or -0.72%.

According to reports, Johnson & Johnson said it would pause its current COVID-19 trial. The company said it would take “a few days” to review its halted clinical trial following an unexplained illness in a study participant, possibly delaying results on one of the most closely watched efforts to contain the global pandemic.

In other news, Dow component Boeing Co dropped 2% as it lost another three orders for its grounded 737 MAX jet in September and delivered half the number of aircraft from the same month a year earlier.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 28846 will signal a resumption of the uptrend. The main trend will change to down on a move through 26407.

The minor trend is also up. A trade through 27531 will change the minor trend to down. This will also shift momentum to the downside.

The short-term range is 29050 to 26407. Its retracement zone at 28040 to 27729 is the nearest potential downside target. Since the main trend is up, buyers are likely to come in on a test of this zone.

Short-Term Outlook

The December E-mini Dow Jones Industrial Average futures contract posted an inside move on Tuesday. This chart pattern tends to indicate investor indecision and impending volatility. It does not indicate an impending change in trend.

At current price levels, the market is well-below major resistance, but at the same time, well above major support. This means the next major move is likely to be driven by momentum.

The return of strong upside momentum could lead to a breakout over 28846. This could trigger a rally into the September 30 main top at 29050. This is a potential trigger point for an acceleration to the upside.

A trade through Monday’s low at 28433 will be the first sign of a possible shift in momentum. If the selling pressure increases under this level then look for the selling to possibly extend into the short-term Fibonacci level at 28040. Watch for a technical bounce on the first test of this level.

If sellers take out 28040 then the 50% level at 27729 will become the next downside target. Once again look for buyers.

A break through 27729 could trigger the start of a steep sell-off.

For a look at all of today’s economic events, check out our economic calendar.

Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout

Rather quickly in trading late Sunday night, the NQ (NASDAQ E-Mini Futures) began to move higher quite consistently.  By the time the markets opened in London on Monday, the rally was ON.  We believe this is related to two underlying factors:

A.  Short positions were getting squeezed after the end of week rally in the markets last week.  The upside price pressure early in trading on Sunday/Monday likely forced many of these shorts out of the market – creating a Short Squeeze.

B.  Global traders may be interpreting a biased election victory by Donald Trump based on news events or other information.  This close to an election and with pending Q3 earnings just days away, a melt-up rally like this is fairly uncommon – unless you take into consideration that global investors may be pre positioning for an expected outcome.

30 Minute Chart of Nasdaq Showing This Weeks Rally & Squeeze

Still, one can’t discount the upside move in the NQ today, as seen on this 30 minute chart (below).  The rally started off moderately strong, then London opened Monday.  After London opened, the momentum grew and price began to rally even higher.  We believe this rally phase will abate after the momentum phase has pushed prices high enough to prompt some concerns.  You can’t fight the squeeze when it happens, but you can’t chase it very long either.

Dow Jones 30 Minute Rally, or Lack of Rally from Underperforming Sectors

The following YM (Dow Jones E-Mini Futures) chart, on the other hand, represented a very small rally phase compared to the NASDAQ.  This suggests more interest was centered in the Technology and Healthcare sectors recently as traders attempted to scoop up Call Options ahead of earnings.  The Dow Jones and the S&P 500 were still higher today, but these two major indexes were not included in the dynamic Short Squeeze like the NASDAQ was today.

Daily Chart of Utility Sector Shows Signs of Leadership

If you take a look at the following Utilities Sector ETF (XLU) it is clear that in the past few weeks they are outperforming almost all other sectors. New multi-month highs, strong momentum, and this is what happens when investors start to become nervous. They buy defensive companies that will always be needed during a recession.

Take a look at what utilities did in Jan/Feb when investors started to get nervous about the economy/COVID. I look at utilities as one of the last moves before a market correction.

Our research continues to suggest we are still in a Bullish price trend.  Our Super Cycles research and other predictive modeling system suggest volatility and risk factors are still very elevated.  In other words, we believe the US market trends are biased to the upside right now and may break higher after the elections.  We are also very cautious of election volatility and unknown factors such as earnings and other issues.

As of today, Tuesday, the NASDAQ is continuing higher as positive earnings start to hit the wires.  Learn how our predictive modeling and other advanced trading technology can assist you in finding the best trades.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. Don’t miss all the incredible trends and trade setups.

