Asia-Pacific Shares Track Wall Street Higher on Hopes of Massive New US Stimulus

The major Asia-Pacific stock indexes were mixed but mostly higher on Thursday with Hong Kong giving back a portion of this week’s stellar gains. Shares in the region rose after stocks on Wall Street soared to record highs as U.S. President Joe Biden was sworn into office.

Investors are hopeful the incoming Biden administration will be able to secure passage of a massive new stimulus package to cushion the economic damage of the COVID-19 pandemic.

Republicans in the U.S. Congress have indicated they are willing to work with President Joe Biden on his administration’s top priority, a $1.9 trillion U.S. fiscal stimulus plan, but some are opposed to the price tag. Democrats took control of the U.S. Senate on Wednesday, though they will still need Republican support to pass the program.

But after record high closes on Wall Street Wednesday, markets in Asia reflected relief over an orderly transition of power and strong expectations that U.S. stimulus will provide continued support for global assets.

Cash Market Performances

In the cash market on Thursday, Japan’s Nikkei 225 Index settled at 28756.86, up 233.60 or +0.82%. Hong Kong’s Hang Seng Index finished at 29927.76, down 34.71 or -0.12% and South Korean’s KOSPI Index closed at 3160.84, up 46.29 or +1.49%.

China’s Shanghai Index settled at 3621.26, up 38.17 or +1.07% and Australia’s S&P/ASX 200 Index finished at 6823.70, up 53.30 or +0.79%.

Hong Kong Stocks Snap 5-Day Winning Streak on Profit-Taking

Hong Kong stocks ended lower on Thursday, snapping a five-day winning streak, as investors locked in profits following sharp gains helped by strong demand from mainland investors.

Bank of Japan Leaves Interest Rates Unchanged Amid Gloomy Outlook

The Bank of Japan (BOJ) left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency.

The BOJ held its interest rate and asset buying setting intact, according to a statement from the central bank on Thursday. All 44 economists surveyed by Bloomberg predicted no change in the bank’s main policy levers ahead of a policy review in March.

Market participants showed scant reaction to the largely in-line outcome of the meeting, with stocks and the Japanese Yen little changed from levels before the decision.

Australia’s Unemployment Rate Drops to 6.6 Percent as 30,000 More People Find Work

Australia’s unemployment rate has dropped to 6.6 percent as 30,000 more Australians found work in the wake of the COVID-19 pandemic.

New data from the Australian Bureau of Statistics (ABS) showed that for December 2020, the number of employed people in the country was a figure 784,000 higher than it was in May.

Despite the dramatic recovery, the total number of employed people was still down year-on-year because of mass COVID-19 layoffs.

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

United Airlines Shares Slump on Deep Quarterly Loss; Lost $7.1 Billion in 2020

United Airlines reported worse-than-expected earnings in the fourth quarter with net loss ballooning to $1.9 billion and to $7.1 billion for the full-year 2020 as the COVID-19 pandemic restrictions hammered air travel demand, sending its shares down about 3% in extended trading on Wednesday.

Chicago, Illinois-based airline reported fourth-quarter adjusted net loss of $2.1 billion, or a loss of $7 per share. That missed Wall Street’s estimates for a loss of $6.56 per share. The airlines’ reported loss of $7.7 billion for the full-year 2020 and total operating revenue declined 69% to $3.4 billion from the same quarter in 2019.

“Domestic remained the relative source of strength for the airline, as revenues fell 72% compared to international down 83%. The one source of relative strength on the international side was Latin America, which saw revenues decline by just 65% y-o-y as leisure demand to the region has remained strong. Cargo revenue was another source of strength, increasing 77% y-o-y, with other operating revenue declining by 31% y-o-y,” wrote Sheila Kahyaoglu, equity analyst at Jefferies.

The airline which operates a large domestic and international route network spanning cities large and small across the United States and all six continents said over the last three quarters, the company has identified $1.4 billion of annual cost savings and has a path to achieve at least $2.0 billion in structural reductions moving forward.

United Airlines forecasts the first quarter 2021 total operating revenue to be down 65-70% versus the first quarter of 2019. Accelerated distribution of the COVID-19 vaccine may lead to faster improvement, however, the company is not including this potential improvement in its first-quarter 2021 revenue outlook. The airline forecast first-quarter 2021 capacity to be down at least 51%.

United Airlines shares slumped about 3% to $43.97 in extended trading on Wednesday; the stock plunged 50% in 2020.

Analyst Comments

“United reported 4Q20 adjusted EPS slightly below our and Street expectations. Near term revenue trends are slightly worse than expected, but likely not a major focus for investors. Management targeted +$2 Bn in annual costs savings that should allow them to exceed2019 EBITDA margins by 2023. Many will look for comments on summer bookings as a snapback in 2H21 travel is expected,” said Helane Becker, equity analyst at Cowen and company.

“Trading activity will likely hinge on management comments about summer bookings and if they’ve seen any increased activity to support the idea of pent-up demand. The idea of a strong 2H21 will be dictated by vaccine distribution, something the Biden administration should push aggressively early in his administration.”

United Airlines Stock Price Forecast

Thirteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months at $48.91 with a high forecast of $62.00 and a low forecast of $32.00.

The average price target represents an 8.26% increase from the last price of $45.18. From those 13 analysts, four rated “Buy”, five rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $37 with a high of $79 under a bull scenario and $21 under the worst-case scenario. The firm currently has an “Underweight” rating on the airline holding company’s stock.

“Why Underweight? We believe United Airlines (UAL) has the most challenged network of any airline in our coverage based on our path for a COVID-19 recovery and a levered balance sheet, which could limit rebound opportunities. In addition, UAL’s new CEO Scott Kirby (former COO) is very well regarded by investors but investors may wait to see evidence that UAL is indeed focused on cost improvement rather than aggressive growth (at the cost of PRASM) before giving the stock credit,” said Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. Stifel raised the target price to $47 from $33. Cowen and company upped to outperform from market perform, raising the price objective to $53 from $34. BNP Paribas issued an “underperform” rating and a $32 target price for the company. Citigroup reduced their price target to $43 from $47 and set a “buy” rating.

In addition, Zacks Investment Research downgraded to a “sell” rating from a “hold” and set a $38 price target. Jefferies Financial Group issued a “hold” rating and a $45 price target. At last, Exane BNP Paribas issued an “underperform” rating and a $32 price target for the company.

