Dollar Under Pressure but EUR/AUD Stands Out

Indices and American Dollar collapsed yesterday. Tuesday brings us a reversal attempt on stocks but Dollar remains ultra-bearish. We are not surprised with that as we were highlighting this possibility in our video from yesterday. As always, welcome to Trading Sniper, where we have three best trading setups on the market.

First one is the Dollar Index, which is in a downfall after creating the flag and the head and shoulders pattern. Both formations ended with broken supports, which in both cases activates a legitimate sell signal. We do not see much of a hope for buyers but comeback above the neckline could be good for a start. As long as we stay below, the sentiment is negative.

Slide on Dollar Index, usually means rise on EURUSD. It is not different this time. The price came back above two major horizontal resistances and then managed to break the long-term down trendline. That breakout gives us a buy signal and a lot of optimism.

EURUSD may look nice but crème de la crème of today’s video is EURAUD. A long time ago, I spotted a nice sideways trend and was waiting for a breakout ever since, to the upside to be accurate. The breakout happened yesterday and ended 4 months of a boring sideways trend. According to Price Action, that is a strong, long-term buy signal, the one that should come as a reward for patient traders. Lets see how this one will work out.

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

IMF Expects Precious Metals Index to Rise

IMF’s economic outlook for 2020 is less grim, but the more distant future is more worrisome. Therefore, the precious metals index is expected to rise.

October’s edition of the IMF’s World Economic Outlook Report is out! The main message that the report conveys is that the IMF now predicts a less severe global contraction than in 2020 but a slower recovery in 2021 . The global economy is projected to plunge 4.4 percent this year and rise 5.2 percent in the subsequent year, contrary to the -5.2 and 5.4 percent changes forecasted in June.

Unfortunately, the prospects for emerging countries, excluding China, have worsened, and the economic decline for 2020 is projected to be greater than previously estimated. As a result, the pandemic will reverse the progress made since the 1990s in reducing global poverty.

When it comes to the US economy, it is forecasted to contract by 4.3 percent this year before growing at 3.1 percent in 2021, compared to -8 percent and 4.5 percent seen a few months ago. However, the reasons for the celebration are limited, as these projections could be revised down soon.

You see, the problem is that the second wave of the coronavirus cases (see the chart below) is hurting the employment rate again.

As the chart below points out, the number of Americans who applied for unemployment benefits has recently risen to the highest level over the last few weeks.

Even though the IMF’s near-term projection improved, another issue is that the baseline forecast envisages growth to slow down into the medium term , as the deep downturn this year will harm the supply potential. It means that the US will only modestly progress toward the 2020–25 path of economic activity projected before the epidemic .

Most importantly, the subdued outlook for medium-term growth comes with a significant projected increase in public debt stock. What is worrying is that the reduced potential output also implies a smaller mid-term tax base than previously anticipated, making repaying debts even more difficult.

Indeed, debt is an increasingly pressing problem all over the world , including the US. As a matter of fact, according to the IMF’s Fiscal Monitor , the debt-to-GDP ratio will stabilize next year everywhere but China and the US:

In 2020, government deficits are set to surge by an average of 9 percent of GDP, and global public debt is projected to approach 100 percent of GDP, a record high. Under the baseline assumptions of a healthy rebound in economic activity and low, stable interest rates, the global public debt ratio is expected to stabilize in 2021, on average, except in China and the United States.

However, public debt is not the only big problem in the US. Corporate indebtedness is also a worrying issue . In response to the coronavirus crisis, firms have also taken on more debt to cope with the reduced income and cash shortages, adding to the already high debt levels. Therefore, if the recovery is delayed, “liquidity pressures may morph into insolvencies,” according to the IMF’s Global Financial Stability Report . So far, the policy support limited the scale of bankruptcies. Still, the economists from the Bank of International Settlements predict that bankruptcies in advanced economies could rise from the baseline in 2019 by around 20 percent in 2021.

Implications for Gold

What does all the above mean for the gold market? Well, the improved near-term outlook for the US economy is not good news for the yellow metal. However, the slower expected growth in 2021 and beyond is becoming more positive. Notably, “the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks”. In other words, the uncertainties persist, which should support the safe-haven demand for gold as a result .

It is perhaps why the IMF expects that the precious metals index will increase by 28.4 percent in 2020 and by an additional 10.4 percent in 2021 amid the elevated risks and dovish monetary policy .

The growing coronavirus cases, subsequent worries about the already fragile recovery, US presidential election uncertainty have recently pushed gold prices above $1,900, as one can see in the chart below.

What is most important here is that the price of gold managed to rise above $1,900 again, despite the declining odds of a new fiscal stimulus before the elections and the resulting S&P 500 Index decrease. Gold’s decoupling from the stock market would increase its role as a safe-haven asset.

However, it might be the case that gold is just hovering around $1,900 right now, and it needs a fresh catalyst to continue its rally . Who knows, maybe the US presidential elections, which are likely to be contested, will provide such a trigger? We will elaborate on this later – stay tuned!

In order to enjoy our gold analyses we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

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

 

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

U.S. Stocks Set To Open Higher As Traders Still Hope For A Stimulus Deal

Coronavirus Aid Talks Continue

Yesterday, S&P 500 lost more than 1.5% on signs that U.S. Republicans and Democrats will not be able to reach consensus on the new coronavirus aid package deal before the November election.

Today, S&P 500 futures are gaining ground in premarket trading amid renewed hopes for a stimulus deal. On Monday, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin talked for about an hour and managed to narrow the gap between the positions of Republicans and Democrats.

Their talks will continue today, and traders hope that they will ultimately manage to agree to a new stimulus package. Failure to reach consensus on the new aid deal could lead to another sell-off.

Brexit Talks Have Stalled

EU and Britain continued to blame each other after they failed to reach consensus on the Brexit deal. However, it looks like both sides are not ready to walk away from the deal, and both EU and UK signaled that they were prepared to continue negotiations.

Despite the absence of any material progress, the market believes that the deal is imminent. EUR/USD and GBP/USD have gained ground in October as currency traders have mostly ignored Brexit risks. Meanwhile, stock traders are more focused on the U.S. stimulus deal and the second wave of coronavirus in Europe.

In this situation, a potential Brexit without a deal could turn into a real black swan event for markets as it looks like nobody is prepared for such a scenario.

U.S. Building Permits Increased By 5.2% In September

The U.S. has just provided Building Permits and Housing Starts reports for September. Housing Starts increased by 1.9% after declining by 6.7% in August (revised from -5.1%). Analysts expected that Housing Starts would grow by 2.8%.

Meanwhile, Building Permits grew by 5.2% compared to analyst consensus which called for growth of 1.8%. Back in August, Building Permits decreased by 0.5% (revised from-0.9%).

