US Stock Market Overview – Stock Rally Led by the Nasdaq; Microsoft and Semis Drive the Gains

US stocks moved higher on Monday, as traders anticipated a deal between the White House and Congressional Democrats. Most sectors in the S&P 500 index were higher, led by Healthcare. Real-estate bucked the trend. The Nasdaq hit a fresh new record high, led by gains in Microsoft and the Semis. The VIX volatility index hit a fresh 5-month low at 22, before rebounding into the close to settle near 24.40. Apple shares continued to rally climbing nearly 3% on Monday after notching up a 14% gain last week.

Manufacturing in the US accelerated the most in 16-months, which is a forward-looking index. This helped buoy US yields which in turn help the US dollar rebound. The dollar rebounded putting pressure on precious metals, but oil and natural gas rallied helping to buoy the energy space. Natural gas prices surged 16% on Monday on a warm weather forecast. Microsoft confirmed that it would work out a deal to purchase Chinese company TikTok from Byedance. President Trump said that he would want part of the sale to come to the American People. This enraged some businesses in China.

ISM Manufacturing Accelerates by the Fast Pace in 16-months

U.S. manufacturing expanded in July at the fastest pace since March 2019. The Institute for Supply Management reported that its manufacturing index rose to 54.2 last month from 52.6. Expectations were for a reading of 53.6. The ISM’s measure of production increased in July to 62.1, the highest level since August 2018, and a gauge of orders climbed to 61.5, which was the strongest since September of that year. Customer inventories fell to 41.6 in July, the lowest this year and showing that stockpiles were shrinking at a faster pace. Factory inventories also declined after barely growing a month earlier.

What To Expect After Walt Disney Earnings

Walt Disney Co. (DIS) reports fiscal Q3 2020 earnings after Tuesday’s closing bell in the United States, with analysts expecting a loss of $0.64 per-share on $12.48 billion in revenue. The stock tread water after missing Q2 profit estimates by a wide margin in May, with shareholders hanging tough as soon as the company reported outstanding subscription growth in the Disney+ streaming service. It’s now trading 15% higher but still below levels broken in the first quarter.

Walt Disney Reopens Florida Theme Park

The Disney World Resort in Orlando, Florida reopened in July, right at ground zero in the U.S.A.’s COVID-19 summer spike. Anecdotal evidence suggests that out-of-state visitors are avoiding the park like the plague but the entertainment giant has offered few specifics. As a result, Wall Street analysts will be listening closely to Tuesday’s conference call, trying to gauge the success or failure of the questionable initiative.

Theme parks are just one of many divisions impacted by the pandemic, with the majority of film production still shut down, forcing Walt Disney to delay the filming of new Star Wars, Marvel, and Pixar movies. The ESPN sports division is struggling as well, with MLB games delayed due to team outbreaks that threaten to derail an abbreviated 60-game season. And, of course, no one expects Disney cruise ships to sail again before the second quarter of 2021.

Wall Street And Technical Outlook

Wall Street Consensus remains highly guarded, with a ‘Hold’ rating based upon 7 ‘Buy’ and 12 ‘Hold’ recommendations. Two analysts believe that shareholders should consider moving to the sidelines at this time. Price targets currently range from a low of $85 to a street-high $146 while the stock is trading $4 below the median $120 target. It’s possible another blowout quarter in Disney+ subscriptions could lift sentiment enough to reach the median target.

Walt Disney is holding up relatively well, given multiple headwinds, oscillating just below the 200-day moving average at 120. Buying pressure eased in June after an oversold impulse, with holding patterns pointing to a wait-and-see attitude by shareholders. A destructive second pandemic wave this fall and winter could shake that faith, generating an exodus that brings the first quarter low back into play.

Positives to Outweigh Negatives, Constructive on Stocks and Other Risk Assets: Fidelity’s Timmer

The direction in which the stock market may head is not as clear as it was at the end of March as some things are working in favour of stocks going up and also against them; however, the positives continue to outweigh the negatives, said Fidelity’s Global Asset Allocation Division director of global macro, Jurrien Timmer, who remains constructive on stocks and other risk assets in general.

So far, the deadly virus has infected more than 18 million people in over 210 countries and killed nearly 700 thousand, wherein the United States is the worst hit. Despite that, stocks continue to act as if we have already beaten the COVID-19, the infectious disease caused by the most recently discovered coronavirus.

The S&P 500 index has gained 50% since hitting a three-year low on March 23 of 2191.86, largely spurred by the Federal Reserve’s massive stimulus and COVID-19 vaccine optimism. However, the year is already halfway through and now it rests with the stock market to prove that it was right about a sharp V-shaped rebound in economic growth.

Since nearly all the country’s economic activity has been suspended since late March amid rising concerns about the spread of the coronavirus disease, federal governments and central banks around the world has spent trillions of dollars trying to help restart the economy and provide some relief to the financial markets.

That stimulus has given the initial impetus to stock as liquidity increased in the debt markets and volatility subdued in several markets. However, the long-term impact of these massive stimuli on the economy and the financial markets is unknown. The S&P 500 ended 1% higher at 3271.12 on Friday, just 122.4 points below its all-time high of 3,393.52 registered on February 19.

The COVID-19 related collapse in earnings will be reversed slowly as the economy re-opens and the recovery matures into expansion in 2021, causing a full recovery in the market to the February highs by the end of this year. The S&P 500 stock index to hit 3,400 By the end of this year and 3,600 next year; earnings to also rebound in 2021, according to Mizuho Securities.

Empirically, big price gains, combined with a large retracement after a fall amid strength in market broadness – a trend that can be seen in the S&P 500 today, has always led to a start of a bull market.

“If there ever was a pivotal moment for making a call on which direction the next 10% or 25% move will be for the S&P 500, now is it, I believe. A few months ago, it seemed to me, it was a relatively simple call, at least based on the study of market history. The stock market typically rallies after the type of historic selling climax experienced in late March, and this time has not been any different so far. But after a 46% rally (which never produced a retest) I think it’s much more of a toss-up now,” said Fidelity’s Global Asset Allocation Division director of global macro, Jurrien Timmer.

On the positives, Fidelity’s Timmer said:

“On the plus side, the economy has bottomed and is recovering, with earnings growth following along. Earnings season is looking good so far, with 85% of companies beating estimates by an average of 15 percentage points. It’s still early days for earnings season with 181 companies reporting, and the differences between estimates and reported earnings are unusually large given how little guidance there has been on the earnings front. The policy response has been another plus, of course. The Fed is keeping its foot on the monetary gas pedal, and more fiscal relief may be on the way as well, as transfer payments threaten to dry up. The promise that the Fed and Treasury (and their global counterparts) can build a bridge across the COVID-19 abyss and on to the other side of this pandemic has been an important factor behind the market’s powerful rally,” Fidelity’s Timmer said.