Check out FX Empire’s earnings calendar

European Equities: Economic Data from the Eurozone and the U.S and the ECB in Focus

Economic Calendar:

Thursday, 21st January

ECB Interest Rate Decision (Jan)

ECB Press Conference

Eurozone Consumer Confidence (Jan) Prelim

Friday, 22nd January

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

The Majors

It was a bullish day for the European majors on Wednesday, with the DAX30 rising by 0.77% to lead the way. The EuroStoxx600 and CAC40 ended the day with gains of 0.72% and 0.53% respectively.

Economic data was on the lighter side, leaving the majors in the hands of corporate earnings and Inauguration Day.

With Joe Biden sworn in as U.S President, the markets are expecting plenty of fiscal stimulus to drive a U.S economic recovery.

Coupled with a planned drive to ramp up vaccination rates, the markets bet on a more rapid economic recovery.

Demand for riskier assets was broad-based as a result, also leading to a pullback in the U.S Dollar.

The Stats

It was a busier day on the economic calendar. Economic data included finalized inflation figures for the Eurozone and wholesale inflation figures from Germany.

In December, Germany’s producer price index rose by 0.8%, month-on-month, following a 0.2% increase in November. Economists had forecast a 0.7% rise.

According to Destatis,

  • The producer prices of industrial products were 0.2% higher in December 2020 than in December 2019.
  • Energy prices, however, were on average 0.1% lower than in December 2019.
  • Excluding energy, producer prices were 0.3% higher than in December 2019.

For the Eurozone, consumer prices rose by 0.3% in December, reversing a 0.3% decline from November.

While the annual core rate of inflation held steady at 0.2%, consumer prices fell by a further 0.3%, year-on-year, in December.

According to Eurostat,

  • Annual inflation was stable at -0.3% for a 4th consecutive month in December.
  • A year earlier, the annual rate of inflation had stood at 1.3%.
  • Greece (-2.4%), Slovenia (-1.2%), and Ireland (-1.0%) registered the lowest annual rates.
  • The highest contribution to the annual euro areas inflation came from services (+0.30 percentage points).
  • Food, alcohol & tobacco contributed +0.25 pp.

From the U.S

There was no economic data from the U.S to provide the European majors with direction late in the session.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. Daimler rallied by 3.51%, with BMW and Volkswagen ending the day up by 3.01% and by 3.13% respectively. Continental rose by a more modest 1.82% on the day.

Daimler led the way mid-week as the markets responded to the unveiling of  the latest Mercedes-Benz’s electric compact SUV.

It was a mixed day for the banks, however. Deutsche Bank fell by 0.99%, while Commerzbank rose by 0.93%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen gained 0.70% and 0.59% respectively, with Credit Agricole rising by 1.54%.

It was a mixed day for the French auto sector. Peugeot ended the day flat, while Renault gained 1.86% on the day.

Air France-KLM bucked the general trend, falling by 0.86%, while Airbus SE ended the day up by 1.22%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Wednesday, marking the 8th daily loss of the year. Following a 4.52% fall on Tuesday, the VIX slid by 7.14% to end the day at 21.58.

The NASDAQ and the S&P500 rallied by 1.97% and by 1.39% respectively, with the Dow gaining by 0.83%.

A lack of economic data left the markets in the hands of corporate earnings and hopes of sizeable fiscal support from the new U.S administration.

Fresh record highs came as President Joe Biden was sworn in as the 46th U.S President.

On the corporate earnings front, Netflix was a front runner off the back of its earnings release, surging by 16.85%.

VIX 210121 Daily Chart

The Day Ahead

It’s a quiet day ahead on the economic calendar. Eurozone consumer confidence figures are due out late in the session to provide the European majors with direction.

Ahead of the stats, the ECB is in action this afternoon. With the markets expecting the ECB to stand pat on policy, the press conference will be the key driver.

From the U.S, the weekly jobless claims figures will also influence, though expect a delayed response with the release coinciding with the ECB press conference.

Away from the economic calendar, COVID-19 news, together with updates from Capitol Hill will also influence.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18.5 points.

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

S&P 500 Price Forecast – Stock Markets Reach All-time Highs Again

The S&P 500 has rallied significantly during the trading session on Wednesday as we continue to see a drive into equities due to the idea of stimulus and of course everything that goes along with that. Ultimately, the stock market has been in an uptrend for ages and I do not see how that changes anytime soon. With this, I think that it is only a matter of time before we would see longer-term traders continue to hang on and newer traders continue to pile in. The consolidation area underneath suggests that we could go as high as 4000, based upon the measured move.

S&P 500 Video 21.01.21

Furthermore, we also have the uptrend line underneath that is far below, so I think that even if we got a 200 point pullback, it is very likely that there would still be plenty of buyers willing to get involved. The 50 day EMA sits just above the uptrend line as well, so that uptrend line will continue to be very important. However, the last couple of days have shown us plenty of bullish pressure, so I think that we are willing to continue going higher as it looks like the earnings season will be a disaster by any stretch of the imagination.

Stimulus will continue to be a main driver anyway, even though the earnings season might be a reason for the short term move. At the end of the day, Wall Street moves on cheap money and that is really all that matters. As long as liquidity is being tossed into the marketplace, the S&P 500 will continue to rally to the upside and towards that psychologically important 4000 handle.

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

Procter & Gamble Raises FY2021 Guidance; Stock Has 20% Upside Potential

Procter & Gamble, the world’s largest maker of consumer packaged goods, reported better-than-expected earnings in the fiscal second quarter and said it has raised its outlook for fiscal 2021 all-in sales growth to a range of 5-6% from the previous forecast of 3-5%.

Cincinnati, Ohio-based consumer goods corporation said its net sales rose 8% to $19.7 billion in the second quarter fiscal year 2021. Diluted net earnings per share increased 4% to were $1.47 and Core-EPS surged 15% to $1.64, beating the Wall Street consensus estimate of $1.51 per share.

Procter & Gamble raised its outlook for organic sales growth to a range of 5-6% from 4-5%. The Company said it now expects fiscal 2021 GAAP diluted net earnings per share growth in the range of 8-10% from fiscal 2020 GAAP EPS of $4.96. In addition, P&G upgraded their guidance for core earnings per share growth to a range of 8-10% from 5-8% versus fiscal 2020 core EPS of $5.12.