The housing sector remains a bright spot in the U.S. economy, and the new reports are bullish for stocks.

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

ConocoPhillips Agrees to Acquire Concho Resources for $9.7 Billion

ConocoPhillips, an independent oil and gas exploration company, said it will acquire the U.S. shale oil producer Concho Resources in an all-stock transaction valued at $9.7 billion.

Under the terms of the deal, each share of Concho Resources common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15% premium to closing share prices on October 13, the company said.

“The 15% premium for the acquiree compares favourably with recent transactions, such as Devon’s merger with WPX, but is modest by historical standards. Until recently, we would have considered a premium of 20%-30% to be the norm for an exploration and production company takeover,” said Dave Meats, director at Morningstar.

“But the environment for E&Ps has deteriorated recently, following the pandemic-related collapse in crude prices. And for Concho specifically, the upcoming presidential election could be more of a threat than it is for most shale companies because Concho has much more exposure to federal land than its peers do,” Meats added.

The transaction is expected to close in the first quarter of 2021.

ConocoPhillips shares ended 3.16% lower at $32.7 on Monday; the stock is down about 50% so far this year. Concho Resources shares closed 2.75% lower at $47.26 on Monday; the stock is down about 46% so far this year

ConocoPhillips stock forecast

Twelve analysts forecast the average price in 12 months at $47.91 with a high forecast of $56.00 and a low forecast of $37.00. The average price target represents a 46.51% increase from the last price of $32.70. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $47 with a high of $69 under a bull scenario and $23 under the worst-case scenario. Citigroup raised their stock price forecast to $39 from $37 and Truist Securities upped their price objective to $55 from $52.

Several other analysts have also recently commented on the stock. ConocoPhillips had its target price decreased by stock analysts at Bank of America to $46 from $50. The brokerage currently has a “neutral” rating on the energy producer’s stock. KeyCorp started coverage on ConocoPhillips, issuing an “overweight” rating and a $46.00 price objective for the company. At last, Raymond James raised their target price to $48 from $46 and gave the company an “outperform” rating.

Concho Resources stock forecast

Twelve analysts forecast the average price in 12 months at $67.73 with a high forecast of $79.00 and a low forecast of $55.00. The average price target represents a 43.31% increase from the last price of $47.26. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $64 with a high of $81 under a bull scenario and $22 under the worst-case scenario. Citigroup lowered their stock price forecast to $67 from $72 and JP Morgan establishes December 2021 price target of $68 vs December 2020 price target of $65.

Several other analysts have also recently commented on the stock. Concho Resources had its target price dropped by Bank of America to $65 from $70. The firm presently has a “buy” rating on the oil and natural gas company’s stock. Mizuho downgraded Concho Resources from a “buy” rating to a “neutral” rating and boosted their price target for the company from $68 to $69.

Analyst Comments

“ConocoPhillips’ (COP) announced the acquisition of Concho Resources (CXO) fortifies the company’s leadership position within US energy. Pro-forma, a diverse portfolio of low-cost resource + ESG focus differentiates COP in lower growth, returns focused shale ‘era.’,” said Devin McDermott, equity and commodities Strategist at Morgan Stanley.

“ConocoPhillips checks all the boxes for sustained outperformance: excellent management, disciplined investment, and consistent return of cash coupled with high quality, low-cost portfolio that can deliver an attractive combination of FCF and growth.”

“Attractive value proposition even in the current commodity price environment with leverage to any rally in oil and with resiliency should price remain low. Strong balance sheet. While management received some investor pushback in 2019 for building an $8 billion strategic cash balance, that disciplined strategy is paying off in 2020 – creating financial and strategic flexibility,” McDermott added.

Upside and Downside Risks to ConocoPhillips

Upside: 1) Higher commodity prices. 2) Upside to Alaska resource discovery. 3) Better well performance in Lower 48 – highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost inflation. 3) Alaska discovery has less potential resources than expected. 4) Federal acreage exposure in Alaska. 5) Worse than expected well results in the Eagle Ford, Permian, and Bakken.

Upside and Downside Risks to Concho Resources

Upside: 1) Reduced operating and development costs. 2) Consistent execution. 3) Non-core divestitures, with cash returned to shareholders – highlighted by Morgan Stanley.

Downside: 1) Downside to Permian natural gas price differentials. 2) Elevated non-operated spending. 3) Regulation preventing development on Federal acreage.

Check out FX Empire’s earnings calendar

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

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

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

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

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

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

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

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

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

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

Short-Term Outlook

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

Bullish Scenario

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

Bearish Scenario

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

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

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

European Equities: Capitol Hill, COVID-19, and Brexit Remain Key Areas of Focus

Economic Calendar:

Tuesday, 20th October

German PPI (MoM) (Sep)

Thursday, 22nd October

GfK German Consumer Climate (Nov)

Eurozone Consumer Confidence Flash

Friday, 23rd October

French Manufacturing PMI (Oct) Prelim

French Services PMI (Oct) Prelim

German Manufacturing PMI (Oct) Prelim

German Services PMI (Oct) Prelim

Eurozone Manufacturing PMI (Oct) Prelim

Eurozone Markit Composite PMI (Oct) Prelim

Eurozone Services PMI (Oct) Prelim

The Majors

It was a bearish start to the week for the European majors on Monday. The DAX30 fell by 0.42%, with the CAC40 and EuroStoxx600 seeing losses of 0.13% and 0.18% respectively.

A lack of economic data from the Eurozone left Brexit, COVID-19, and updates from Capitol Hill in focus on the day.

While hopes of a COVID-19 Stimulus package had provided early support, concerns over COVID-19 and Brexit weighed.

A reintroduction of lockdown measures in Europe raised concerns over the economic outlook, as did Brexit.

Following the British PM’s decision to end negotiations, the EU had yet to deliver a meaningful compromise in response to Johnson’s announcement. Downing Street had left the door ajar for further talks but not if the EU’s stance remained unchanged.

The Stats

It was a particularly quiet day on the Eurozone economic calendar. There were no material stats from the Eurozone to provide the majors with direction on Monday.

Ahead of the European open, economic data from China had provided the European majors some support going into the open.

The stats from China reflected the continued economic recovery from the COVID-19 shutdown, though GDP numbers fell short of forecasts.

From the U.S

It was also a particularly quiet day on the economic calendar, with no stats from the U.S to influence.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Continental bucked the trend, rising by 0.48%, while Daimler slid by 2.32% to lead the way down. BMW and Volkswagen saw modest losses of 0.03% and 0.06% respectively.