If you want to learn how to become a better trader and investor, visit www.TheTechnicalTraders.com to learn how we can help you make money with our swing and investing signals.

Chris Vermeulen
Chief Market Strategies

NOTICE AND DISCLAIMER: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only to our subscribers and not intended to be acted upon.

 

DOW 30 is Bullish but at the Weekly Resistance

The Dow Jones Industrial Average is making a strong upside zigzag. We could see the drop before next bounce.

Looking at the chart we can see that POC shows a strong confluence with 78.6, 88.6 and D L5. However, an ascending trend line is also holding the price around 50.0 fib at 28604. Bullish candlestick reversal pattern might push the price up without the price getting to the POC zone. Watch it! If the price continues lower, then 28330-28500 is the zone to watch for bullish reversals. Targets are 29020, 29140 and 29330.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Overview – Stocks Rally Ahead of Earnings Led by Financials

 

U.S. stocks rallied on Monday driven by a surge in technology stocks that put major indexes on track for their highest close in nearly six weeks. Most sectors in the S&P 500 index were higher on Monday, led by gains in the financial and communications sectors. Materials bucked the trend. Markets were also focusing on additional stimulus which is unlikely to be brought to the President’s desk until after the election. The markets seem to believe that a Biden victory with a senate sweep will provide a larger stimulus that with the current administration.

Apple shares rose move than 6% on Monday ahead of their October event where their new phones will be announced. Apple shares are now trading at 30-times earnings which is not cheap but less than many of its competitors. The VIX volatility index moved sideways but did not decline despite the rally in the large-cap index. The US dollar continued to move lower helping to buoy large-technology shares. The US bond market was closed for the day in observance of the Columbus Day Holiday.

Earnings season kicks off this week with the large banks. There is also a plethora of economic data including September CPI, PPI, industrial production, and retail sales along with the October Empire and Philadelphia Fed surveys.  The Senate began its confirmation process for President Trump Supreme Court Nominee Amy Coney Barrett. The Republican lead senate is desperate to get the confirmation concluded before the election. Barret is a conservative and if the Senate flips the new president will replace Ruth Bader Ginsburg’s seat with a liberal justice. Ahead of earnings technology shares were some of the best performers, helping to lift the Nasdaq 100 by nearly 3%.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Near-Term Target is 29050

December E-mini Dow Jones industrial Average are trading higher late Monday along with the rest of the major stock indexes on optimism that a coronavirus relief package would eventually get agreed upon. The price action also suggests that investors aren’t really worried about whether the aid comes before or after the election on November 3.

At 17:32 GMT, December E-mini Dow Jones Industrial Average is at 28803, up 285 or +1.02%.

Dow component Apple Inc jumped 5.3% ahead of a special event on Tuesday, which most analysts believe will be used to unveil the new iPhone with 5G capabilities.

Results from big U.S. banks will be in focus this week, with Dow component JPMorgan & Co set to report on Tuesday.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend continued on Monday when buyers took out Friday’s high. The market is in no position to change the main trend to down, but it may be vulnerable to a potentially bearish closing price reversal top. The chart pattern won’t change the main trend to down, but it could trigger a short-term correction.

The minor trend is also up. A trade through 27531 will change the minor trend to down. This will also shift momentum to the downside.

The short-term range is 29050 to 26407. Its retracement zone at 28040 to 27729 is support. Trading above this zone is helping to generate the upside momentum.

Daily Swing Chart Technical Forecast

There is no resistance until 29050 so we expect the rally to continue into thilevel. The only fear for buyers should be a closing price reversal top that could lead to a slowdown in upside momentum.

On the downside, the first support is the Fibonacci level at 28040. A failure at this level will be the first sign of weakness. This could lead to a test of the 50% level at 27729. Buyers could come in on a test of this level, but if it fails then look for a dramatic shift in momentum.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Investors Buying With Confidence Knowing Stimulus Will Come Eventually

U.S. stocks rallied last week, with the S&P 500 Index posting its best weekly performance since early June, while long-term government yields rose to a four-month high. The catalyst behind the equity-market strength was the anticipation that another stimulus package will eventually be passed despite the confusing negotiations so far.