Procter & Gamble’s (PG) strong quarter should lift shares, improve sentiment for (lagging) HPC group -stock remains a Franchise Pick. We are focused on a “stronger for longer” theme in HPC w/ ’21 a transition year as the public gradually overcomes its trepidation toward the vaccine, though certain consumer behaviours sustain (cleaning, health & wellness, etc.), which should benefit PG and the group,” noted Kevin Grundy, equity analyst at Jefferies.

“At 22x P/E, PG (and our “core” HPC / beverages basket) are near relative lows vs. the S&P 500 last seen during the 08-09 downturn, leaving risk-rewards skewed to the upside. PG’s strong quarter should drive shares higher and offers a positive read-through for the group as Procter kicks off earnings season.”

However, Procter & Gamble shares traded 1.2% lower at $132.0 on Wednesday; the stock rose over 11% in 2020.

Procter & Gamble Stock Price Forecast

Twelve analysts who offered stock ratings for Procter & Gamble in the last three months forecast the average price in 12 months at $157.00 with a high forecast of $169.00 and a low forecast of $130.00.

The average price target represents an 18.82% increase from the last price of $132.14. From those 12 analysts, eight rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $165 with a high of $184 under a bull scenario and $103 under the worst-case scenario. The firm currently has an “Overweight” rating on the consumer goods corporation’s stock.

Several other analysts have also recently commented on the stock. JP Morgan lowered the target price to $159 from $163. Jefferies decreased the price objective to $168 from $169. Smith Barney Citigroup boosted their price objective to $165 from $159.

In addition, Truist boosted their price objective to $150 from $125. Wells Fargo & Company set an “overweight” rating and a $160.00 price objective for the company.

Equity Analyst’s View

“We expect a positive reaction to a strong FQ2 with a 2.5% top-line and 10.8% operating profit beat vs consensus, driven by strong 8% organic sales growth and an 80-bps gross margin beat vs consensus. Importantly, each segment organic sales growth was 5% or above, giving us greater confidence that PG momentum can continue going forward, as results were not narrowly driven by any one segment benefitting from COVID-19 demand. PG essentially flowed through almost all of Q2 EPS upside vs consensus to FY21 EPS guidance, which moved up by 250 bps at its midpoint, but we still view as overly conservative,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe strategy tweaks can sustain PG long-term top-line growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports long-term top-line growth above HPC peers. We see continued GM expansion with moderate commodity headwinds and a solid competitive environment. PG trades at 23x CY22e EPS, a discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher long-term PG growth.”

Check out FX Empire’s earnings calendar

Asia-Pacific Stocks Finish Mostly Higher as Alibaba Shares Soar in Hong Kong

Most of the focus was on Hong Kong where listed shares of Chinese tech juggernaut Alibaba surged following the reappearance of founder Jack Ma.

Asian shares were supported early as U.S. Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package to help the world’s largest economy ride out a pandemic-driven slump. At her confirmation hearing on Tuesday, she said the benefits of a big stimulus package to help the world’s largest economy ride out a pandemic-driven slump.

Cash Market Performance

In the cash market on Wednesday, Japan’s Nikkei 225 Index settled at 28523.26, down 110.20 or -0.38%. Hong Kong’s Hang Seng Index finished at 29962.47, up 320.19 or +1.08% and South Korea’s KOSPI Index closed at 3114.55, up 21.89 or +0.71%.

China’s Shanghai Index settled at 3583.09, up 16.71 or +0.47% and Australia’s S&P/ASX 200 Index finished at 6770.40, up 27.80 or +0.41%.

Hong Kong Shares End at Over 20-Month High on Tech Boost

Hong Kong shares ended at their highest level in more than 20 months on Wednesday, extending gains for the fifth straight session boosted by gains in tech stocks. The IT sector sub-index led the gains by rising 5.47%, with the heavyweight Alibaba Group recorded the best intraday gain in more than six months.

Alibaba’s founder Jack Ma made his first public appearance since October, as he spoke to a group of teachers by video, easing concerns about his unusual absence from public life and boosting shares in the e-commerce giant.

South Korea’s Kia Says Looking at Electric Car Projects with Multiple Firms after Apple Report

In corporate developments, shares of South Korean automaker Kia Motors surged 5.04% after the firm said it is looking at electric car projects with multiple firms, Reuters reported citing a regulatory filing.

That development came after a local online publication reported that Kia’s parent Hyundai Motor Group had decided Kia would be in charge of the proposed cooperation with Cupertino-based tech giant Apple on electric cars, according to Reuters.

Australian Shares at Near 11-Month High as Yellen Backs More US Stimulus

Australian shares ended firmer on Wednesday, taking cues from overnight gains in Wall Street, on expectations that a $1.9 trillion U.S. stimulus package would come through, while optimism over domestic corporate earnings also lent support.

Auto parts seller RPM Automotive Group, not an index constituent, advanced as much as 35.9% after raising its 2021 revenue forecast by 44%, while Ansell also rose after the glove maker forecast exceeding its earlier sales outlook.

Morgan Stanley recently said the upgrade cycle for ASX200 stocks in calendar year 2021 was underway and saw some signs of an earnings revival to come through in the upcoming February earnings season, estimating high-single-digit earnings growth in fiscal 2021.

Stocks Move Higher Ahead Of Joe Biden’s Inauguration

Traders Remain Optimistic As Biden Takes Office

S&P 500 futures are gaining ground in premarket trading as traders prepare for the first term of the new U.S. President Joe Biden.

Biden is expected to sign many executive orders in the first days of his presidency, reversing some of Donald Trump’s policies and boosting response to the coronavirus pandemic.

The market clearly provides Biden with the benefit of the doubt and expects that the new President will be able to provide additional support to the U.S. economy.

Market’s main focus is the new $1.9 trillion stimulus plan which should boost consumer spending at a time when Retail Sales have started to show weakness under the pressure from the second wave of the virus. If Biden succeeds in delivering the new stimulus package in the upcoming weeks, stocks will have an opportunity to gain strong upside momentum.

Janet Yellen Urged Lawmakers To “Act Big”

Yesterday, Janet Yellen stated that U.S. lawmakers should “act big” on the new coronavirus aid package to provide support to the economy.