It was a bullish day for the banks, however. Deutsche Bank rose by 0.38%, with Commerzbank rallying by 1.99%

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.23% and by 0.60% respectively. Soc Gen led the way once more, however, with a 1.96% gain.

It was a mixed day for the French auto sector, with Peugeot rising by 0.16%, while Renault slipped by 0.25%.

Air France-KLM rallied by 7.36%, with Airbus SE gaining by 2.14%.

On the VIX Index

It was a 6th consecutive day in the green for the VIX. Following a 1.63% gain on Friday, the VIX rose by 6.46% on Monday to end the day at 29.18.

Hopes of a stimulus deal, following chatter from the weekend, faded on the day, sending the U.S majors into the red.

The Dow and S&P500 fell by 1.44% and by 1.65% respectively, with the NASDAQ ending the day down by 1.65%.

VIX 20/10/20 Daily Chart

The Day Ahead

It’s a relatively quiet day on the Eurozone economic calendar. German wholesale inflation figures for September are due out going into the European open.

The numbers are unlikely to influence, however, with COVID-19, geopolitics, and PBoC monetary policy in focus.

From the U.S, economic data is limited to housing sector figures for September. We would expect the markets to brush aside the numbers, with all eyes on Capitol Hill.

Democrat Nancy Pelosi had set a Tuesday deadline to reach a stimulus agreement before the Presidential Election. Negative sentiment towards the chances of a stimulus package weighed on the U.S majors on Monday. We can expect the European majors to come under pressure early on.

Ahead of the European, the PBoC is in action. The markets are expecting the PBoC to leave loan prime rates unchanged. Economic data from Monday supported a hold on monetary policy.

The Futures

In the futures markets, at the time of writing, the Dow was up by 158 points, while the DAX was down by 33.5 points.

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

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strengthens Over 11761.75, Weakens Under 11550.50

December E-mini NASDAQ-100 Index futures are trading sharply lower shortly before the close on Monday as traders express doubts that government policymakers will be able to agree on a new fiscal stimulus package that is needed to help keep the economy on the road to recovery.

At 20:46 GMT, December E-mini NASDAQ-100 Index futures are trading 11685.00, down 113.00 or -0.96%.

In other news, according to Reuters, Netflix Inc will tell investors on Tuesday how the ongoing COVID-19 pandemic affected membership in the third quarter – a period when analysts remain bullish on the company despite the return of live sports and more streaming competition. The video-streaming service was up around 1% ahead of its results on Tuesday.

Daily December E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 12249.00 will signal a resumption of the uptrend. The main trend officially turns down on a move through the last swing bottom at 11197.50.

The minor trend is down. This shifted momentum to the downside. The minor trend changed to down when sellers took out 11736.50.

The intermediate range is 12444.75 to 10656.50. Its retracement zone at 11761.75 to 11550.50 is currently being tested. Trader reaction to this zone will likely determine the near-term direction of the index.

The short-term range is 10656.50 to 12249.00. Its retracement zone at 11452.75 to 11264.75 is the next downside target.

Since the main trend is up, all retracement zones are potential support areas until the trend changes to down. The price action also suggests that investors may not be willing to chase the market higher, but instead may be looking for a value area.

Short-Term Outlook

We’re going to be watching trader reaction to 11761.75 early Tuesday since this is likely to set the tone for the session. Over the short-run, however, it’s probably best to watch 11761.75 and 11550.50.

Buyers may try to form a support base inside 11761.75 to 11550.50.

We are also confident that a break down under 11550.50 will not mean a major break is coming. Buyers are still likely to come in at 11452.75 to 11264.75.

We’re also pretty confident that new fiscal stimulus is coming, but we don’t know when, or even the size of the deal. In the meantime, investors may continue to probe the downside, looking for a value area. Basically, I still like the upside potential of this market, except I only want to buy at my price. I think chasing a rally is dangerous at this time and at current price levels.

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 – Momentum Shifted to Downside on Monday

December E-mini S&P 500 Index futures are trading lower late Monday as investors worried that they might not see a coronavirus economic stimulus deal before the November 3 presidential election. While House Speaker Nancy Pelosi said Sunday that she was optimistic legislation could be pushed through before the election, but that an agreement would have to come by Tuesday for that to happen.

At 19:46 GMT, December E-mini S&P 500 Index futures are at 3420.00, down 42.25 or -1.22%.

A spokesperson told Fox on Monday that the White House was “cautiously optimistic” that Pelosi was moving toward making a deal.

Daily December 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 3541.00 will signal a resumption of the uptrend. The main trend changes to down on a trade through 3198.00. This is highly unlikely but there is room for a normal 50% to 61.8% correction of the current rally.

The minor trend is down. This accounts for the shift in momentum. The minor trend changed to down when sellers took out the last swing bottom at 3431.50. The new minor swing top is 3508.50.

The short-term range is 3576.25 to 3198.00. The index is currently testing its retracement zone at 3431.75 to 3387.00. This area is controlling the near-term direction of the index.

The second minor range is 3198.00 to 3541.00. Its retracement zone at 3369.50 to 3329.00 is the second potential downside target.

Short-Term Outlook

Based on Monday’s price action, the direction of the market the next session will likely be determined by trader reaction to the short-term Fibonacci level at 3431.75. The near-term direction, however, will likely be determined by trader reaction to the 3431.75 to 3387.00 retracement zone. We have to leave some room due to the possibility of a support base forming.

Bullish Scenario

A sustained move over 3431.75 will indicate the presence of buyers. This move won’t get interesting unless buyers can overcome 3508.50.

Bearish Scenario

A sustained move under 3431.75 will signal the presence of sellers. This could lead to a labored break due to a series of retracement levels, but not necessarily a change in trend to down. The potential support levels include 3387.00, 3369.50 and 3329.03.

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

S&P 500 Price Forecast – Continue to Face Headwinds at 3500

The S&P 500 did rally a bit during the trading session on Monday, reaching towards the 3500 level. That is a large, round, psychologically significant figure that will attract a certain amount of attention, and it has caused a bit of a reaction every time we approach it. Furthermore, it is worth noting that the Thursday candlestick was a hammer, the Friday candlestick was a shooting star, and now the Monday candlestick is looking very much like one that is showing resistance as well. Because of this, the technical analysis looks like we are certainly looking at a range as well.

S&P 500 Video 20.10.20

This setup a nice trade for those of you looking towards short-term charts, as we can go back and forth and show opportunities in both directions. Although one could make an argument that we have just formed a “double top”, I think that is probably jumping the gun. I would anticipate that there is a lot of support below at the 3400 level, and it is likely that we would find the 50 day EMA reaching towards that area by the time we get there. All things being equal, we are still very much in an uptrend, so that is something worth paying attention to.