“The tape (momentum and breadth) has been another plus for the US market. The sentiment picture is another positive. Finally, on the plus side, there appear to be a number of potential positive developments underway in terms of COVID-19 treatments and vaccines. This prospect, along with the Fed, have put a floor under the market, including the more economically sensitive ‘reopen’ sectors,” he added.

On the negatives, Fidelity’s Timmer said

“COVID-19 continues to burn its way through sections of the U.S. and the world, and this is causing some states to delay or reverse their reopening plans. As a result, some of the high-frequency economic indicators are suggesting that the economy is starting to stall out following the initially strong V-shaped recovery. The longer the recovery gets dragged out, the greater the risk that this V could turn into a U or L, and that the liquidity crisis that the Fed was able to mitigate will turn into a solvency crisis not unlike 2008,” Fidelity’s Timmer said.

“The risk is not that the economy will not recover, just that it won’t recover back to its full potential. If the economy recovers, but only to say 70% of what it was pre-COVID, then it will be a long slog back to normal. Right now, the stock market seems to be priced for something quicker. On top of this we have a pivotal election in a few months, bringing with it various potential policy outcomes, which could eventually affect corporate taxes and U.S.-China relations,” he added.

“A well-diversified portfolio of both growth stocks and deep value stocks (especially emerging market and non-US developed), gold and Treasury Inflation-Protected Securities (TIPS), and long-duration bonds. A portfolio similar to this, in my view, is pretty close to an all-weather portfolio,” he concluded.

The Week Ahead – COVID-19, Economic Data and US Politics in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.

For the Dollar:

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

In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.

We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.

The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.

Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.

For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.

The Dollar Spot Index ended the week down by 1.15% to 93.349.

For the EUR:

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

On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.

The focus will then shift German factory orders for June, due out on Thursday.

At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.

Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.

The EUR/USD ended the week up by 1.05% to $1.1778.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.

Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.

On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.

While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.

The GBP/USD ended the week up by 2.27% to $1.3085.

For the Loonie:

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

On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.

Expect the employment figures to have the greatest impact, however.

Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.

Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.

The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.

We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.

The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.

For the week, however, the main event is the RBA monetary policy decision on Tuesday.

Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\

Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.

The Aussie Dollar ended the week up by 0.53% to $0.7143.

For the Kiwi Dollar:

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

2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.

With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.

Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.

The Kiwi Dollar ended the week down by 0.18% to $0.6629.

For the Japanese Yen:

It is a busy week ahead on the economic calendar.

Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.

The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.

While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.

The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.

Out of China

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

July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.

On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.

Away from the economic calendar, any chatter from Beijing will also need monitoring.

The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.

60 days may sound like a lot but when considering the lack of progress over 4-years…

A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.

Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…

U.S Politics:

Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.

The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…

The Coronavirus:

It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.

At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.

Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070

For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Major Support 25938, Resistance 26608

September E-mini Dow Jones Industrial Average futures closed higher on Friday, diverging from the cash market Dow, which closed lower for the session. The blue chip average started higher, boosted by a surge in Apple after the tech giant reported stunning quarterly earnings the night before. However, the Dow couldn’t hold on to those gains shortly after the opening as concerns about the economic damage from the COVID-19 pandemic encouraged investors to book profits.

On Friday, September E-mini Dow Jones Industrial Average futures settled at 26378, up 160 or +0.61%.

Investors betting on more U.S. government stimulus were also disappointed as the Senate adjourned for the weekend after letting the extra $600-per-week federal jobless benefit expire.

Other Dow components were also a drag on the blue chip average. Chevron Corp reported an $8.3 billion loss on asset write-downs and ExxonMobil Corp recorded a second consecutive quarterly loss. Caterpillar reversed premarket gains and fell 3.2% after the heavy equipment maker signaled more pain from an uncertain economic outlook.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 25881 will signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at 27057 and 27063.

The minor trend is also down. A trade through 26599 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is 27057 to 25881. Its retracement zone at 26469 to 26608 is resistance. This zone is controlling the near-term direction of the Dow.

The main range is 27466 to 24409. Its retracement zone at 25938 to 26298 is major support and a possible trigger point for an acceleration to the downside.

Short-Term Outlook

Last week’s price action said it all. Simply stated, in order to get the September E-mini Dow Jones Industrial Average rolling to the upside again, the 50% level at 25938 has to hold as support, and the buying has to be strong enough to overcome the minor Fibonacci level at 26608.

Since the main trend is down, sellers are likely to defend 26469 to 26608. If buyers can overtake 26608, however, we could see an acceleration to the upside with the next targets 27057 to 27063.

If sellers can stop the rally then traders are going to try to work on the downside. This could mean a test of 25938 to 25881. There’s even another minor bottom at 25874. This price is a potential trigger point for an acceleration to the downside with 25293 and 25053 the next potential downside targets.

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

Asia-Pacific Shares Close Mostly Lower, Fading Wall Street

The major Asia-Pacific stock indexes finished mixed but mostly lower on Friday, led by a steep decline in Japan. The sell-off was primarily fueled by a record contraction in U.S. gross domestic product in the second quarter. This was followed by another rise in weekly U.S. initial claims, the inability of Congress to pass another stimulus bill and mixed earnings results. Meanwhile, China’s factory activity beat expectations.

On Friday, Japan’s Nikkei 225 Index settled at 21710.00, down 629.23 or -2.82%. Hong Kong’s Hang Seng Index finished at 24595.35, down 115.24 or -0.47% and South Korea’s KOSPI Index closed at 2249.37, down 17.64 or -0.78%.

China’s Shanghai Index settled at 3310.01, up 23.18 or +0.71% and Australia’s S&P/ASX 200 Index finished at 5927.80, down 123.30 or -2.04%.

US GDP Plunges During Second Quarter

Data released Thursday by the U.S. government showed GDP dropping 32.9% in the second quarter – the worst drop ever, with the closest previously coming in mid-1921. Still, the data print was not as bad as feared, with economists polled by Dow Jones have expected a 34.7% decline.

US Weekly Jobless Claims Rise

The number of Americans who filed new claims for unemployment benefits last week totaled 1.434 million, the Labor Department reported Thursday, roughly in line with expectations, as the coronavirus pandemic continues to ravage the U.S. economy.

Continuing claims – which are composed of those receiving unemployment benefits for at least two straight weeks – rose by 867,000 to 17.018 million for the week-ending July 18.

Congress Fails to Agree on Next Coronavirus Stimuli Deal

Republicans and Democrats have made little progress toward a coronavirus relief deal as economic data show an economy still reeling from the coronavirus pandemic. Congressional leaders are blaming one another for the expiration as coronavirus cases continue to increase around the country. Meanwhile, an enhanced federal unemployment benefit is expiring even as initial jobless claims increased for two consecutive weeks.

China’s Factory Activity Beats Expectations in July

China’s factory activity expanded in July for the fifth month in a row and at a faster pace, beating analyst expectations despite disruptions from floods and a resurgence in coronavirus cases around the world.