On Friday, the Trump administration increased its fiscal stimulus offer to $1.8 trillion from $1.6 trillion, which partly soothes the gap between Republicans and Democrats, but still fell short of the $2.2 trillion package the House of Representatives has already approved.

We’re of the belief that a deal for further fiscal relief is likely, even if it ends up arriving after the election, as both sides agree on the need for more spending to offset the coronavirus pandemic’s hit to incomes and certain industries, especially small businesses.

In the cash market last week, the benchmark S&P 500 Index settled at 3477.13, up 128.69 or +3.84%. The blue chip Dow Jones Industrial Average finished at 28586.90, up 904.09 or +3.27% and the tech-based NASDAQ Composite ended at 11579.94, up 504.92 or +4.56%.

In its weekly market summary, analysts at Edward Jones said, “Two forces were in the driver’s seat last week:  policy and politics. While it may be hard to tell the two apart, we think there are elements of each that pose particular implications for the market ahead. We expect politics (election) to keep a hand on the wheel in coming weeks, while policy developments (specifically, fiscal and monetary stimulus) will be a more persistent driving force behind the economic recovery ahead.”

Wall Street Betting on Biden

Rising stocks and a falling U.S. Dollar are signs that Wall Street is betting on Joe Biden to win the U.S. presidency and offer fiscal stimulus after the elections.

Several Wall Street banks forecast a stimulus package no matter which candidate wins, but say that a Biden presidency, if Democrats also retake control of the Senate, would be likely to result in a bigger one. UBS Asset Management, for example, is assigning a 75% probability of a Biden win.

“Besides possibly losing the presidency, Republicans may also lose control of the Senate as betting odds are giving Democrats a near 70% chance of taking the Senate,” Brown Brothers Harriman strategists said.

Edward Jones analysts added, “A Trump win would likely maintain the status quo in terms of lower taxes and deregulation as means to supporting the recovery. A Biden win would likely be accompanied by higher taxes (most impactfully for corporations and higher-income earners), but some of this drag could be offset by a larger infrastructure bill or fiscal package post-election.”

For a look at all of today’s economic events, check out our economic calendar.

JPMorgan Chase Kicks Off Third Quarter Earnings Season

Dow component JP Morgan Chase and Co. (JPM) kicks off third quarter earnings season on Tuesday, highlighting a hopeful quarter in which economic activity ticked higher around the world. Wall Street analysts now expect the banking giant to report $2.24 earnings-per-share (EPS) on $28.12 billion in Q3 2020 revenue.  That would mark a 15% decline in profits compared to 2019, reflecting pandemic headwinds that could persist well into next year.

Growing Bank Sector Headwinds

September’s blockbuster money laundering report implicated JPMorgan, alleging more than $500 billon in suspicious transactions in the last 20 years. The matter has been turned over to the Department of Justice and the Treasury Department’s inspector general. Their potential involvement could impact sentiment in coming quarters because it’s the largest U.S. bank and a Democratic administration could take a more aggressive stance than the current White House occupant.

In addition to the pandemic and its dampening effect on economic activity, commercial banks may have to deal with long-term ultra-low interest rates. Federal Reserve Chairman Jerome Powell recently outlined a dovish new formula that has the potential to depress industry profits for the next two to three years, at a minimum. Of course, rates have already fallen precipitously, dropping the banking sector near the bottom of the bull market performance list.

Wall Street And Technical Outlook

Wall Street consensus on JPMorgan is generally upbeat, with a ‘Moderate Buy’ rating based upon 7 ‘Buy’ and 3 ‘Hold’ recommendations. One analyst now recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $80 to a street-high $122 while the stock closed Friday’s session about $10 below the median $111 target. This placement perfectly matches sideways price action in the second and third quarters.

The stock ended several years of market leadership in the first quarter, descending from an all-time high to a three-year low. The downdraft crushed 200-day moving average support on high volume while three attempts to mount new resistance have failed. A mild winter and an effective vaccine should lift JPMorgan above this formidable barrier but current shareholders should keep one finger on the exit button because a trip into the March low is also possible.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead: A Brexit Showdown, U.S Politics, and Economic Data in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 68 stats in focus in the week ending 16th October. In the week prior, 53 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic data front.

On Monday and Tuesday, September inflation and wholesale inflation figures are due out.