At this point, the market is focusing on the idea of whether or not we get some type of stimulus, and of course the value of the US dollar. If the US dollar continues to strengthen, then it is very likely that will continue to weigh upon the stock market.

Halliburton Posts Fourth Straight Loss in Q3 as Oil Rout Drags Demand

Halliburton Co, one of the world’s largest providers of products and services to the energy industry, reported a loss for the fourth consecutive time in the third quarter as demand slowdown due to the COVID-19 pandemic and lower oil prices have hurt businesses.

The U.S. largest hydraulic fracturing provider reported a net loss of $17 million, or $0.02 per diluted share, for the third quarter of 2020. This compares to a net loss for the second quarter of 2020 of $1.7 billion, or $1.91 per diluted share. Adjusted net income for the third quarter of 2020, excluding severance and other charges, was $100 million, or $0.11 per diluted share.

Halliburton’s total revenue in the third quarter of 2020 was $3.0 billion, a 7% decrease from revenue of $3.2 billion in the second quarter of 2020, the company said.

At the time of writing, Halliburton shares traded 3.55% higher at $12.68 on Monday; however, the stock is down about 50% so far this year.

Its rival, Schlumberger reported a loss for the third consecutive time in the September quarter as a prolonged period of lower crude prices due to COVID-19 disruptions caused clients to suspend drilling activities.

Executive comments

“The pace of activity declines in the international markets is slowing, while the North America industry structure continues to improve, and activity is stabilizing. We have a strong international business, a lean North America operation, and an efficient capital deployment strategy, all enabled by continued adoption of leading digital technologies that benefit our customers and Halliburton,” said Jeff Miller, Chairman, President and CEO.

“We believe executing on our strategic priorities will boost our earnings power reset and free cash flow generation today and as we power into and win the eventual recovery,” concluded Miller.

Halliburton stock forecast

Seventeen analysts forecast the average price in 12 months at $15.28 with a high forecast of $22.50 and a low forecast of $11.50. The average price target represents a 21.80% increase from the last price of $12.55. From those 17 equity analysts, five rated “Buy”, 11 rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $14 with a high of $20 under a bull scenario and $4 under the worst-case scenario. Halliburton’s stock price forecast has been raised by equity research analysts at Cowen and Company to $20 from $19.

Several other analysts have also recently commented on the stock. BMO Capital Markets initiated coverage on Halliburton, issuing a “market perform” rating and a $14 price objective for the company. Goldman Sachs Group raised Halliburton from a “buy” rating to a “conviction buy” rating in August. HSBC increased their stock price forecast to $13.70 from $9.50 and gave the company a “hold” rating in July.

Analyst Comments

“Outsized exposure to deteriorating North America (NAm) markets impacts Halliburton’s results more meaningfully vs. less exposed peers, in our view, and we continue to see greater downside revision risk for those focused on this market. Few bullets left to offset deteriorating fundamentals: Halliburton is winding down a major cost-cutting program in NAm, which suggests to us its ability to further cut overhead as US activity trends lower is limited,” said Connor Lynagh, equity analyst at Morgan Stanley.

“We believe the company’s exposure to areas in high demand (i.e. Ventilators, Patient Monitoring, CT and X-Ray) puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months.”

Upside and Downside Risks

Upside: 1) Signs of a bottom in NAm pressure pumping activity and pricing. 2) International contract awards. 3) Bolt-on M&A – highlighted by Morgan Stanley.

Downside: 1) Further pricing pressure and activity declines, particularly in Nam. 2) Undisciplined project bidding. 3) Failure to deliver on cost savings goals. 4) Commodity price/cyclical risk.

Check out FX Empire’s earnings calendar

Dollar Comes Back to the Bearish Territory

Nasdaq is still below dynamic and horizontal resistance

SP500 is on a good way to break crucial levels and go higher

DAX sharply bounces from the 12960 points

Dollar Index ignores the inverse head and shoulders and creates a flag. Situation here is bearish

EURUSD are flirting with important dynamic resistance

GBPUSD are one step from breaking 1,3 – the most important level in the past few weeks

AUDUSD with a small bullish correction but the main sentiment is very negative

EURAUD makes another attempt to escape from the long-term rectangle

EURCHF breaks crucial support and later tests it as a resistance. Pretty standard price action move

Gold tries to go higher but the upper line of the pennant looks well defended

U.S. Stocks Set To Open Higher On Renewed Stimulus Hopes

Traders Hope For A New Round Of Stimulus

Stimulus talks are back into spotlight as U.S. President Donald Trump has recently signaled that he wanted a bigger stimulus package. It remains to be seen whether Republicans will agree to such a deal, but Donald Trump stated that he could convince them.

The American economy clearly needs another round of economic stimulus, and the markets are convinced that Republicans and Democrats will ultimately agree to a compromise deal. However, the timing of such agreement is unclear so any indications that the deal may be coming soon are bullish for stocks.

Not surprisingly, S&P 500 futures are gaining ground in premarket trading as traders increase their stock purchases on hopes for a big coronavirus aid package.

Data From China Provides Additional Support To Stocks

Today, China reported that its GDP increased by 4.9% year-over-year in the third quarter. While analysts expected that GDP would grow by 5.2%, China’s growth is still impressive given the challenges posed by the pandemic.

Meanwhile, China’s Retail Sales increased by 3.3% year-over-year in September while Industrial Production grew by 6.9%, suggesting that Chinese economy continued to recover from the heavy blow dealt by the virus.

Many investors view China as an example of what will happen in other countries once they manage to contain the virus so positive data from China is usually bullish for stocks across the globe.

European Countries Introduce New Restrictions In Their Battle Against The Second Wave

European countries have so far managed to avoid nationwide lockdowns but new restrictions are introduced on a weekly basis.

Italy has provided its mayors with the power to shut public squares from 9 p.m. and introduced other curbs. UK is set to announce additional measures in Wales and Manchester as it tries to contain the growing number of daily cases. Ireland will also impose additional nationwide measures in the upcoming days.

At this point, the world markets have mostly ignored the potential negative impact from the second wave of the virus in Europe. While closures of pubs and gyms could be devastating for their owners, the negative impact on the whole economy is limited.

However, traders will continue to monitor the situation closely as potential nationwide lockdowns could deal huge damage to the European economy and cause a sell-off in the world markets.

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

S&P 500 Testing Critical Fractals after Bounce at 21 EMA

The S&P 500 made a critical break above the 21 ema zone. The bulls are in clear control but can price action break above the critical resistance trend line (orange)?

Let’s review the key decision zones and expected wave patterns on the S&P daily and 4 hour charts.