The official manufacturing Purchasing Manager’s Index (PMI) rose to 51.1 in July from June’s 50.9, official data showed on Friday, marking the highest reading since March. Analysts had expected it to slow to 50.7.

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

US Stock Market Overview – Stocks Close Mixed Ahead of Key Large Cap Tech Earnings

US stocks were mixed on Thursday ahead of earnings from the major large-cap tech stocks. After the closing bell, Apple, Amazon, Facebook, and Alphabet are scheduled to release financial results. Most sectors in the S&P 500 index were lower on Thursday led down by energy following a 5% decline in crude oil prices. Technology shares bucked the trend. US GDP tumbled declining nearly 33% year over year which weighed on the US 10-year yield. The yield closed below 55-basis points. US Jobless claims came out in line with expectations rising for the second consecutive week.

US Jobless Claims Rise for Second Consecutive Week

US jobless claims rose to 1.434 million, according to the Labor Department in line with expectations. This was the 19th straight week in which initial claims totaled at least 1 million and the second consecutive week in which initial claims rose after declining for 15 straight weeks.

Q2 GDP Contracts Sharply

Second-quarter GDP plunged the most in history contracting by 32.9% on a year over year basis according to the Commerce Department’s first reading on US growth. Economists had been looking for a drop of 34.7%, which means that despite the decline it was better than expected. With Q1 growth down 5% this number officially put the US economy in a recession. This news is not good for the incumbent President. No president in modern history has won reelection while there was a recession.

Personal consumption, subtracted 25% from the Q2 total, with services accounting for nearly all that drop. Prices for domestic purchases, known as the GDP deflator fell 1.5% for the period, compared with a 1.4% increase in the first quarter. The personal consumption expenditures price index dropped 1.9% after rising a tepid 1.3% in Q1. Excluding food and energy, the core PCE was off 1.1%.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Chopping Inside Retracement Zone

September E-mini Dow Jones Industrial Average futures are trading lower at the mid-session as it tries to claw back earlier losses that saw the blue chip average hit a two-week low. Earlier in the session it plunged into an area that could’ve triggered an even steeper decline, but buyers came in to defend against that move.

At 16:05 GMT, September E-mini Dow Jones Industrial Average futures are at 26122, down 318 or -1.20%.

Some of the early selling pressure was fueled by data that confirmed the economy suffered its steepest contraction since the Great Depression in the second quarter. Adding to the gloom was an initial claims report that showed another rise in the latest week and a resurgence in coronavirus cases throughout the United States.

After the close, Dow component Apple Inc reports quarterly earnings.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 27057 will change the main trend to up.

The minor range is 27057 to 25881. Its retracement zone at 26469 to 26608 is a potential upside target and resistance zone. If tested, sellers are likely to show up in an effort to form a secondary lower top.

The main retracement zone is 26298 to 25938. This zone is controlling the longer-term direction of the Dow. The market is currently trading inside this zone.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 26122, the direction of the September E-mini Dow Jones Industrial Average into the close is likely to be determined by trader reaction to the 50% level at 25938 and the Fibonacci level at 26298.

Bearish Scenario

A sustained move under 25938 will indicate the presence of sellers. Taking out the low at 25881 and the minor bottom at 25874 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with the next targets a main bottom at 25293 and another major 50% level at 25053.

Bullish Scenario

A sustained move over 26298 will signal the presence of buyers. This could lead to a labored rally with potential targets coming in at 26469 and 26608. Taking out the latter could trigger an acceleration to the upside.

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

US Stock Market Overview – Stock Rally Following Fed Decision; Pending Home Sales Surge

US stocks moved higher on Wednesday, following the Federal Reserve decision to keep interest rates unchanged. Fed Chair Powell in his testimony said that rates will remain at zero for a considerable period and the Fed will do everything in their power to buoy the US economy. All sectors in the S&P 500 index were higher led by gains in energy, Consumer staples was the worst-performing sector. Pending Home sales rose more than expected and the US Trade Deficit narrowed led by gains in exports.

Pending Home Sale Rise More than Expected

Pending home sales rose more than expected in May increasing by 16.6% and rising 6.3% year over year according to the National Association of Realtors. This beats the expectation for the monthly gain of 12.5%. It’s the second straight month of increases in contract activity. For 2020, existing home sales are expected to decline by only 3%. New home sales are projected to rise by 3%. The previous forecast for existing home sales in 2020 was down 7.7%, with new home sales up 1%.

US Trade Deficit Falls

The United States’ trade deficit fell sharply in June as exports rebounded following several months of decline. The goods trade deficit dropped 6.1% to $70.6 billion last month. Exports of goods accelerated 13.9% to $102.3 billion, eclipsing a 4.8% increase in goods imports to $173.2 billion. Goods imports fell in May to their lowest level since July 2010. The rebound in exports was led by a 144.1% surge in shipments of motor vehicles and parts. Exports of capital goods soared 11.0% and consumer goods jumped 12.6%.

The Fed Kept Rates Unchanged

The Federal Reserve kept interest rates unchanged which were widely expected. Along with keeping rates low, the Fed expressed its commitment to maintaining its bond purchases and the array of lending and liquidity programs. The post-meeting statement labeled the current state of growth as better than it was at the trough but still not up to par.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Weakens Under 26178

September E-mini Dow Jones Industrial Average futures are trading lower shortly after the cash market opening, partially pressured by weakness in components 3M Co and McDonald’s Corp. A firmer trade in another component, Pfizer, is helping to ease some of the selling pressure.

The early trade is choppy as investors await a key monetary policy decision by the U.S. Federal Reserve on Wednesday. Investors are also monitoring the discussion on new fiscal stimulus in Congress with the hopes of a deal by Friday.

At 14:57 GMT, September E-mini Dow Jones Industrial Average futures are trading 26301, down 183 or -0.69%.

Shortly before the opening, 3M Company reported it fell short of estimates on quarterly profit and revenue, hurt by a plunge in demand across its business units.

McDonald’s Corp fell 2.1% after posting a bigger-than-expected drop in global same-store sales and missing profit expectations as its restaurants were shut due to the pandemic.

Pfizer Inc rose 3.1% after it raised its full-year forecast on strong demand for cancer drug and blood thinner. Late on Monday, the drug maker announced a pivotal global study to evaluate a COVID-19 vaccine candidate.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 26232 will signal a resumption of the downtrend. The main trend will change to up on a move through 27057 and 27063.

The minor trend is also down. A trade through the new minor bottom at 26232 will indicate the selling pressure is getting stronger.

The minor range is 27057 to 26232. Its retracement zone at 26645 to 26742 is resistance.

On the downside, the nearest retracement level support comes in at 26298 and 26178.

Taking out 26178 could trigger an acceleration to the downside with 25938 the next major target.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the September E-mini Dow Jones Industrial Average the rest of the session on Tuesday is likely to be determined by trader reaction to the Fibonacci level at 26298.