She argued that the benefits of additional stimulus outweighed the risks of higher debt levels. Yellen’s dovish stance may serve as an additional upside catalyst for the markets.

Interestingly, foreign exchange market traders have not made up their minds on the impact of the new stimulus package, and the U.S. dollar was volatile but lacked direction in recent days. Meanwhile, stock traders are clearly optimistic about Yellen’s future policies.

Oil Moves Towards Multi-Month Highs

WTI oil is currently trying to get to the test of the recent highs at $53.90 as traders bet that the new round of stimulus will boost demand for oil.

Oil-related stocks had a strong trading session on Tuesday and look set to continue their upside move as investors put more money into the sector due to rising oil prices.

Oil traders have managed to ignore all negative developments on the coronavirus front and focused on the long-term picture. The current market mood remains bullish, and WTI oil has a good chance to get above recent highs and move towards the $55 level.

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

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Needs Follow-Through Rally to Confirm Uptrend

March E-mini NASDAQ-100 Index futures closed higher on Tuesday as U.S. Treasury Secretary Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump.

On Tuesday, March E-mini NASDAQ-100 Index futures settled at 12985.50, up 183.25 or +1.41%.

In other news, Netflix shares rose more than 11% following the closing bell on Tuesday after the streaming television provider reported paid subscriber additions for the fourth quarter topped Wall Street expectations.

Daily March E-mini NASDAQ-100 Index

 

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned back up when buyers took out the previous main top at 13028.75 late in the session. The new main bottom is 12727.00. A trade through this level will change the trend to down.

The minor range is 12491.25 to 13125.00. Its 50% level at 12808.00 is new support.

The short-term range is 12217.00 to 13125.00. Its 50% level at 12671.00 is additional support.

The main range is 10936.25 to 13125.00. Its retracement zone at 12030.50 to 11772.25 is the major support area controlling the near-term direction of the index.

Short-Term Outlook

With two changes in trend in as many sessions, conditions are very choppy, but this is the daily chart, so you have to expect two sided price action before the next major move. Professionals have to shake the trees a little to rattle the weaker traders.

Now that the trend has turned back up, the follow-through move becomes the key as to whether the change in trend was fueled by buy stops or aggressive new buyers.

The longer the index spends under the record high at 13125.00 set on January 8, the more the chart pattern will look distributive, which tends to indicate lower prices are coming.

The real key to the next move is whether the next catalyst encourages investors to chase the market higher and buy strength, or pushes them to look for value at much lower levels. It comes down to determining how much bang for the buck can they get buying a new contract higher versus buying a near-term correction into support.

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 – Trade Through 31116 Changes Trend to Up

March E-mini Dow Jones Industrial Average futures finished higher on Tuesday. The blue chip average was supported by a surge in shares of component Goldman Sachs Group, which rose 2.5% as its fourth-quarter profit more than doubled, dwarfing estimates after another blowout performance at its trading and underwriting business.

On Tuesday,  March E-mini Dow Jones Industrial Average futures settled at 30828, up 108 or +0.35%.

Goldman Sachs on Tuesday beat analysts’ expectations for fourth-quarter profit and revenue on strong performance from the firm’s equities traders and investment bankers. The bank posted earnings of $12.08 a share, crushing the $7.47 estimate of analysts surveyed by Refinitiv. Revenue of $11.74 billion exceeded expectations by about $1.75 billion.

Daily March 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 31116 will change the main trend to up. A move through 30506 will signal a resumption of the downtrend.

The minor range is 31148 to 30506. The market is currently straddling its 50% level at 30827.

The second minor range is 29760 to 31148. Its 50% level at 30454 is potential support.

The short-term range is 29318 to 31148. Its 50% level is another potential support level.

Daily Swing Chart Technical Forecast

Tuesday’s price action suggests the direction of the March E-mini Dow Jones Industrial Average futures contract over the short-run will be determined by trader reaction to 30827.

Bullish Scenario

A sustained move over 30827 will indicate the presence of buyers. If this generates enough upside momentum then look for a test of 31116. Taking out this level will change the main trend to up. This could trigger an extension of the rally into the next main top at 31148.

Bearish Scenario

A sustained move under 30827 will signal the presence of sellers. This could lead to a retest of Friday’s minor bottom at 30506, followed by 30454. If this fails then look for an extension of the selling into 30233. This level is a potential trigger point for an acceleration to the downside.

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

European Equities: COVID-19 and U.S Politics in Focus

Economic Calendar:

Wednesday, 20th January

German PPI (MoM) (Dec)

Eurozone Core CPI (YoY) (Dec) Final

Eurozone CPI (MoM) (Dec) Final

Eurozone CPI (YoY) (Dec) Final

Thursday, 21st January

ECB Interest Rate Decision (Jan)

ECB Press Conference

Eurozone Consumer Confidence (Jan) Prelim

Friday, 22nd January

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

The Majors

It was a bearish day for the European majors on Tuesday. The CAC40 fell by 0.33%, with the DAX30 and EuroStoxx600 seeing losses of 0.24% and 0.19% respectively.

News from Germany of a lockdown extension to mid-February sent the European majors into the red.

In addition to an extended lockdown, the possibility of reintroducing border controls was also raised over concerns of new COVID-19 strains.

Sentiment had been more bullish early on, with a pickup in economic sentiment in Germany and the Eurozone providing support.

The Stats

Economic sentiment figures for Germany and the Eurozone and finalized German inflation figures were in focus.

For January, Germany’s ZEW Economic Sentiment Indicator rose from 55.0 to 61.8, with the current conditions indicator rising from -66.5 to -66.4.

Economists had forecasted an economic sentiment indicator of 60.0 and a current conditions indicator of -68.5.

For the Eurozone, the Economic Sentiment Indicator increased from 54.4 to 58.3.

On the inflation front, consumer prices increased by 0.5% in December in Germany, which was in line with prelim figures. Consumer prices had fallen by 0.8% in November.

According to Destatis,

  • Consumer prices were down by 0.3% on the same month a year earlier.
  • A temporary reduction in value added tax contributed to the fall in consumer prices.
  • Energy product prices slid by 4.8%. Prices had risen by 1.4% in 2019.
  • Prices of goods were down by 0.4% on 2019, while prices of services rose by 1.3%.