Price Charts and Technical Analysis

S&P 500 daily chart

The S&P 500 has made a break, pullback and bounce pattern at the 21 ema zone. Price action must now break above the resistance Fractal for a confirmed bullish continuation (green arrow) within wave 5 (pink). The main targets are at the round 30,000 level and 30,750.

If price action breaks below the 21 ema zone (orange arrow), then the wave 4 (pink) pattern is not completed. In that case, we expect price action to retrace and test the long-term moving averages.

A bullish bounce (blue arrows) at the support zone could confirm an ABC pattern via the wave 4 at a later point (pink 4’). A break below the long-term moving averages, however, would invalidate (red x) the bullis outlook.

On the 4 hour chart, price action must break above the resistance trend lines and fractals (orange line) for a bullish breakout (green arrows) within the wave 5 (purple). A break below the 21 ema zone could trigger a deeper retracement (orange arrows).

A bullish bounce (blue arrows) at the long-term moving averages support zone (blue boxes) could confirm a wave 4 at a later spot (4’ purple). But a break below that zone, however, indicates a bearish ABC (red) correction that could take the price way lower. This could indicate the start of a deeper correction.

S&P 500 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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

Could the DXY be Set to Move Higher as Election Night Approaches?

In less than a month, perhaps one of the most hotly contested and acrimonious presidential elections in recent memory is due to be held during a global pandemic and against a backdrop of civil unrest. On November 3, President Donald Trump will seek to maintain his grip on the reins of power for another four years as Democratic nominee Joe Biden hopes to unseat him.

A look back to 2016

What will this mean for the markets? It’s still anyone’s guess, but looking back to 2016’s election can perhaps provide us with an insight as to what may be in store. Some of you may remember that the recent bout of dollar strength we saw earlier this year at the height of the coronavirus crisis has only been eclipsed once this past decade. In mid-March, the DXY breached the 100 level to top out at around 103 by the end of the month. The last time the dollar rallied as hard was in the wake of the 2016 election following President Trump’s victory, where it topped out just shy of 104. To get anywhere near to those levels prior to that, you have to go all the way back to the end of 2002.

Weekly Chart of DXY going back to 2016. Source: Trading View.

Those of you following US equities back in 2016, will also recall what, at the time, seemed like a worrying sell-off, which hindsight has revealed to be a mere blip as markets shook off the shock of a Trump victory and promptly rallied to new highs. So, we had the risk-off combination of a dollar rally and equity sell-off until markets came to terms with the fact that the sky was not indeed falling, and that the new commander-in-chief may just be good for business. But will this time be as cut and dried?

A much more volatile 2020

As you can appreciate, what we have now is a much more volatile situation. What we’ve seen in the US since March is a V-shaped recovery in equities combined with a downturn in dollar strength. The US dollar index hit lows of 91.70 at the beginning of September and has been coiled up in a range between 91 and 94 since July. The S&P 500 is currently trading around 58% higher than it was at the lows in March (also up some 70% since the November 2016 sell-off during the last presidential election).

Meanwhile, the situation on the ground for your average American couldn’t be starker. US unemployment throughout 2016 hovered at around 4.5 million, while it currently finds itself at 7.9 million, having fallen from a staggering 14.7 million back in April. Despite resounding calls for more fiscal stimulus, the package of unemployment benefits known as the Cares Act was brought to a xclose at the end of July and now appears to be off the agenda until after the election.

US unemployment data 2016-2020.

The United States and its population finds itself in a much more precarious situation in 2020 than it did in 2016. Aside from the economic consequences of COVID-19 and a cyclical downturn that seemed to be on the cards from back in 2018, recent events have revealed it to be more polarized along ideological, racial and generational lines. Even something as seemingly objective as the science behind pandemics and how to stem their spread has become a highly politicised issue.

Markets haven’t priced in a chaotic election

But it’s the election itself that has market participants most concerned, with some fearing that a contested election result could result in nationwide disruption and market chaos. The distinctly uncollegiate first debate between Biden and Trump, in which neither candidate seemed willing to advise their more militant followers to stand down should a conclusive victor not emerge on the night, seemed to provide a confirmation of these concerns.

There has been a great rise in the casting of postal ballots due to changes in the law since 2016 to allow for, or expand, early voting by mail in certain states. These changes, coupled with the pandemic, mean that a certain contingent of voters (which skew slightly Democrat) have been casting their votes a month before the election. The manner in which postal ballots are processed makes it increasingly likely that a clear victor will not be announced on the night or even the morning after November 3.

This is particularly so if the numbers are close. In the event of anything other than a landslide for either candidate, we could see a situation in which Trump or Biden could refuse to concede defeat. Indeed, it has been reported that former presidential candidate, Hillary Clinton, has advised Biden to do just this and not concede on the night until all of the postal ballots are counted.

With US stock markets at or around their all-time highs and the DXY trading at 2-year lows, it’s becoming clear that markets have yet to fully price in the possibility that this election may not run as smoothly or be resolved as conclusively as the previous one was; and that’s despite the fact that Trump’s 2016 victory was something of a wild card that markets failed to foresee. The moral of the story?

Expect volatility to rise as the election draws near, and be prepared for surprises. Incidentally, this is true even if you don’t trade the dollar or equities. Even assets, like cryptocurrencies, which are usually removed from the above concerns, are likely to be shaken should we experience a messy and chaotic presidential election. Also, be aware that, excluding 2008, the US dollar has risen between 2% and 12% every year following a presidential election since 1980.

by Giles Coghlan, Chief Currency Analyst, HYCM

Trade with HYCM


About HYCM

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Philips Posts Better-Than-Expected Third-Quarter Profit; Target Price EUR 56 in Best Case

Philips, a leading European electrical engineering group, reported better-than-anticipated core earnings in the third quarter of this year as the COVID-19 pandemic boosted demand for hospital equipment with comparable sales rising 10% to 4.98 billion euros in the quarter.

Dutch health technology company said its income from continuing operations increased to EUR 341 million, compared to EUR 211 million in Q3 2019. Adjusted EBITA margin increased to 15.4% of sales, compared to 12.4% of sales in Q3 2019.

Philips said its third-quarter income from operations improved to EUR 476 million, compared to EUR 320 million in Q3 2019. EPS from continuing operations (diluted) amounted to EUR 0.37; Adjusted EPS increased to EUR 0.60, compared to EUR 0.46 in Q3 2019. Operating cash flow improved to EUR 770 million, compared to EUR 356 million in Q3 2019. The market consensus for core earnings was 630 million euros, on 4.82 billion euros of sales.

Philips forecasts average annual comparable sales growth of 5-6% and said next year its comparable sales will deliver low-single-digit growth, driven by solid growth in Diagnosis & Treatment and Personal Health. The company expects an Adjusted EBITA margin improvement of 60-80 basis points on average annually from 2021, reaching the high teens for the Group by 2025.