Bearish Scenario

A sustained move under 26298 will indicate the presence of sellers. This could trigger a quick break into 26232 and 26176.

If 26176 is taken out with conviction then look for the selling to possibly extend into the main 50% level at 25938.

Bullish Scenario

A sustained move over 26298 will indicate that buyers are coming in to defend against a steep sell-off. If this creates enough upside momentum then look for the rally to possibly extend into 26645 to 26742. I don’t think we can think about the long side unless we get a close over 26742.

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

Wall Street Lower as the Busiest Week of Earnings Season Continues

U.S. stock index futures are indicating a slightly lower opening on Tuesday as investors prepare for a slew of fresh earnings reports from several major corporations.

The busiest week of earnings season continues on Tuesday with 3M, McDonald’s, Pfizer, JetBlue and Raytheon Technologies all set to report before the opening bell.

Visa, Advanced Micro Devices, Amgen, eBay, Mondelez International and Starbucks report after the bell on Tuesday.

Apple Inc, Amazon.com Inc, Facebook Inc and Alphabet Inc were among the top boosters of the S&P 500 ahead of their quarterly reports due out this week.

Dow futures pointed to an opening loss of more than 50 points, while S&P 500 futures were little changed. NASDAQ-100 futures traded slightly higher.

After the bell on Monday, Senate Majority Leader Mitch McConnell unveiled the Republican coronavirus relief plan. The legislation would include relief for jobless Americans, another direct payment to individuals of up to $1,200, more Paycheck Protection Program small business loan funds, among other provisions. McConnell said the bill would set federal unemployment insurance at 70% of a worker’s previous wages, replacing the $600 per week which states stopped paying out this week.

Republicans and Democrats will now debate the issues with the hope of finding common ground by Friday when the previous stimulus bill provisions are set to expire.

Monday Recap

Wall Street’s main indexes were higher on Monday as investors monitored progress in government stimulus efforts along with rising U.S. COVID-19 cases and restrictions around the world.

In the cash market on Monday, the benchmark S&P 500 Index settled at 3239.41, up 23.78 or +0.79%. The blue chip Dow Jones Industrial Average closed at 26584.77, up 114.88 or +0.46% and the technology-driven NASDAQ Composite finished at 10536.27, up 173.09 or +1.82%.

The technology sector, up more than 1%, was the biggest percentage gainer among the S&P’s 11 major sectors while materials was next, boosted by shares of gold miners. Financials, utilities and energy were the only sectors in the red.

Investors maintained their focus on earnings, with 189 S&P 500 companies scheduled to report results this week. About 80% of the 130 S&P 500 firms that have reported so far have beaten a low bar of earnings estimates, according to IBES Refinitiv 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 – Big Test at 26645 – 26742

September E-mini Dow Jones Industrial Average futures are trading flat to higher in the pre-market session early Tuesday as investors prepare for a slew of earnings reports from major U.S. corporations.

The blue chip average finished higher on Monday as investors monitored progress in government stimulus efforts along with rising U.S. COVID-19 cases and restrictions around the world.

After the bell on Monday, Senate Majority Leader Mitch McConnell unveiled the Republican coronavirus relief plan. The $1 trillion coronavirus aid proposal will now need to be negotiated with Democrats before enhanced unemployment benefits expire on Friday.

At 05:53 GMT, September E-mini Dow Jones Industrial Average futures are trading 26502, up 18 or +0.07%.

Apple Inc and Facebook Inc are among the top Dow components scheduled to release their quarterly earnings reports later this week.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 26232 will signal a resumption of the downtrend. The main trend will change to up on a move through the pair of main tops at 27057 and 27063.

The minor range is 27057 to 26232. Its retracement zone at 26645 to 26742 is the primary upside target. Since the main trend is down, we expect to see sellers on the first test of this area. They are going to try to form a secondary lower top.

The short-term range is 25293 to 27063. Its 50% level at 26178 is potential support.

The main range retracement zone is 26298 to 25938. This zone is controlling the near-term direction of the Dow.

Daily Swing Chart Technical Forecast

Trader reaction to 26645 to 26742 sets the tone on Tuesday. Look for the bearish tone to reestablish itself on a sustained move under 26645 and for a bullish tone to possibly develop over 26742.

Bearish Scenario

A sustained move under 26645 will indicate the presence of sellers. This could trigger a break into a series of potential support levels at 26298, 26232 and 26178. Look for an acceleration into 25938 if 26178 fails as support.

Bullish Scenario

Overtaking 26645 will be the first sign of strength, but a sustained move over 26742 could trigger an acceleration to the upside with the next target the pair of main tops at 27057 and 27063.

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

NASDAQ Double Top & Price Channels Suggest Pending Price Correction

Our research team continues to attempt to navigate the difficult market dynamics ahead as traders’ concerns related to continued global economic functions persist.  We believe the US stock market has rallied well beyond sustainable levels and the recent move in the US Dollar and Precious Metals has issued a clear warning that global traders are not buying into the current valuation levels of the major indexes.  The NASDAQ (NQ) has rallied to new all-time highs at a time when a majority of the US Stock Market is contracting and concerns about future earnings/revenues continue to shock investors.  It is almost as if a large group of traders piled into the “Fed Recovery” message and ignored the fact that the COVID-19 virus event is vastly different than any other price correction we’ve experienced over the past 40+ years.

NQ DOUBLE TOP SETUP

Recently, the NQ setup a very clear Double Top pattern near a somewhat obscure Fibonacci level (85.4%).  The Double Top pattern is a common technical pattern that suggests a resistance has formed near the Double Top price level, near 11058.50. Next week, critical GDP data and economic data will be announced on Thursday, July 30.  We believe the move in Gold and Silver is foreshadowing an ominous series of data that will reflect a very clear 20% to 30%+ contraction in the US and global economy.  The Double Top pattern in the NQ could be a very strong warning that the FOMO (Fear Of Missing Out) rally may be over.

NASDAQ DAILY CHART

NQ 100% MEASURED MOVE SETUP

This NQ Weekly chart highlights the nearly 3,950 point rally from the low in December 2018 to the high formed on February 17, 2020.  The current low formed in March 2020, near 6628, to the recent peak level, near 11,085, represents a “100% measured price advance” of 4,430 points.  Yes, the current rally extended the 100% measured move by 12.15% – which often happens as price tests resistance or support. Measuring from Weekly closing bar to Weekly closing bar on this chart, the 100% measured move is only about 50 points away from a true 100% advance.

NASDAQ WEEKLY CHART

We believe this combination of technical price patterns suggests the US stock market, particularly the high-flying NASDAQ (NQ), may be setting up for a dramatic price decline.  Both the Double Top and 100% Measured Move patterns suggest price has reached a limit.  If our interpretation of these technical patterns is correct, after such an incredible price rally in the face of unsure future economic data, we believe a move back to 8,750 is not out of the question (or lower).