From the U.S

There were no material from the U.S.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Tuesday. Volkswagen rose by 0.81% to buck the trend on the day. BMW and Daimler fell by 0.95% and by 1.22% respectively, while Continental saw more modest loss of 0.59%.

It was a mixed day for the banks, however. Deutsche Bank slid by 3.90%, while Commerzbank rose by 0.14%.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.55%, with Credit Agricole and Soc Gen sliding by 2.24% and by 2.39% respectively.

It was a mixed day for the French auto sector. Peugeot ended the day flat, while Renault fell by 1.30%.

Air France-KLM fell by 0.72%, while Airbus SE ended the day with a modest 0.12% gain.

On the VIX Index

It was back into the red for the VIX on Tuesday. Reversing a 4.69% gain from Friday, the VIX fell by 4.52% to end the day at 23.24. On Monday, the U.S markets had been closed.

The NASDAQ rallied by 1.53%, with the Dow and the S&P500 rising by 0.0.38% and by 0.81% respectively.

Support for more fiscal stimulus delivered support to the U.S markets after the Monday holiday.

Former FED Chair Yellen, nominee for Treasury Secretary talked of support for a sizeable fiscal stimulus package.

Coupled with the incoming administration’s plans to drive vaccinations, hopes of a speedier economic recovery drove the main indexes to fresh record highs.

VIX 200121 Daily Chart

The Day Ahead

It’s a quiet day on the economic calendar. Inflation figures from Germany and the Eurozone are due out later today.

We don’t expect the numbers to have any material impact on the European majors, however.

It’s Inauguration Day, so expect Biden’s immediate plans upon taking office to be the main area of focus.

Yellen’s support for further economic stimulus should deliver some comfort going into the open.

COVID-19 news will also continue to influence, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 46 points.

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

Halliburton Beats Q4 Earnings Estimates; Target Price $25 in Best Case

Halliburton, one of the world’s largest providers of products and services to the energy industry, reported better-than-expected earnings in the fourth quarter, largely driven by cost-cutting and recovery in business demand.

Halliburton reported a net loss of $235 million, or $0.27 per diluted share, for the fourth quarter of 2020. This compares to a net loss for the third quarter of 2020 of $17 million, or $0.02 per diluted share.

Adjusted net income for the fourth quarter of 2020, excluding impairments and other charges, was $160 million, or $0.18 per diluted share. That was higher than the market expectations of 15 cents per share.

The second-biggest services provider’s total revenue rose 9% to was $3.2 billion, up from revenue of $3.0 billion in the third quarter of 2020. Reported operating loss was $96 million in the fourth quarter of 2020 compared to reported operating income of $142 million in the third quarter of 2020.

“We view the strong results (Q4/20 EBITDA 8% better than consensus) as positive, with Halliburton (HAL) demonstrating that increasing activity should flow to the bottom line after completing its $1bn cost-out program in Q3/20,” said Waqar Syed, equity analyst at ATB Capital Markets.

“We think the key driver for HAL’s stock today will be guidance in the earnings call, if provided, but still think the results, high-level commentary, and supportive macro/commodity price environment should help the stock.”

At the time of writing, Halliburton shares traded nearly flat at $20.74 on Tuesday; however, the stock fell over 20% in 2020.

Halliburton Stock Price Forecast

Thirteen analysts who offered stock ratings for Halliburton in the last three months forecast the average price in 12 months at $18.84 with a high forecast of $25.00 and a low forecast of $12.00.

The average price target represents a -9.20% decrease from the last price of $20.75. From those 13 analysts, five rated “Buy”, six rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $20 with a high of $25 under a bull scenario and $8 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the energy company’s stock.

Several other analysts have also recently commented on the stock. Cowen and company raised the target price to $28 from $24. Credit Suisse upped the price objective to $14 from $12.

In addition, Barclays increased the target price to $21 from $14. Stifel raised the target price to $26 from $18. Citigroup upped to buy from neutral; raises price target to $24 from $13.5.

Analyst Comments

“Relative positioning less favourable vs. some global peers: Though it has decreased in absolute size, Halliburton (HAL) still remains more NAm-focused vs. peers, where we see a higher relative risk of downward upstream capex revisions. Cost savings likely at their limit: HAL is winding down a major cost-cutting program, which suggests to us its ability to further cut overhead and significantly surprise on margins is relatively limited,” said Connor Lynagh, equity analyst at Morgan Stanley.

“Risk-reward relatively balanced: We see relatively balanced risk-reward for HAL’s shares and believe a more significant capex shift back into its core markets would be required for meaningful outperformance vs. the group.”

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast – Stock Markets Continue Upward Pressure

The S&P 500 rallied a bit during the trading session on Tuesday to reach towards the 3800 level. The 3800 level of course is an area that has offered a bit of support and resistance more than once, and I think at this point in time it is obvious that there are a lot of concerns about whether or not the stimulus will be big enough to keep Wall Street satiated. At the end of the day though, this is all about stimulus and has nothing to do with anything other than that. Yes, its earnings season but over the longer term that tends to have very little in the way of what happens next, it is all about that cheap money.

S&P 500 Video 20.01.21

We have an uptrend line underneath that should continue to support this market in general so therefore I look it dips as potential opportunities to get long in a market that is essentially one way over the longer term. The uptrend line and the 50 day EMA converge quite nicely underneath so that would be an area that I would be very interested in. As far as shorting is concerned, I would not have any real interest in doing so but could be convinced to take a short-term selling position if we did somehow break down below the 3600 level, something that is not going to happen in the next few days.

To the upside, I believe that we will eventually go looking towards the 4000 level, as soon as Wall Street gets the “all clear” of more cheap money being thrown in its direction, and perhaps once we get past the bulk of earnings season.

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

Dollar’s Weakness is Back

Gold creates a double bottom formation with two hammers on a daily chart.

Nasdaq and DAX bounce from the upper line of a correction pattern.

Dollar index cancels the Inverse Head and Shoulders and drops lower.

EURUSD starts bullish correction.

AUDJPY is heading higher after testing the neckline of a giant iH&S pattern.

USDCHF bounces from the neckline and drops lower with a proper sell signal.

CADCHF goes lower after the false bullish breakout from the symmetric triangle.