Philips shares traded closed 3.62% higher at EUR41.5 on Friday; the stock is down about 3% so far this year. At the time of writing, it was trading 1.3% higher at EUR 42.84.

Executive comments

“We are excited to continue our journey to create further value by improving growth and profitability, while recognizing that we are in very uncertain times, and with the assumption that the world economy will return to growth next year,” said CEO Frans van Houten.

“The new targets are underpinned by our strategic imperatives to further improve customer and operational excellence, boost growth in our core businesses through geographical expansion and more customer partnerships and win with innovative solutions along the health continuum. Our strategy to transform care along the health continuum – from healthy living and prevention to diagnosis and treatment, telehealth and home care – strongly resonates with customers and has been further validated during the COVID-19 pandemic.”

Philips stock forecast

Eleven analysts forecast the average price in 12 months at EUR 47.74 with a high forecast of EUR 56.00 and a low forecast of EUR 38.60. The average price target represents a 14.61% increase from the last price of EUR 41.65. From those 11 equity analysts, eight rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of EUR 48 with a high of EUR 64 under a bull scenario and EUR 33 under the worst-case scenario. Koninklijke Philips has been given a EUR 47.50 price target by research analysts at Goldman Sachs Group. The brokerage presently has a “buy” rating on the stock.

Several other analysts have also recently commented on the stock. Barclays set a EUR 51 target price on shares of Koninklijke Philips and gave the company a “buy” rating. Sanford C. Bernstein set a EUR 52 price objective and gave the stock a “buy” rating. JPMorgan Chase & Co. set a EUR 38.60 price objective and gave the stock a “neutral” rating. Deutsche Bank set a EUR 54 price objective and gave the stock a “buy” rating.

Analyst Comments

“Order Book Momentum: acceleration in order book growth for the Connected Care business (Ventilators, Patient Monitoring) should offset COVID-19 related pressures in Personal Health; stabilising sales developments over the near term. Margin Recovery: Outsized orders in Connected Care should drive operational leverage, while cost management initiatives in Personal Health and Diagnosis & Treatment helps limit pressures on EBITA margin,” said Michael Jungling, equity analyst at Morgan Stanley.

“Valuation: we believe the company’s exposure to areas in high demand (i.e. Ventilators, Patient Monitoring, CT and X-Ray) puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months.”

Upside and Downside Risks

Upside: 1) Product Launch Momentum: Momentum from on-going product launches and COVID-19 focused products drive topline growth and market share gains. 2) Online retail strategy: Growth in online consumer retail could accelerate organic growth, highlighted by Morgan Stanley.

Downside: 1) FX: EM currency volatility could be a source of headwinds on margins. 2) COVID-19: pressure on consumer and hospital budgets following a potential COVID-19 driven recession.

Check out FX Empire’s earnings calendar

European Equities: China Stats, COVID-19, and Geopolitics in Focus

Economic Calendar:

Tuesday, 20th October

German PPI (MoM) (Sep)

Thursday, 22nd October

GfK German Consumer Climate (Nov)

Eurozone Consumer Confidence Flash

Friday, 23rd October

French Manufacturing PMI (Oct) Prelim

French Services PMI (Oct) Prelim

German Manufacturing PMI (Oct) Prelim

German Services PMI (Oct) Prelim

Eurozone Manufacturing PMI (Oct) Prelim

Eurozone Markit Composite PMI (Oct) Prelim

Eurozone Services PMI (Oct) Prelim

The Majors

It was a bullish end to the week for the European majors on Friday. The CAC40 rallied by 2.03%, with the DAX30 and EuroStoxx600 seeing gains of 1.62% and 1.26% respectively.

Corporate earnings gave the European majors a much-needed boost on Friday to reverse most of Thursday’s losses.

Impressive earnings results for Daimler and LVMH contributed to the upside on the day.

The upside on the day came in spite of the continued spike in new COVID-19 cases, Brexit woes, and a lack of progress on Capitol Hill.

On Friday, Boris Johnson announced that trade talks with the EU are over following a failure to find common ground at the EU Summit.

From the U.S, lawmakers failed to agree on a COVID-19 stimulus bill, with the chances of a pre-election stimulus bill diminishing by the day.

Of greater immediate significance to the Eurozone’s economic recovery is the upward trend in new COVID-19 cases.

In France alone, more than 30,000 new cases had been reported in a single day as the government began reintroducing lockdown measures. As a result of the latest spike, the WHO warned that COVID-19 deaths could be 5 times higher than in April. The WHO’s projections come in response to the impact of governments easing containment measures in the summer.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. Key stats included Eurozone trade data and finalized September inflation figures.

The Eurozone’s trade surplus narrowed from €27.9bn to €14.7bn.

According to Eurostat,

  • Exports of goods to the rest of the world fell by 12.2%, compared with August 2019, to €156.3bn.
  • Imports from the rest of the world fell by 13.5%, compared with August 2019, to €141.6bn.
  • In August 2019, the trade surplus had stood at €14.4bn.
  • For the period January to August 2020, exports to the rest of the world fell by 12.4%, with imports down by 13.1%.
  • Intra-euro area trade fell by 12.3% when compared with the same period in 2019.

Inflation figures for the Eurozone also failed to impress at the end of the week, with annual inflation down by 0.3% in September. In August, annual inflation had been down by 0.2%.

According to Eurostat,

  • Greece (-2.3%), Cyprus (-1.9%), and Estonia (-1.3%) had the lowest annual rates of inflation.
  • The highest contribution to the annual euro area inflation came from food, alcohol, & tobacco (+0.34 pp) and services (+0.24pp).

From the U.S

It was a busier day on the economic calendar. Key stats included October consumer sentiment figures and September retail sales and industrial production figures.

In September, core retail sales rose by 1.5%, with retail sales jumping by 1.9%. Economists had forecast increases of 0.5% and 0.7% respectively.

Consumer sentiment also improved in October, with the Michigan Consumer Sentiment Index rising from 80.4 to 81.2. The improved sentiment came in spite of the dire labor market conditions.

Concerns over slowing employment growth, a jump in COVID-19 infections, and the absence of federal relief payments weighed on sentiment towards current conditions.

The Michigan Consumer Current Conditions Index, fell while the Expectations Index rose from 75.6 to 78.8, leading to the pickup in consumer sentiment.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler jumped by 4.63%, supported by impressive earnings results. Continental and Volkswagen saw gains of  2.51% and 2.17% respectively. BMW trailed, with a 1.60% rise.

It was a mixed day for the banks. Deutsche Bank rose by 2.01%, while Commerzbank fell by 1.26%

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.71% and by 1.32% respectively. Soc Gen led the way, however, rising by 1.96%.