NQ FIBONACCI CHANNELS

Very few people understand the relationship of Fibonacci price theory and how it relates to price action.  Fibonacci Price Theory suggests that price must move higher or lower to establish new price highs or lows within a trend.  Obviously, the NQ has rallied to “new price highs” – thus the current trend is “bullish”.  Yet, a Double Top pattern is also a critical warning of resistance near the dual top level.  Additionally, a 100% measured price advance is another warning sign that price may have reached an upside limit.  Now, we add our proprietary Fibonacci Price Amplitude Arcs using a 0.854% Fibonacci extension level.

This extension level is not commonly used by many traders but is completely valid if you spend a bit of time exploring the Fibonacci Number Sequence and the relationship between the numbers.  In fact, there are a number of levels between the 0.75% and 1.0% common Fibonacci levels that are valid for traders.

We have drawn the 1.854% Fibonacci Price Amplitude Arc in a MEGENTA color to highlight just how critical this level appears on the Weekly price chart.  If our research is correct, we now have three technical/Fibonacci patterns that are setting up warning us that the NQ price may turn downward and begin a new downside price rotation.  When we combine this with the data that we are expecting this week (GDP, Consumer and other data), this could turn into a “knockout blow” for the high-flying NASDAQ.

NASDAQ DAILY – FIBONACCI CHANNELS

If you were paying attention, you already know that the US Dollar is under pressure and the Precious Metals are showing signs that fear is rising in the global markets.  This next week, and the weeks that follow, will likely result in global traders attempting to re-valuate expectations based on the level of destruction the COVID-19 virus has done to the US and global economy.

Our researchers expect a minimum of a 20% to 25% contraction in consumer and business engagement in the US – possibly much more.  In March 2020, our research team suggested the Q1 and Q2 GDP data could contract by as much as -10% to -15%, potentially pushing the 2020 yearly GDP level into a -5% or deeper level.  On Thursday, July 30, 2020, we’ll find out just how rough Q2 of 2020 really was for the US.

This is when the crap is likely to stick to the walls, so our advice would be to protect your open longs, prepare for increased volatility and don’t get married to any position you have right now.  If you have not already prepared for this move, do it quickly early this week.

If the news is bad enough, there is no reason why the US and global markets could not attempt to retest recent low-price levels again.  Remember, Fibonacci Price Theory suggests price is ALWAYS seeking new price highs or new price lows.  Just because the NQ has reached new price high levels does not mean the S&P500, Dow Jones or other indexes, which have not reached new all-time highs, could not collapse and attempt to find new price low levels.

Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.

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

Chris Vermeulen
Chief Market Strategist
Founder of Technical Traders Ltd.

NOTICE: 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 research and educational purposes only.  The Technical Traders Ltd. does not provide financial or investment advice, so please contact your financial advisor before making decisions about your personal finances.

 

US Stock Market Overview – Stocks Rise Led by Technology Shares, Utitlies Bucked the Trend

US stocks moved higher on Monday, led by gains in the Nasdaq ahead of several key company’s earnings later in the week. Thursday will be a key day for the markets as Amazon, Apple, and Facebook are all scheduled to released financial results. Sectors in the S&P 500 index were mixed, led higher by technology, Utilities and energy bucked the trend. The dollar continued to head south, helping to buoy gold prices and the mining companies.

The VIX continued to ease, declining to 25.4, which is still well above the 2019 average. Durable goods orders moved higher on Monday, rising more than expected, but this failed to buoy US yields. Google announced that it will keep employees away from their offices until the summer of 2021. Under Armor received a Wells Notice from the SEC related to the companies accounting practices. The information was not referred to the Justice Department which means that it’s only civil and not criminal. The founder of the company Kevin Plank was named in the investigation. On Tuesday several key companies will release earnings results. This includes McDonald’s, Visa, Starbucks, Amgen, and Pfizer.

Durable Goods Orders Rise More than Expected

Durable goods orders increased 7.3% in June after rebounding 15.1% in May. Durable goods orders were driven by robust demand for motor vehicles, which accelerated 85.7% after increasing 28.8% in May. That offset a 462.3% plunge in civilian aircraft orders, leading to a 20% rise in orders for transportation equipment. Motor vehicles have a bigger weighting in the transportation category. Orders for transportation equipment surged 78.9% in May. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 3.3% last month. That was the biggest increase in these so-called core capital goods orders since July 2018 and followed a 1.6% rise in May.

American Express Could Sell Off To March Low

Dow component American Express Co. (AXP) reported mixed Q2 2020 results last week, with $0.29 per-share (EPS) beating profit estimates, while revenue of $7.67 billion fell well short of $8.25 billion expectations. Revenue contracted a staggering 29.2% year-over-year, undermined by the ongoing impact of the COVID-19 pandemic. The release triggered a modest sell-the-news reaction, dropping the stock 1.4% to a 2-week low.

American Express Heavily Exposed To Business Travel

The travel services giant has been pummeled by the pandemic, losing significant income since corporations worldwide stopped business travel in the first quarter and sent employees home to work through virtual meeting spaces. Many industry experts now believe that many of Amex’s blue chip customers will remain sidelined well after the infection runs its course, addicted to the lower costs of conducting business digitally, rather than in person.

Executives summed up the tough quarter, noting “while our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one. Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.”

Wall Street And Technical Outlook

Wall Street consensus has grown increasing cautious on American Express in the last two months, unlike Mastercard Inc. (MA) and Visa Inc. (V), who have continued to book significant income through high volumes of digital transactions. It’s currently rated as a ‘Hold’, based upon 6 ‘Buy’ and 9 ‘Hold’ recommendations. Three analysts are now telling shareholders it makes sense to sell positions and move to the sidelines. Price targets range from a low of $85 to a street high $119 while the stock is trading about $6 below the median $101 target.

Technically-speaking, there’s little to love about American Express, which looks like a better short sale opportunity than long-term investment through the second half of 2020. It posted an all-time high in January, fell more than 50% into March, and reversed at the 200-day moving average in June, settling in the lower half of the 6-month range. Ominously, accumulation readings have dropped to depressed March levels, predicting that price may soon follow.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Possible Steep Plunge Under 26298

September E-mini Dow Jones Industrial Average futures tumbled on Friday, led lower by another plunge in technology stocks amid escalating tensions between the United States and China.

Among the Dow-components, Intel dropped more than 16% after the chipmaker offered disappointing guidance for the third quarter and delayed the release of its next-generation chips.

The blue chip index also closed lower for the week, snapping a three-week winning streak where gains were mostly generated by a rotation from high-flying technology stocks into less-volatile cyclical shares.

On Friday, September E-mini Dow Jones Industrial Average futures settled at 10460.75, down 87.50 or -0.84%.