The focus then shifts to manufacturing sector activity and labor market numbers on Thursday.

Expect the Philly FED Manufacturing PMI for October and the weekly initial jobless claims to impact.

At the end of the week, retail sales and industrial production figures are due out, along with October consumer sentiment numbers.

Expect the retail sales and prelim Michigan consumer Sentiment figures to have the greatest impact.

Away from the calendar, the next Presidential debate on 15th October will also provide direction. That is assuming that Trump decides to attend…

The Dollar Spot Index ended the week down by 0.84% to 93.057.

For the EUR:

It’s also a relatively busy week ahead on the economic data front.

On Tuesday, ZEW Economic Sentiment figures for Germany and for the Eurozone are in focus.

Expect some EUR sensitivity to the numbers on the day.

The focus will then shift to Eurozone industrial production figures for August, due out on Wednesday.

At the end of the week, the Eurozone’s trade figures for August will also garner some interest.

Finalized inflation figures for member states and the Eurozone are also due out. Barring deviation from prelims, however, the numbers should have a muted impact on the EUR.

On the monetary policy front, ECB President Lagarde is scheduled to speak on a number of occasions in the week. Expect any forward guidance or views on the economy to influence.

Away from the economic calendar, Brexit and COVID-19 will need monitoring throughout the week.

The EUR/USD ended the week up by 0.94% to $1.1826.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

September claimant counts and August’s unemployment rate are due out on Tuesday and will influence.

BRC Retail Sales Monitor figures, due out in the early hours of Tuesday, will also draw some attention.

August’s employment change and average earnings figures are also due out but should have a muted impact on the day.

Away from the calendar, Brexit and COVID-19 will also provide direction. David Frost is due to attend talks in Brussels. The markets will be looking for an agreement.

The GBP/USD ended the week up by 0.78% to $1.3036.

For the Loonie:

It’s a quiet week ahead on the economic calendar.

In a shortened week, August manufacturing sales figures on Friday will provide direction.

Market risk sentiment and crude oil prices will drive the Loonie ahead of Friday’s numbers.

OPEC and the IEA’s monthly reports are due out in the week. Projections on demand will be of particular interest as the global economic recovery sputters.

The Loonie ended the week up by 1.41% to C$1.3121 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, consumer confidence figures are in focus ahead of September employment figures on Thursday.

Expect the employment figures to have a material impact on the Aussie Dollar.

At the end of the week, new home sales figures will likely have a muted impact on the Aussie.

On the monetary policy front, RBA Governor Lowe is scheduled to speak on Thursday. Expect the Aussie Dollar to be particularly sensitive to any chatter on monetary policy.

While the stats will influence, economic data from China and U.S politics will be the key drivers.

The Aussie Dollar ended the week up by 1.10% to $0.72400.

For the Kiwi Dollar:

It’s also a relatively quiet week ahead on the economic calendar.

Key stats include Electronic card retail sales figures on Tuesday and Business PMI numbers on Friday.

Expect both sets of numbers to influence in the week.

While the stats will influence, economic data from China and updates from Washington will be the key drivers.

From China, trade, industrial production, and inflation figures will influence in the week.

The Kiwi Dollar ended the week up by 0.38% to $0.6666.

For the Japanese Yen:

It is a relatively quiet week on the economic calendar.

Key stats include core machinery orders, finalized industrial production, and tertiary industry activity figures.

We would expect the core machinery order numbers to garner the greatest interest in the week.

The key driver for the Japanese Yen, however, will be chatter from Capitol Hill and the U.S Presidential Election race.

The Japanese Yen ended the week down by 0.31% to ¥105.62 against the U.S Dollar.

Out of China

It’s a busy week ahead on the economic data front.

Mid-week, September trade figures will draw plenty of attention. The markets will be eyeing both the import and the export figures.

The focus will then shift to inflation, industrial production, and unemployment figures due out on Thursday.

Fixed asset investment figures are also due out but would likely have a muted impact on the markets.

The Chinese Yuan ended the week up 1.42% to CNY6.6947 against the U.S Dollar.

Geo-Politics

UK Politics:

It’s last chance saloon for Britain and the EU to come up with the needed compromises to deliver a trade agreement.

Expect plenty of chatter as the markets continue to pin hope on a last-minute agreement.