It was a much better day for the French auto sector, with Peugeot and Renault seeing gains of 5.49% and 5.18% respectively.

Air France-KLM reversed Thursday’s 1.90% loss, with a 1.97% gain, with Airbus SE rallying by 4.13%.

On the VIX Index

It was a 5th consecutive day in the green for the VIX. Following a 2.16% gain on Thursday, the VIX rose by 1.63% to end the day at 27.41.

The Dow and S&P500 rose by 0.39% and by 0.01% respectively, while the NASDAQ ending the day down by 0.36%.

VIX 19/10/20 Daily Chart

The Day Ahead

It’s a particularly quiet day on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

The lack of stats will leave updates on COVID-19 and Brexit to influence.

From the U.S, there are also no material stats to provide direction late in the session. A lack of stats will leave the majors in the hands of chatter from Capitol Hill and the latest election polls.

Ahead of the European, 3rd quarter GDP figures from China will also set the tone.

The Futures

In the futures markets, at the time of writing, the Dow was up by 131 points, with the DAX up by 15.5 points.

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

Doji Clusters Show Clear Support Ranges On The S&P500

Clusters of Doji shaped candles have, for centuries, illustrated very clear levels of support/resistance in price action.  Whenever multiple Doji candles appear in a cluster-like formation, traders should pay attention to these levels as future support/resistance ranges for price action.  In the case of the S&P500 E-Mini Futures Daily Chart, we can clearly see three separate support zones – the highest one being right where price closed on Friday (near 3475).

As the US elections near, we do expect increased volatility to become a factor in the US markets.  Currently, our predictive modeling systems are suggesting a Bullish trend bias is in place in the markets.  Therefore, we expect the bias of the trend to continue to push higher.  Yet, these Doji Cluster support levels become very clear downside targets if increased volatility prompts any broad market rotation over the next few days/weeks. These three levels are :

  • 3445~3495
  • 3330~3390
  • 3185~3225

We are suggesting that IF any deeper market rotation takes place, support near these Doji Cluster levels would likely act as a major price floor – prompting some price support and a potential for a quick upside price reversal near these levels.  If the lowest level, near 3200, is breached by deeper price rotation, then a new price correction phase may setup.

Traders should use these levels to prepare for the expected volatility spike as we near the US elections.  We believe price will become more volatile as traders/investors attempt to reposition assets away from risk before the elections.  We are particularly concerned of a breakdown in the Technology sector related to recent threats to increase liability related to a special clause (230) that protects companies like Facebook and Twitter from the same Publisher Liability as major newspapers.

Given the renewed focus on these social media sites and the content posted/restricted on these sites, it appears they have become the target of investigations and the US Congress.  This could lead to some very big volatility spikes in the NASDAQ and the Technology sector over the next few weeks and months.  This could result in some very good trade setups as price levels may rotate wildly because of the elections and the pending decisions related to these social media firms.

Want to learn how we help traders stay ahead of these bigger trends and setups?  Visit www.TheTechnicalTraders.com to learn more about my swing trade alert and passive long-term signals services. Stay ahead of the market and protect your wealth by signing up today!

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

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

Netflix Stock Price Forecast Raised to $630 at Morgan Stanley; $840 in Best Case Scenario

Morgan Stanley raised their stock price forecast on Netflix to $630 from $600, assigning an “Overweight” rating to the Internet television network’s stock and foresees short and long-term benefits to Netflix growth and earnings power due to the changes brought on by the COVID-19 pandemic.

The world’s leading streaming entertainment service company is set to report its third-quarter results on October 20. According to Zacks Research, Netflix forecasts Q3 earnings to be $2.09 per share, implying over 40% of year-over-year growth, but the Zacks consensus estimate was pegged at $2.12 per share. The Zacks consensus estimate for September quarter revenues was pegged at $6.38 billion, over 20% higher than a year earlier.

“Price increases as a lagging indicator… Our ‘Overweight’ thesis assumes Netflix has additional pricing power. We believe signals that Netflix looks for before raising prices are engagement growth and falling churn, trends that indicate an increase in “value” delivered to the consumer. Recent price increases in Australia and Canada, 2% and 4% of the estimated paid member base respectively, indicate to us that engagement levels and engagement growth rates are likely high and accelerating in these markets,” said Benjamin Swinburne, equity analyst at Morgan Stanley.

“We realize the 2019 rate adjustments led to slightly more elevated churn levels, particularly in the US, that sustained into subsequent quarters. However, we believe Netflix’s competitive moat is perhaps deeper than ever today. Production delays due to (the) COVID-19 have likely impacted its competitors more significantly than Netflix. Finally, given the size of the base business price increases create substantial long-term value.”

Netflix’s shares closed 2.05% lower at $530.79 on Friday; however, the stock is up over 60% so far this year.

Twenty-six analysts forecast the average price in 12 months at $564.83 with a high forecast of $670.00 and a low forecast of $220.00. The average price target represents a 6.41% increase from the last price of $530.79. From those 26, 19 analysts rated “Buy”, four rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $840 under a bull scenario and $400 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Netflix had its price objective lifted by KeyCorp to $634 from $590. They currently have an overweight rating on the Internet television network’s stock.

Pivotal Research boosted their stock price forecast on shares of Netflix to $650 from $600 and gave the stock a buy rating. Loop Capital raised their price objective to $600 from $500 and gave the company a buy rating.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow Netflix (NFLX) to leverage content investments and drive margins,” Morgan Stanley’s Swinburne added.

“Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

The success of programming drives increased subscriber growth and pricing increases lead to revenue upside, driving – were highlighted by Morgan Stanley as two major downside risks.

Pricing increases drive elevated churn, increased competition drives higher pricing for exclusive content lowering margins, challenges in newer markets negatively impacts member growth expectations, were the major downside risks.

Check out FX Empire’s earnings calendar

E-mini S&P 500 Index (ES) Futures Technical Analysis – Trader Reaction to 3486.25 Sets the Tone on Monday

December E-mini S&P 500 Index futures edged lower on Friday, diverging from the benchmark cash index as investors remained disappointed by the lack of progress toward a fiscal stimulus deal. There was also an air of caution over the lack of clarity regarding the timeline for the development of a coronavirus vaccine. Underpinning prices however was a much better-than-expected retail sales report.

On Friday, December E-mini S&P 500 Index futures settled at 3462.25, down 13.25 or -0.38%.

In other news, third-quarter reporting season burst from the starting gate this week, with 49 of the companies in the S&P 500 having reported. Of those, 86% have cleared the low bar set by expectations, according to Refinitiv, Reuters reported.