Another Dow-component, American Express Co, fell after reporting an 85% slump in quarterly profit after setting aside nearly $628 million to cover potential defaults. Meanwhile, Verizon Communications Inc beat analyst profit and revenue estimates as the telecom saw strong demand due to stay-at-home mandates, sending shares higher.

Technology stocks, Apple and Microsoft also traded lower.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the last main bottom at 26330. The main trend will change to up if buyers can take out the two main tops at 27057 and 27063.

The minor trend is also down. This confirms the shift in momentum and the change in trend. Thursday’s closing price reversal top is also a bearish chart pattern.

The short-term range is 27466 to 24409. Its retracement zone at 26298 to 25938 is potential support. This zone is also controlling the near-term direction of the market.

The major support zone is 25053 to 24484.

Short-Term Outlook

Friday’s price action suggests that the direction of the E-mini Dow on Monday is likely to be determined by trader reaction to the short-term Fibonacci level at 26298. We could see a technical bounce on the first test of this level, but if it fails then look for an acceleration to the downside with the next target the 50% level at 25938.

Buyers could come in again on a test of 25938, but the daily chart indicates there is plenty of room to the downside under this level with 25293 the next major target.

Look for a labored break as the market travels through 26298 to 25938. I don’t think investors are going to give up on the bull market easily.

Furthermore, if the market is headed lower, we expect to see a number of short-term rallies that help lead to a series of lower tops.

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

The Week Ahead – Geopolitics, the FED, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 57 stats in focus in the week ending 31st July. In the week prior, just 41 stats had been in focus.

For the Dollar:

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

In the 1st half of the week, June’s durable and core durable goods orders are due out along with July consumer confidence figures.

Expect consumer confidence to be the key driver, however. The figures will indicate sentiment towards the spike in new COVID-19 cases and unemployment.

The focus will then shift to 2nd quarter GDP numbers and the weekly initial jobless claims figures on Thursday.

With the markets expecting the worst on the GDP front, the weekly jobless claims will need to drop to sub-1.3m levels.

At the end of the week, inflation, personal spending, and finalized consumer sentiment figures will also draw attention.

On the monetary policy front, the FED delivers its July monetary policy decision on Wednesday. While no rate cut is expected, the markets will want the assurance of more support and perhaps some adjustments to its asset purchasing program. The press conference will garner plenty of attention.

The Dollar Spot Index ended the week down by 1.57% to 94.435.

For the EUR:

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

At the start of the week, July’s IFO Business Climate Index figures are due out of Germany.

We may see some resilience in the EUR and the European majors, however, as progress is made with the EU Recovery Fund.

The focus will then shift to the 2nd half of the week.

On Thursday, 2nd quarter GDP and July unemployment figures are due out of Germany.

At the end of the week, French 2nd quarter GDP numbers and June consumer spending figures are in focus.

Expect prelim July inflation figures from member states and the Eurozone to have a muted impact.

Following the agreement on the mechanics of the EU Recovery Fund. Progress will need to be made in the coming weeks to support the EUR at its current levels.

The EUR/USD ended the week up by 2.00% to $1.1656.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound firmly in the hand of Brexit and trade talks.

The GBP/USD ended the week up by 1.80% to $1.2794.

For the Loonie:

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

The markets will need to wait until Friday for May GDP and June RMPI figures.

While we expect some sensitivity to the numbers, U.S fiscal policy measures and COVID-19 updates will remain a key driver.

One curveball continues to be the ongoing spat between the U.S and China…

The Loonie ended the week up by 1.22% to C$1.3415 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

2nd quarter inflation and wholesale inflation figures are due out on Wednesday and Friday.

We don’t expect the numbers to have a lasting impact on the Aussie Dollar, however.

June’s private sector credit figures, also due out on Friday, will likely be brushed aside.

2nd quarter GDP figures from key economies, COVID-19 news, and geopolitics will remain the key drivers. A jump in new COVID-19 cases and deteriorating relations with China would likely test support for the Aussie Dollar.

The Aussie Dollar ended the week up by 1.56% to $0.7105.

For the Kiwi Dollar:

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

After a quiet start to the week, building consent and business confidence figures are due out on Thursday.

Expect the ANZ Business Confidence figures to have a greater influence on the Kiwi.

Away from the numbers, private sector PMIs from China, COVID-19, and geopolitics will remain in focus.

The Kiwi Dollar ended the week up by 1.28% to $0.6641.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

June retail sales figures, due out on Thursday, and industrial production numbers on Friday are the key stats for the week.

We would expect the Yen to brush aside the stats, however, with the market focus elsewhere.

Progress towards a COVID-19 vaccine would pin back any upside in the Yen. Support could come from the U.S administration, however.

There’s the spat with China and the U.S fiscal stimulus package to track.

The Japanese Yen ended the week up by 0.82% to ¥106.14 against the U.S Dollar.

Out of China

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

July’s private sector PMIs are due out on Friday. Expect the figures to influence risk appetite at the end of the week.

Away from the economic calendar, any chatter from Beijing will also need consideration.

The Chinese Yuan ended the week down 0.37% to CNY7.0184 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus in the week. Both sides agreed to continue negotiations through to September, which has bought Boris and the Pound some time.

With Germany having made it clear that they will focus on talks in September and October, however, it might be a slow summer.

U.S Politics:

It was quite a week for Trump and the Republicans last week. Expect more of the same in the week ahead.

First on the agenda will be to get the next fiscal stimulus package wrapped up. With benefits expiring at the end of the month, failure to deliver the next phase would be a blow to Trump’s hopes of a 2nd term.

Then we have the spat with China to consider and there’s the continued rise in new COVID-19 cases.

Corporate Earnings

Out of Germany, Deutsche Bank (Wed) is the marquee name delivering earnings results.

From France, LVMH (Mon), Peugeot (Tues), Total (Thurs), Airbus Grp (Thurs), Renault (Thurs), BNP Paribas (Fri), and Air France KLM (Fri) are key names delivering results.

The Coronavirus:

It was another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw positive news of progress towards a vaccine deliver support to riskier assets early in the week. This will need to continue in the week ahead to offset the negative impacts of points ii) and iii).

At the time of writing, the total number of coronavirus cases stood at 16,199,447. Monday to Saturday, the total number of new cases increased by 1,531,149. Over the same period in the previous week, the total number had risen by 1,385,504.

Monday through Saturday, the U.S reported 417,070 new cases to take the total to 4,315,709. This was down marginally from the previous week’s 419,276.

For Germany, Italy, and Spain, there were 17,083 new cases Monday through Saturday. This took the total to 771,697. In the previous week, there had been 10,124 cases over the same period. Spain accounted for 12,166 of the total new cases… With EU member states reopening borders, the chances of a 2nd wave across the EU will be on the rise.

Over the weekend, Reuters had reported a record rise in new COVID-19 cases in almost 40 countries last week.