Failure to come up with a deal will sink the Pound, which has very little going for it at present.

The UK economy is in trouble and the government is expected to inflict more pain in the week ahead. A sharp pickup in new COVID-19 cases is going to force the government to reintroduce containment measures this week.

U.S Politics

There’s never a dull moment in U.S politics and the markets have abandoned Trump and his quest for a 2nd term.

Trump and Biden are scheduled to go head-to-head in the 2nd of 3 debates on Thursday.

Following Trump’s hospitalization, however, the debate had been changed to a virtual debate. The U.S President had responded by refusing to take part, which led to the cancellation of this week’s debate. For Trump, the next debate is still on for 22nd October. It may be too late, however… Trump’s latest loss was a court decision to allow the use of drop boxes and mobile sites to collect mail-in ballots in Pennsylvania. As a swing state, the Republicans are eager to overturn the ruling… It would be a blow should Trump also lose the appeal…

With the polls favoring a Biden/Harris clean sweep, the markets have warmed to Biden’s policies.

While a repeal of Trump’s tax bills is expected, Biden is expected to deliver greater fiscal support.

Don’t expect Trump to go down without a fight, however, which should make things interesting…

The Weekly Wrap – Trump and U.S Politics Drove Demand for Riskier Assets

The Stats

It was a quieter week on the economic calendar, in the week ending 9th October.

A total of 43 stats were monitored, following 74 stats from the week prior.

Of the 43 stats, 23 came in ahead of forecasts, with 17 economic indicators came up short of forecasts. 3 stats were in line with forecasts in the week.

Looking at the numbers, 26 of the stats also reflected an upward trend from previous figures. Of the remaining 17 stats, 14 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive week in the red, with the Dollar Spot Index falling by 0.84% to 93.057. In the week ending 2nd October, the Dollar Spot Index had fallen by 0.84% to 93.844.

Market risk appetite returned, with the U.S President returning to the Oval Office from the hospital. Stimulus was the key area of focus upon Trump’s return to the White House. Late in the week, Trump stated that stimulus talks with the Democrats had become productive. Nancy Pelosi was also upbeat, stating that she wanted a big deal.

On the U.S political front, there was also hope that a blue wave in the election would remove any contest over the outcome of the election.

Out of the U.S

It was a relatively busy week on the economic data front.

Key stats included September’s ISM Non-Manufacturing PMIs, August JOLT’s job openings, and the weekly jobless claims figures.

A pickup in non-manufacturing sector activity was the only positive on the data front. The PMI increased from 56.9 to 57.8.

Employment figures raised more red flags, however. Job openings came up short of expectations and July levels in August.

The weekly jobless claims figures also suggested a possible stall in the labor market recovery.

In the week ending 2nd October, initial jobless claims came in at 840k, down marginally from 849k from the week prior.

For riskier assets, however, U.S politics and the continued hope of a COVID-19 relief Bill delivered support.

Concerns over a lengthy contest over the outcome of the U.S Presidential Election also eased in the week.

As things stand, the polls suggest a clean sweep for Biden and the Democrats. An orderly transition of power and easing political uncertainty was market positive in spite of Biden’s tax plans.

On the monetary policy front, the FOMC meeting minutes had a muted impact. FED Chair Powell, speaking mid-week, called on Congress to deliver more stimulus else face a slower economic recovery.

The comments had come ahead of Trump’s mid-week announcement to end stimulus negotiations until after the election.

In the equity markets, the NASDAQ rallied by 4.56%, with the Dow and S&P500 gaining 3.27% and 3.84% respectively.

Out of the UK

It was a busy week on the economic data front.

In the 1st half of the week, September PMIs were in focus. Upward revisions to the composite and services PMI and a pickup in construction sector activity were Pound positive.

The markets then had to wait until Friday, for GDP, trade, industrial production, and manufacturing production figures.

In August, Manufacturing production rose by just 0.7%, following a 6.9% jump in July. Economists had forecast a 3% increase.

The economy grew by 8% over the 3-months to August, reversing a 6.8% contraction in the 3-months to July.

There was a marked slowing in growth in August, however, with the economy growing by 2.1%. In July, the economy had grown by 6.4%.

Other stats including industrial production, which disappointed, and a mixed set of trade data that had a muted impact.