Daily December E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 3541.00 will signal a resumption of the uptrend. The main trend will change to down on a move through 3198.00. This is highly unlikely, but the market is in a position to change the minor trend to down.

The minor trend is also up. A trade through 3431.50 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 3541.00 to 3431.50. The close under its 50% level or pivot at 3486.25 makes this level new resistance.

On the downside, the first target is the short-term Fibonacci level at 3431.75. This is followed by the short-term 50% level at 3387.00.

Short-Term Outlook

Our focus will be on 3486.25 on Monday because of the possibility of a secondary lower top. This would suggest the presence of counter-trend sellers.

If the selling pressure continues on Monday then look for the move to extend into the support cluster at 3431.75 to 3431.50. Since the main trend is up, we could see a technical bounce on the first test of this area, but if 3431.50 fails as support then look for the selling to possibly extend into the 50% level at 3387.00. A failure at this level will suggest a bigger break is coming.

Overcoming 3486.25 will signal the presence of buyers. This could create the momentum needed to challenge the top at 3541.00.

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

European Equities: A Week in Review – 06/10/20

The Majors

It was a bearish week for the European majors in the week ending 16th October.

The DAX fell by 1.09% to lead the way down, with the CAC40 and EuroStoxx600 seeing losses of 0.22% and 0.77% respectively.

With economic data on the lighter side in the week, it was geopolitics and COVID-19 that weighed on the majors.

A continued rise in new COVID-19 cases across the EU weighed heavily on the European majors in the week. The reintroduction of lockdown measures delivered greater uncertainty over the economic outlook.

Brexit woes also tested market risk sentiment, with the EU and the UK failing to progress towards a Brexit deal.

From the U.S, fading hopes of a COVID-19 stimulus Bill ahead of the U.S Presidential Election was also market negative.

It could have been much worse, however, with a Friday rally paring some of the losses from earlier in the week.

The Stats

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

In the early part of the week, ZEW Economic Sentiment figures for the Eurozone and Germany were in focus. Concerns over Brexit and the U.S Presidential Election led to a slide in the respective indicators for October.

Germany’s Economic Sentiment Indicator fell from 77.4 to 56.1, with the Eurozone’s falling from 73.9 to 52.3.

The focus then shifted to economic data from the Eurozone that included industrial production, inflation, and trade data.

In August, industrial production rose by just 0.7%, following a 5% jump in July. More significantly, however, was a marked narrowing in the Eurozone’s trade surplus. The surplus narrowed from €27.9bn to €14.7bn.

According to Eurostat,

  • Exports of goods to the rest of the world fell by 12.2%, compared with August 2019, to €156.3bn.
  • Imports from the rest of the world fell by 13.5%, compared with August 2019, to €141.6bn.
  • In August 2019, the trade surplus had stood at €14.4bn.
  • For the period January to August 2020, exports to the rest of the world fell by 12.4%, with imports down by 13.1%.
  • Intra-euro area trade fell by 12.3% when compared with the same period in 2019.

Inflation figures for the Eurozone also failed to impress at the end of the week, with annual inflation down to 0.3% in September. In August, annual inflation had been down by 0.2%.

According to Eurostat,

  • Greece (-2.3%), Cyprus (-1.9%), and Estonia (-1.3%) had the lowest annual rates of inflation.
  • The highest contribution to the annual euro area inflation came from food, alcohol, & tobacco (+0.34 pp) and services (+0.24pp).

From the U.S

It was a busy week on the economic data front.

Key stats included September’s inflation and retail sales figures, October manufacturing data, and the weekly jobless claims.

It was a mixed bag for the Dollar in the week. The annual rate of core inflation held steady at 1.7%. Month-on-month increases in consumer prices, however, were softer than in August.

Wholesale inflation was marginally better, with the producer price index rising by 0.4% in September. In August, wholesale prices had risen by 0.3%.

For October, the NY Empire State Manufacturing Index fell from 17.0 to 10.5, while the Philly Manufacturing Index rose from 15.0 to 32.3.

At the end of the week, retail sales and consumer sentiment figures were positive, supporting riskier assets.

In September, core retail sales rose by 1.5%, with retail sales jumping by 1.9%. Economists had forecast increases of 0.5% and 0.7% respectively.

Consumer sentiment also improved in October, with the Michigan Consumer Sentiment Index rising from 80.4 to 81.2. The improved sentiment came in spite of dire labor market conditions.

In the week ending 9th October, initial jobless claims came in at 898k, which was up from 845k from the week prior.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler rose by 0.25% and by 2.12% respectively, with Volkswagen eking out a 0.01% gain. BMW bucked the trend, however, sliding by 2.48%.

It was a bearish week for the banking sector. Commerzbank slid by 8.09, with Deutsche Bank ending the week down by 0.25%.

From the CAC, it was a particularly bearish week for the banks. BNP Paribas and Credit Agricole slid by 3.62% and by 4.30% respectively. Soc Gen saw a more modest 2.90% loss following last week’s 12.5% rally.

The French auto sector saw green, however. Peugeot rose by 3.22%, with Renault rallying by 4.74%.

Air France-KLM partially reversed an 11.25% gain from the previous week with a 6.07% slide, while Airbus fell by 3.65%.

On the VIX Index

It was the 3rd week in the green from 4 for the VIX. In the week ending 16th October, the VIX rose by 9.64%. Reversing a 9.52% loss from the previous week, the VIX ended the week at 27.41.

A lack of progress towards a U.S Stimulus Bill, rising COVID-19 cases, and uncertainty over the U.S Presidential Election supported the VIX.

Economic data delivered mixed signals, also raising concerns over the pace of the economic recovery.

In spite of the risks being tilted to the downside and the rise in the VIX, it was a positive week for the U.S majors. In the week ending 16th October, the S&P500 and the Dow rose by 0.07% and by 0.19% respectively. The NASDAQ led the way, however, gaining 0.79%.

VIX 17/10/20 Weekly Chart

The Week Ahead

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

After a quiet start to the week, consumer confidence figures for Germany and the Eurozone are in focus on Thursday.

With the latest spike in new COVID-19 cases, a marked decline in confidence will raise concerns regarding consumption.

At the end of the week, the focus will shift to October’s prelim private sector PMIs. Another fall in the services PMIs will be a test for the majors, with the ECB looking for a consumption-driven economic recovery.

We can expect manufacturing PMI numbers to also influence…

From elsewhere, 3rd quarter GDP numbers due out of China on Monday will set the tone for the week.

From the U.S, it’s a relatively quiet week on the economic data front. The weekly jobless claims on Thursday and private sector PMIs on Friday will influence.

Away from the economic calendar, U.S politics, COVID-19 news, and Brexit will also continue to provide direction.