European Equities: A Week in Review – 25/07/20

The Majors

It was a bearish week for the European majors in the week ending 24th July. The CAC40 and EuroStoxx600 fell by 2.23% and 1.45% respectively, with the DAX30 seeing a loss of 0.63%.

A Friday sell-off delivered the losses for the week, with the DAX30 sliding by 2.02% to lead the way down on Friday.

It was a mixed week for the majors. EU member states agreeing on the mechanics of the EU Recovery Fund had delivered an early boost.

Further news of progress towards a COVID-19 vaccine had also provided the majors with support earlier in the week.

Rising tensions between the U.S and China ultimately weighed, however.

Mid-week, the U.S accused China of hacking U.S companies, leading to the U.S administration’s order for China to shut down its Houston consulate.

At the end of the week, China announced that it was shutting down the U.S consulate in Chengdu in retaliation.

The latest U.S – China spat overshadowed some positive stats from the Eurozone at the end of the week. While news of progress towards a COVID-19 vaccine was positive, a continued rise in new cases was also negative for the majors.

The Stats

It was a relatively busy week on the Eurozone economic calendar.

Key stats included consumer confidence figures from Germany and the Eurozone and July’s prelim private sector PMIs.

Germany’s GfK Consumer Climate indicator rose by 9 points to -0.3 for August, providing early support to the DAX30.

By contrast, the consumer confidence across the Eurozone weakened, with the indicator falling from -14.7 to -15.0 in July.

While the stats were mixed on Thursday, it was a positive set of prelim private sector PMIs on Friday.

The Eurozone’s manufacturing PMI rose from 47.4 to 51.1, with the services PMI jumping from 48.3 to 55.1.

From France, the manufacturing PMI slipped from 52.3 to 52.0, while the services PMI rose from 50.7 to 57.8.

Out of Germany, the manufacturing PMI rose from 45.2 to 50.0, with the services PMI increasing from 47.3 to 56.7.

Supported by a marked improvement in service sector activity, the Eurozone’s Composite PMI jumped from 48.5 to 54.8.

From the U.S

The stats were less impressive. On Thursday, the weekly initial jobless claims rose by 1.416m in the week ending 17th July. Economists had forecast a 1.3m rise following the previous week’s 1.307m increase.

Service sector activity continued to contract in July, with the PMI rising from 47.9 to 49.6. Economists had forecast a rise to 51.0. The Manufacturing PMI also disappointed, with a rise from 49.8 to 51.3 falling short of a forecasted 51.5.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental rallied by 3.75% to lead the way. BMW and Daimler also found support, with gains of 0.79% and 1.12% respectively. Volkswagen bucked the trend, however, falling by 1.95%.

Continental found support following the release of its quarterly earnings. A positive outlook delivered the upside.

It was a bearish week for the banking sector, however. Commerzbank fell by 1.08%, with Deutsche Bank sliding by 5.50%.

From the CAC, it was also a bearish week for the banks. Soc Gen tumbled by 6.43% to lead the way down. BNP Paribas and Credit Agricole saw relatively more modest losses of 2.19% and 2.20% respectively.

It was another bullish week for the French auto sector, however. Peugeot and Renault ended the week with gains of 1.16% and 5.78% respectively.

Air France-KLM and Airbus reversed gains from the previous week, with losses of 3.63% and 2.99% respectively.

On the VIX Index

A run of 5 consecutive weeks in the red came to an end for the VIX. In the week ending 24th July, the VIX rose by 0.62%. Partially reversing a 5.90% decline from the previous week, the VIX ended the week at 25.84.

The S&P500 and the Dow ended the week down by 0.28% and by 0.76%, while the NASDAQ fell by 1.33%.

It was the 1st week in the red in 4 weeks for the S&P500, while the NASDAQ saw red for a 2nd consecutive week.

Over the week, rising tensions between the U.S and China and disappointing employment figures weighed on the majors.

Adding to the negative sentiment was news of Trump sending Federal agents into a number of U.S states to maintain law and order. A continued rise in new COVID-19 cases didn’t help.

The losses were modest, however, with news of progress towards a COVID-19 vaccine delivering support.

The Week Ahead

It’s a particularly busy week on the Eurozone economic calendar.

It’s a quiet start to the week, however. Key stats include July’s Ifo Business Climate figures out of Germany on Monday.

The markets will then need to look ahead to 2nd quarter GDP and July unemployment figures from Germany on Thursday.

At the end of the week, French and Spanish 2nd quarter GDP numbers and French and German retail sales for June figures are also due.

From the U.S

It is also a particularly busy week ahead.

Key stats include July durable goods and consumer confidence figures on Monday and Tuesday.

On Thursday, the weekly jobless claims and 2nd quarter GDP numbers will also influence.

At the end of the week, July’s Chicago PMI, consumer sentiment, and June personal spending figures will garner interest.

On the monetary policy front, the FED is in action on Wednesday after the European close.

From Elsewhere

Private sector PMIs from China will also influence at the end of the week.

Away from the economic calendar, however, COVID-19 news and chatter from Beijing and Washington will need monitoring.

Expect the majors to remain under pressure should either Beijing or Washington make any retaliatory moves.

The Weekly Wrap – COVID-19, Geopolitics, and Economic Data Drove the Majors

The Stats

It was a quieter week on the economic calendar, in the week ending 24th July.

A total of just 41 stats were monitored, following the 74 stats from the week prior.

Of the 41 stats, 23 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 33 of the stats reflected an upward trend from previous figures. Of the remaining 8, 7 stats reflected a deterioration from previous.

For the Greenback, it was a 5th consecutive week in the red. In the week ending 24th July, the Dollar Spot Index fell by 1.57% to 94.435. In the week prior, the Dollar had fallen by 0.73%.

For the U.S, the Dollar was on the back foot throughout the week. News of progress towards a COVID-19 vaccine weighed on the Dollar in the early part of the week.

Domestic issues will have also tested demand for the Dollar, however. News of the U.S administration sending Federal agents to control protests tested the Dollar. Rising tension between the U.S and China didn’t help as Trump looked to distract voters from the continued spike in new COVID-19 cases.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 15,930,779 for Friday, rising from last Friday’s 14,189,223 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,741,556 on a global basis. This was higher than the previous week’s increase of 1,584,328 in new cases.

In the U.S, the total rose by 478,299 to 4,248,311. In the week prior, the total number of new cases had risen by 484,462.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 17,404 to bring total infections to 771,051. In the previous week, the total number of new cases had risen by 10,432. Spain continued to see larger rises over the week.

Out of the U.S

It was another relatively quiet week on the economic data front.

Key stats included the weekly jobless claims figures and July’s private sector PMI numbers.

In the week ending 17th July, jobless claims rose by 1.416m following 1.3m from the previous week. It was yet more evidence that the economic recovery has more speed bumps to come.

Private sector PMIs also failed to impress. While manifesting sector activity returned to expansion in July, the services sector continued to contract.