While the stats influenced, Brexit remained the key driver in the week. News of progress in talks and a possible willingness by Michel Barnier to compromise supported the Pound.

COVID-19 remained negative for the Pound, however. Expectations are for an announcement of more restrictions and further government support to limit the damage.

In the week, the Pound rose by 0.78% to $1.3036. In the week prior, the Pound had risen by 1.48% to $1.2935.

The FTSE100 ended the week up by 1.94%, following on from a 1.02% gain from the previous week.

Out of the Eurozone

It was another busy week on the economic data front.

In the early part of the week, September’s private sector PMIs for Italy and Spain and Eurozone retail sales figures were in focus.

Finalized PMIs for France, Germany, and the Eurozone also influenced, however.

The PMIs were skewed to the positive, with better than expected numbers from Italy. There were also upward revisions to Germany and the Eurozone’s services and composite PMIs.

Over the remainder of the week, the focus was on Germany. August factory orders, industrial production, and trade data were in focus.

While factory orders impressed, industrial production and trade data disappointed. The impact was muted, however, with the jump in factory orders aligned with Germany’s PMI numbers for September.

On the monetary policy front, the ECB monetary policy meeting minutes provided little influence late in the week.

For the week, the EUR rose by 0.94% to $1.1826. In the week prior, the EUR had risen by 0.73% to $1.1716.

For the European major indexes, it was another bullish week. The CAC40 and EuroStoxx600 rose by 2.53% and by 2.11% respectively, with the DAX30 gaining by 2.85%.

For the Loonie

It was a relatively busy week on the economic data front.

Key stats included August trade data and September Ivey PMI and employment figures.

The stats were mixed in the week.

While the trade deficit narrowed marginally, the Ivey PMI tumbled from 67.8 to 54.3 in September.

The disappointing PMI number came ahead of the all-important employment figures.

In September, 378.2k jobs were added following 245.8k jobs in August. Economists had forecast a 156.6k increase in employment. The jump in employment brought the unemployment rate down from 10.2% to 9.0%. Economists had forecast a fall in the unemployment rate to 9.7%.

Adding to the upside for the Loonie was a jump in crude oil prices in the week. WTI rallied by 9.58%, with Brent up by 9.12%.

The Loonie rose by 0.87% to end the week at C$1.3121. In the week prior, the Loonie had risen by 0.58%.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9th October, the Aussie Dollar rose by 1.10% to $0.72400. The Kiwi Dollar ended the week up by 0.38% to $0.6666. A bullish end to the week delivered the upside for the pair.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats business confidence and trade data.

It was a mixed bag, with business confidence improving, while the trade surplus narrowed.

While the stats did provide direction, the RBA’s monetary policy decision was the main event of the week.

The RBA stood pat on policy while continuing to assure the markets of further support should the need arise. Some positive views on the recovery in labor market conditions provided the Aussie Dollar with support.

At the end of the week, the RBA Financial Stability Review also painted a relatively robust picture. The positive views on Australia’s financial stability added further support to the Aussie Dollar.

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included business confidence figures for October.

The ANZ Business Confidence Index rose from -28.5 to -14.5 according to prelim figures.

Another widespread improvement in forward-looking indicators supported the improvement in confidence.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

September’s finalized services PMI and August household spending figures were in focus.

While there was an upward revision to the services PMI, the sector continued to contract at a marked pace.

Household spending also failed to impress. While spending up by just 1.7% in August, spending was down by 6.9% year-on-year.

The figures continued to reflect a weak economic recovery.

The Japanese Yen fell by 0.31% to ¥105.62 against the U.S Dollar. In the week prior, the Yen had risen by 0.27%.

Out of China

It was a quiet week on the economic data front, with China on Holiday for 4 of the 5 days.

Key stats included September’s private sector PMIs, which were positive for market risk sentiment.

September’s Caixin Service PMI at the end of the week was the only major start for the markets to consider.

An increase from 54.0 to 54.8 continued to support the positive sentiment towards the economic recovery.

The upside came from domestic demand, as overseas orders continued to decline.

In the week ending 9th October, the Chinese Yuan rose by 1.42% to CNY6.6947. In the week prior, the Yuan had risen by 0.48%.

The CSI300 rose by 2.04%, with the Hang Seng gaining 2.81%.