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

E-mini S&P 500 Index (ES) Futures Technical Analysis – Sustained Move Over 3782.50 Signals Strong Buying

March E-mini S&P 500 Index futures are trading higher on Tuesday after upbeat earnings from big U.S. banks and Halliburton, while investors awaited a speech from U.S. Treasury Secretary nominee Janet Yellen that is expected to advocate hefty fiscal spending.

Bank of America topped fourth-quarter profit estimates and joined JPMorgan, Citigroup Inc and Wells Fargo & Co in releasing some cash reserves to cover for coronavirus-driven loan losses, underscoring its confidence in the economy.

At 14:30 GMT, March E-mini S&P 500 Index futures are trading 3792.25, up 23.75 or +0.69%.

Daily March E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. A trade through 3824.50 will signal a resumption of the uptrend. A move through 3596.00 will change the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through 3740.50 will indicate the selling is getting stronger. Taking out 3817.75 will change the minor trend to up and shift momentum to the upside.

The minor range is 3824.50 to 3740.50. Its 50% level at 3782.50 is currently being tested.

The second minor range is 3652.50 to 3824.50. Its 50% level at 3738.50 provided support earlier in the session.

The short-term range is 3596.00 to 3824.50. Its 50% level at 3710.25 is another potential support level.

Daily Swing Chart Technical Forecast

The direction of the March E-mini S&P 500 Index into the close is likely to be determined by trader reaction to 3782.50.

Bullish Scenario

A sustained move over 3782.50 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the minor top at 3817.75, followed by the main top at 3824.50.

Bearish Scenario

A sustained move under 3782.50 will signal the presence of sellers. This could lead to a retest of the intraday low at 3740.50, followed by the 50% level at 3738.50. If this level fails then look for the selling to possibly extend into 3710.25. This is a potential trigger point for an acceleration into another 50% level at 3660.75.

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

Stocks Move Higher Ahead Of Yellen Speech

Treasury Secretary Nominee Janet Yellen Is Expected To Support The Huge Stimulus Package

S&P 500 futures are gaining ground in premarket trading as traders expect that Janet Yellen will support Biden’s $1.9 trillion stimulus package when she speaks before the Senate Finance Committee.

Yellen is projected to state that the stimulus package is a vital instrument in the combat against the consequences of the coronavirus pandemic, and that the U.S. debt burden is not a concern right now.

Yellen is also projected to commit to market-determined exchange rate of the U.S. dollar, in contrast with the outgoing President Donald Trump who has many times stated that he wanted a weaker U.S. dollar.

However, it remains to be seen whether Yellen’s comments will provide additional support to the U.S. dollar which is currently losing ground against a broad basket of currencies. The new stimulus package may ultimately serve as a bearish catalyst for the American currency and push it to multi-month lows.

IEA Cuts Its Oil Demand Forecast

IEA decided to cut its oil demand outlook by 0.3 million barrels per day (bpd) due to continued problems on the coronavirus front.

This is not a big surprise to the market as traders are prepared to see poor demand data in the first quarter of 2021 due to lockdowns in Europe.

Another downside revision of the full-year oil demand forecast did not spoil the mood of oil traders, and WTI oil is currently trying to settle above $52.50.

Not surprisingly, oil-related stocks are set for a strong start of the trading session after the correction on Friday.

Precious Metals Lack Momentum As Higher Yields Reduce Demand For Gold And Silver

Gold and silver have been trying to stabilize after the sell-off which happened at the beginning of this year.

The recent rebound of the U.S. dollar put additional pressure on precious metals, but rising U.S. Treasury yields were the main negative catalyst.

The bond market may be sensitive to Yellen’s speech before the Senate Finance Committee, so gold and silver may have an active trading session today. Gold and silver mining stocks, which have recently suffered a significant correction, may also be volatile today.

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

Asia-Pacific Shares Finish Mostly Higher Amid More Than 2.6% Gains in Hong Kong, South Korea

The major Asia-Pacific stock indexes were mixed but mostly higher on Tuesday, led by more than two-percent gains in Hong Kong and South Korea. China struggled, however, as a rise in coronavirus cases offset the bullish gross domestic product data released on Monday. Analysts said the markets may have been underpinned by optimism ahead of remarks from U.S. President-elect Joe Biden’s nominee for Treasury secretary, Janet Yellen, later today.

In the cash market on Tuesday, Japan’s Nikkei 225 Index settled at 28633.46, up 391.25 or +1.39%. Hong Kong’s Hang Seng Index finished at 29642.28, up 779.51 or +2.70% and South Korea’s KOSPI Index closed at 3092.66, up 78.73 or +2.61%.

In China, the benchmark Shanghai Index settled at 3566.38, down 29.84 or -0.83% and Australia’s S&P/ASX 200 Index finished at 6742.60, up 79.60 or +1.19%.

Yellen Says US Must ‘Act Big’ on Next Coronavirus Relief Package

Janet Yellen, U.S. President-elect Joe Biden’s nominee to run the Treasury Department, will tell the Senate Finance Committee on Tuesday that the government must “act big” with its next coronavirus relief package.

“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen, a former Federal Reserve chair, said in a prepared opening statement for her hearing before the committee.

“I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” she said in the statement, which was obtained by Reuters.

Hong Kong Stocks End at 20-Month High on Mainland China Demand

Hong Kong stocks closed at a 20-month high on Tuesday, helped by steady and robust demand from investors in mainland China for shares in the Asian financial hub. Leading the gains, the Hang Seng Tech Index and the Hang Seng Financials Index both closed 2.8% higher.

Mainland China investors purchased 26.1 billion Yuan ($4.02 billion) worth of Hong Kong stocks on Tuesday via the Stock Connect linking mainland and Hong Kong, after spending a record HK$23 billion on Monday, according to HKEX and Refinitiv data.

China Stocks Retreat on Coronavirus Worries

China shares fell on Tuesday as a resurgence of COVID-19 cases hit market sentiment, with consumer discretionary and materials stocks leading the retreat.

Leading the decline, the CSI300 Consumer Discretionary Index dropped 2.9%, while the CSI300 materials Index slid 2.7%.

China is battling the worst outbreak of COVID-19 since March 2020, with one province posting a record daily rise in cases, as an independent panel reviewing the global pandemic said China could have acted more forcefully to curb the initial outbreak.