With the stats on the negative, the Dollar was on the slide for the wrong reasons.

Rising tensions between the U.S and China, the use of Federal agents, and COVID-19 also weighed on the Greenback.

In the equity markets, the NASDAQ fell by 1.33%, with the Dow and S&P500 declining by 0.76% and 0.28% respectively.

Out of the UK

It was another busy week on the economic calendar.

Key stats included June retail sales and prelim private sector PMI numbers.

The stats were skewed to the positive for the Pound.

In June, retail sales surged by 13.9%, month-on-month, with core retail sales jumping by 13.5%.

A 2nd consecutive monthly jump saw sales return to pre-COVID-19 levels.

Private sector activity also impressed. According to prelim figures, the all-important services PMI jumped from 47.1 to 56.6.  With the Manufacturing PMI rising from 50.1 to 53.6, the composite increased from 47.7 to 57.1.

The only negative for the Pound was weaker than expected recovery in industrial trend orders. In July, industrial trend orders rose from -58 to -46. Economists had forecast a rise to -38.

Away from the economic calendar, the Pound also found support in the week. A combination of improved economic indicators and positive progress on trade talks delivered the upside.

In the week, the Pound rallied by 1.80% to $1.2794 in the week, reversing a 0.43% loss from the previous week. The FTSE100 ended the week down by 2.65%, partially reversing a 3.20% gain from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Key stats included German and Eurozone consumer confidence figures and prelim private sector PMIs.

The stats were skewed to the positive.

While the consumer confidence slipped in the Eurozone, confidence in Germany improved in August.

More importantly, private sector activity continued to see a pickup in activity in July.

The Eurozone’s Services PMI jumped from 48.3 to 55.1, with the Manufacturing PMI rising from 47.4 to 51.1.

Supported by a marked pickup in service sector activity in both France and Germany, the Eurozone Composite rose from 48.5 to 54.8.

On the geopolitical risk front, rising tension between the U.S and China was EUR negative.

At the start of the week, agreement on the mechanism of the EU Recovery Fund delivered a boost, however.

For the week, the EUR rallied by 2.00% to $1.1656, following a 1.13% gain from the previous week.

For the European major indexes, it was a bearish week. The CAC30 and EuroStoxx600 slid by 2.23% and 1.45% respectively, while the DAX40 slipped by 0.63%.

For the Loonie

It was a relatively busy week on the economic calendar.

Economic data included May retail sales and June inflation figures.

Retail sales bounced back from April’s slump, with inflationary pressures picking up in June.

Crude oil prices also headed northwards in the week, providing the Loonie with support.

The Loonie rose by 1.22% to end the week at C$1.3415 against the Greenback. In the week prior, the Loonie had risen by 0.09% to C$1.3415.

Elsewhere

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

In the week ending 24th July, the Aussie Dollar rose by 1.56% to $0.7105, with the Kiwi Dollar gaining 1.28% to $0.6641.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Retail sales figures disappointed on Wednesday, in spite of a 2.40% rise off the back of a 16.9% surge in May. Economists had forecast a 7.1% gain.

Also negative was a fall in business confidence. In the second quarter, the NAB Quarterly Business Confidence fell from -12 to -15, which was to be expected. The decline reflected the impact of the COVID-19 pandemic on the business sentiment.

On the monetary policy front, the RBA meeting minutes provided few surprises.

The upside in the week came as a result of the news of progress towards a COVID-19 vaccine. Even rising tensions between the U.S and China failed to send the Aussie into reverse.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

Key stats were limited to June trade figures.

A rise in exports and little movement in imports led to a narrowing of the trade deficit in June. The stats ultimately had a muted impact on the Kiwi Dollar, however, with geopolitics in focus on Friday.

Tracking the Aussie Dollar, hopes of a COVID-19 vaccine to boost the global economy supported the Kiwi.

For the Japanese Yen

It was a busy first half of the week on the data front, with Japan on holiday on Thursday and Friday.

June trade figures and July’s prelim private sector PMIs were in focus in the week.

The stats were mixed. In June, exports slid by 26.2%, following a 28.3% tumble in May. A more marked decline in imports, however, led to a narrowing of the trade deficit to ¥268.8bn.

From the private sector, both the manufacturing and services sectors reported a slower pace of contraction. It was of little consolation, however, with the rises in the PMIs only marginal.

The Manufacturing PMI rose from 40.1 to 42.6, with the Services PMI rising from 45.0 to 45.2.

Over the week, the stats had a muted impact on the Japanese Yen, however.

A weakening U.S Dollar stemming from the progress towards a COVID-19 vaccine supported the Yen.

The Japanese Yen rose by 0.82% to end the week at ¥106.14 against the Greenback. In the week prior, the Yen had fallen by 0.08%.

Out of China

It was a quiet week on the economic data front.

There were no material stats to provide the markets with direction.

On the monetary policy front, the PBoC left the 3-year and 5-year loan prime rates unchanged. This was in line with expectations, with the PBoC having pre-warned the markets of the likely end to policy easing near-term.

Over the week, rising tensions between the U.S and China weighed on the Yuan.

In the week ending 24th July, the Chinese Yuan fell by 0.37% to CNY7.0184 against the Dollar. In the week prior, the Yuan had gained 0.10%.

The CSI300 declined by 0.86% in the week, with the Hang Seng falling 1.53%, as U.S – China tensions weighed once more.

US Stock Market Overview – Stocks Drop Ahead Large Tech Earnings

US stocks moved lower on Friday helping the Nasdaq notch up its second consecutive lower week. The Nasdaq was the worst-performing of the major indices during the week, despite some solid earnings from large-cap technology names. Next week the earnings parade will continue to Apple and Amazon reporting financial results. Most sectors in the S&P 500 index were lower on Friday, led down by technology, communications bucked the trend.

Gold prices hit a fresh 8-year high on Friday closing up the week more than 5%, and helping to buoy the mining sector. The dollar also moved lower for the week with the dollar index declining by 1.75%. Despite the downward movement in stocks for the week, the VIX volatility index barely changed rising 0.6% for the week and closing below 26. The VIX still remains elevated and is hovering above the 50-day moving average well above the 2019 average of 15. Optimism in the US jobs market is fading. President Trump is attempting to revamp his outlook on COVID, understanding that his poll numbers are fading as he fights for a second term as the US president.

Republicans Will Unveil Their Stimulus Package Next Week

Early in the week, Republicans will unveil their stimulus package proposal, which will then be debated as Friday’s deadline nears for the expiration of enhanced unemployment benefits. The current outlines shows that Senators want to add $100 per week onto standard unemployment benefits. This is in contrast to the House which wants $600 per week. The House goes on recess on July 31.

US Job Optimism is Fading Quickly

Job optimism in the US is fading. In April, 78% of those in households with a job loss thought they’d be temporary. Now, 47% think that lost job is definitely or probably not coming back, according to the latest poll from The Associated Press.