China will provide necessary policy support for the economic recovery this year, to avoid a “policy cliff”, as small firms remain hard-pressed amid the pandemic, a senior official at the state planner said.

South Korean Stocks See Best Day in Over a Week on Samsung Electric, Hyundai Motor Boost

South Korean shares rebounded to end higher on Tuesday, marking its sharpest gain since January 8, boosted by shares of Samsung Electronics and Hyundai Motor, and upbeat Chinese data from Monday.

An 11.2% gain in auto stocks was the biggest boost, with the country’s largest carmaker Hyundai Motor surging as much as 8.5%. Chip giant Samsung Electronics also jumped as much as 3.5%, recovering from its sharpest decline in five months on Monday after its group leader was sentenced to a 30-month jail term.

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

Logitech International’s Q3 Profit Jumps Over 190% to $2.45; Sales Grow 85%

Logitech International S.A., a Swiss-American manufacturer of computer peripherals and software, reported better-than-expected earnings in the fiscal third quarter with operating income surging 192% to $2.45 per share and sales rising 85% to $1.67 billion.

The company which manufactures mobile speakers, keyboards, mice and video conferencing devices said its Q3 GAAP operating income grew 248% to $448 million, compared to $129 million in the same quarter a year ago. Q3 GAAP earnings per share (EPS) grew 222% to $2.22, compared to $0.69 in the same quarter a year ago.

Moreover, Q3 non-GAAP operating income grew 214% to $476 million, compared to $152 million in the same quarter a year ago. Q3 non-GAAP EPS grew 192% to $2.45, compared to $0.84 in the same quarter a year ago. That was higher than the market consensus estimates of $1.08 per share.

For the fiscal year 2021, Logitech upgraded its sales growth forecasts to between 57%-60%, up from the previous outlook of between 35%-40%. The technology company raised their non-GAAP operating income to approximately $1.05 billion, up from $700 million to $725 million range.

Logitech International shares closed 2.79% lower at $100.91 on Friday; however, the stock more than doubled in 2020.

Executive Comments

“This quarter’s record results demonstrate the strength of our portfolio, addressing long-term growth trends in remote work and education, video collaboration, esports, and digital content creation,” said Bracken Darrell, Logitech president and chief executive officer.

“We are increasingly investing in our capabilities and people for the growth potential we see in the future. Logitech has never been more relevant to our customers’ work, play and creativity.”

Logitech International Stock Price Forecast

Twelve analysts who offered stock ratings for Logitech in the last three months forecast the average price in 12 months at $102.46 with a high forecast of $116.00 and a low forecast of $63.97.

The average price target represents a 1.54% increase from the last price of $100.91. From those 12 analysts, nine rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $113 with a high of $151 under a bull scenario and $63 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology company’s stock.

Several other analysts have also recently commented on the stock. JP Morgan raised shares of Logitech International from a neutral rating to an overweight. Citigroup upped their price target to $110 from $105. Zacks Investment Research lowered to a hold rating from a strong-buy rating and set a $100 target price on the stock.

In addition, Credit Suisse Group reaffirmed an outperform rating and Wedbush upped their price target to $95 from $73.50 and gave the company a neutral rating.

Analyst Comments

“Logitech has been a COVID environment beneficiary, but it is on the cusp of a new era of growth where normalized EPS growth post-COVID will accelerate by 2 points from pre-pandemic levels as 1) enterprises permanently increase spending on tools that enable video collaboration, productivity and communication, 2) gaming and eSports soon become just as, if not more popular, than traditional sports, and 3) the attach rate of PC and tablet related peripherals multiplies off a low base driven by the structural shift towards notebooks,” said Erik Woodring, equity analyst at Morgan Stanley.

“We believe this makes Logitech a long-term secular beneficiary, which argues for a premium valuation not currently reflected in Logitech’s current share price.”

Check out FX Empire’s earnings calendar

European Equities: Economic Sentiment Figures and COVID-19 in Focus

Economic Calendar:

Tuesday, 19th January

German CPI (MoM) (Dec) Final

German ZEW Current Conditions (Jan)

German ZEW Economic Sentiment (Jan)

Eurozone ZEW Economic Sentiment (Jan)

Wednesday, 20th January

German PPI (MoM) (Dec)

Eurozone Core CPI (YoY) (Dec) Final

Eurozone CPI (MoM) (Dec) Final

Eurozone CPI (YoY) (Dec) Final

Thursday, 21st January

ECB Interest Rate Decision (Jan)

ECB Press Conference

Friday, 22nd January

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

The Majors

It was a relatively bullish start to the week for the European majors on Monday. The DAX30 rose by 0.44%, with the EuroStoxx600 and CAC40 seeing gains of 0.20% and 0.10% respectively.

Economic data from China had failed to support the majors going into the open in spite of solid GDP numbers for Q4.

Concerns over the Eurozone’s economic outlook had overshadowed the numbers. A continued rise in new COVID-10 cases and vaccination supply issues tested support.

Ultimately, however, luxury, bank, and auto stocks were amongst the front runners, delivering the upside on the day.

While concerns over the economic outlook were evident, China’s continued economic recovery provided some optimism on the day.

The Stats

It was a quiet day on the economic calendar. Economic data was limited to finalized December inflation figures for Italy.

In December, consumer prices rose by 0.2%, coming up short of a prelim 0.3% rise while reversing a 0.1% decline from November.

From the U.S

There were no material from the U.S to provide directions, with the U.S markets closed on Monday.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. Continental and Daimler rose by 1.02% and by 0.95% respectively.  BMW and Volkswagen saw more modest gains of 0.32% and 0.08% respectively.

It was also a bullish day for the banks. Deutsche Bank rose by 0.60%, with Commerzbank rallying by 1.98%.

From the CAC, it was a bullish day for the banks. Credit Agricole ended the day up by 1.03%, with BNP Paribas and Soc Gen rising by 0.83% and by 0.38% respectively.

It was a mixed day for the French auto sector, however. Peugeot ended the day flat, while Renault rose by 1.64%.

Air France-KLM and Airbus SE fell by 1.06% and by 1.47% respectively.

Carrefour led the day down, however, sliding by 6.92% following the French government’s intervention in the Couche-Tard takeover bid.

On the VIX Index

The U.S markets were closed on Monday.

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Germany and the Eurozone’s ZEW Economic Sentiment figures for January are in focus in the early part of the day.

Expect Germany’s sentiment figures to have the greatest influence on the European majors.

Finalized December inflation figures for Germany are also due out but will likely have a muted impact on the majors.

From the U.S, there are no material stats to provide direction late in the European session.

The lack of stats from the U.S will leave COVID-19 news updates as a key driver later in the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 47 points.

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

US Stocks Recap (15th Jan): Stocks Decline, More May be Coming

We’ve reached a very critical juncture in the markets. Last week, I mentioned how this reminded me of the Q4 2018 pullback ( read my story here ), and still maintain that there is way too much complacency in this market. Stock markets are risky for a reason, something many Robinhood traders are sure to find out this year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth. Hopefully, you’ll find the below enlightening from my perspective, and I welcome your thoughts and questions.

Stocks closed the week with their first weekly declines in nearly a month.

The pullbacks weren’t anything astronomical, but it could potentially be the start of the Q1 declines that I have been predicting.

For one, valuations are insane, and the tech IPO market is looking like clown school. The S&P 500 is trading near its highest forward P/E ratio since 2000, while the Russell 2000 has never traded this high above its 200-day moving average.

Signs are starting to point towards the return of inflation by mid-year as well. As the 10-year yield ticked up to its highest level since March, economist Mohammed El-Erian said “if we were to see another 20 basis point move in yields, that would be bad news.”

Expectations haven’t been this high for inflation in years either. According to Edward Jones , the 10-year breakeven rate hit its highest level since 2018 last week due to rising commodity prices, a weaker dollar, and broad stimulus policy. The 10-year breakeven rate is a market-based measure of inflation expectations.

What’s also concerning is that investors didn’t seem to bat an eye at Joe Biden’s $1.9 trillion stimulus package !

What does this tell me?

That maybe this was anticipated and priced in already. According to Jim Cramer on his Mad Money show on CNBC, “When an event occurs and the market gets exactly what it wants, but nothing more, it’s treated as a reason to sell, not to buy.”

Although this week’s decline was moderate, I still feel that a correction between now and the end of Q1 2020 is likely amidst a tug of war between good news and bad news.

Generally, corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). The last time we saw one was in March 2020, so we could be well overdue.

Corrections are healthy market behavior and could be an excellent buying opportunity for what should be a great second half of the year.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

I hope everyone has a great day. Best of luck, and happy trading!

Time to Wager – Is the Dow Over/Under 31,000 Before the End of January?

Figure 1- Dow Jones Industrial Average $INDU

Is it possible to choose “push” on this gamble?

I have too many short-term questions and concerns about the Dow Jones to unequivocally say it’s overheated like the Russell or tech IPOs, or if it’s at the right buying level.

Although the Dow’s RSI is comparable to the Nasdaq’s on the surface, it has also not exceeded overbought levels as much.

I do like the Dow’s decline this week. But I’d like to see a more profound dip before buying back in.

If someone wanted to make an over/under bet with me on the Dow’s 31,000 level by the end of January, the truth is I’d probably choose “push.” You’d have better luck betting on the AFC Championship game this year (but only if Mahomes plays).

I don’t like how COVID-19 is trending (who does?), I am disappointed in the vaccine roll-out (although it’s improving), and I am concerned about short-term economic and political headwinds. But I think it’s more likely than not that the Dow hovers around 31,000 by month’s end rather than make any significant move upwards or downwards. It is very hard right now to make a conviction call on this index.

If and when there is a drop in the index, it probably won’t be anything like we saw back in March 2020.

While a 35,000 call to close out 2021 is a bit aggressive, the second half of 2021 could show robust gains for the index once vaccines are available to the general public.

With so much uncertainty, the call on the Dow stays a HOLD. I am closely monitoring the RSI if it exceeds 70.

For an ETF that looks to directly correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a strong option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

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

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Goldman Sachs’ Profit to Jump 56% to $7.33 in Fourth Quarter

New York-based leading global investment bank Goldman Sachs’ profit is expected to grow nearly 56% to $7.33 in the quarter ended December 2020 from the same quarter last year; however, revenue could decline 4.9% to $9.47 billion in the same period.

It is worth noting that in in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the times. The better-than-expected number would help the stock to rally. The company will report its earnings result on Tuesday, January 19.

“Shares of Goldman have underperformed the industry in the past three months. Earnings estimate have been revised upward prior to the fourth-quarter earnings release. The company has a decent earnings surprise history, outpacing the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. Goldman’s solid position in worldwide announced and completed M&As will keep strengthening the business,” noted analysts at ZACKS Research.

“Also, business diversification helps Goldman sustain growth. The company’s cost management efforts continue to support bottom-line growth. Moreover, with strong liquidity, Goldman carries a low credit risk in case of any economic downturn. Though, legal issues, high dependence on overseas revenues and volatile client-activity might impede top-line growth, steady capital deployment activities keep us encouraged.”

Goldman Sachs shares closed 2.23% lower at $301.01 on Friday; however, the stock rose about 15% in 2020.

Goldman Sachs Stock Price Forecast

Eleven analysts who offered stock ratings for Goldman Sachs in the last three months forecast the average price in 12 months at $312.00 with a high forecast of $407.00 and a low forecast of $225.00.

The average price target represents a 3.65% increase from the last price of $301.01. From those 11 analysts, eight rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $291 with a high of $347 under a bull scenario and $160 under the worst-case scenario. The firm currently has an “Underweight” rating on the financial services company’s stock.

Several other analysts have also recently commented on the stock. BofA global research raised the stock price forecast to $345 from $270. BMO upped the target price to $306 from $289. Citigroup increased the price objective to $357 from $325. Piper Sandler raised the target price to $325 from $270. Barclays increased the price objective to $362 from $270.

Analyst Comments

“As market volatility and the urgency around capital raising activity (both equity and debt) subside in 2021, we expect total revenues decline 11% y/y from a strong 2020. We are valuing the group on normalized 2023 EPS. While we still see 15%+ upside to Goldman Sachs based on this methodology, we see even more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure. This drives our Underweight rating,” said Betsy Graseck, equity analyst at Morgan Stanley.

“Over time, we expect Goldman Sachs can drive some multiple expansion as management executes on its multi-year strategic shift towards higher recurring revenues.”

Check out FX Empire’s earnings calendar