E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Tech Up as Investors Buy Semiconductors

June E-mini NASDAQ-100 Index futures are trading higher shortly before the cash market close on Friday after President Trump’s China actions kept the trade deal intact.

During his news conference late in the session, Trump said he would take action to eliminate special treatment towards Hong Kong, however, he did not indicate the U.S. would pull out of the phase one trade agreement reached with China earlier this year. The news greenlit the late session rally as it eased trader concerns for the time being.

Technology sector investors celebrated the news by buying up semiconductor stocks. The iShares PHLX Semiconductor ETF (SOXX) jumped to its session high following the news conference, trading more than 2% higher.

Nvidia and Micron Technology shares advanced more than 2% each. However, among the biggest gainers in the ETF were Marvell Technologies and Lam Research, rising 6.7% and 2.9%, respectively.

At 19:46 GMT, June E-mini NASDAQ-100 Index futures are at 9537.00, up 76.75 or +0.81%.

Daily June 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 9604.00 will signal a resumption of the uptrend. The main trend will change to down on a move through the last main bottom at 8847.00.

The minor trend is down. This is controlling the short-term momentum. A trade through 9604.00 will change momentum to the upside, while a trade through 9172.50 will reaffirm the downtrend.

The first minor range is 9604.00 to 9172.50. Its 50% level at 9388.25 is support.

The second minor range is 8847.00 to 9604.00. Its 50% level at 9225.50 is additional support.

The short-term range is 8556.25 to 9604.00. Its retracement zone at 9080.00 to 8956.50 is a support zone.

Daily Swing Chart Technical Forecast

Into the close on Friday the key level that must hold is the first minor pivot at 9388.25.

A close near 9604.00 will put the index in a position to continue the rally early next week. If there is enough buying behind the move then look for the rally to possibly extend into the February 20 main top at 9780.50.

US Stock Market Overview – Stocks Whipsaw and Close Mixed Despite Mixed Economic Data

US stocks whipsawed between positive and negative territory ahead of the President’s press conference where he denounced Chinese actions. President Trump called COVID-19 the Wuhan virus, antagonizing the Chinese leadership. The Chicago PMI numbers came in worse than expected showing that manufacturing in the mid-west remains weak. The US personal savings rate hit a historic high, while spending tumbled. The Dow closed lower on the session while the S&P 500 and Nasdaq closed in the black. Sectors in the S&P 500 index were mixed, led higher by technology, real-estate was the worst-performing sector.

Total Energy Rigs Decline Buoying Oil

Oil prices rose into the close, climbing 5.6% for the week. Prices rose on Friday following a report from Baker Hughes which showed that the number of active U.S. rigs drilling for oil declined by 15 to 222 this week. The oil-rig count has now fallen for 11 weeks in a row, suggesting further declines in domestic natural gas output. The total active U.S. rig count, meanwhile, also fell by 17 to 301, according to Baker Hughes.

Manufacturing Declines

The Institute of Supply Management reported that the May Chicago PMI came in at 32.3 versus expectations it would rise to 40.0. This compares to 35.4 in April. That’s the weakest since 1982. Among the main five indicators, order backlogs and supplier deliveries saw the largest declines.

Personal Spending Falls while Savings Rise

The commerce department reported that the personal savings rate hit a historic 33% in April. The previous record savings rate was 17.3% in May 1975. U.S. consumer spending, the U.S. economy’s main engine, fell by a record 13.6% in April during coronavirus lockdowns, but there are signs that purchasing is slowly creeping up. Personal income, which includes wages, interest and dividends, increased 10.5% in April,. The jump reflected a sharp rise in government payments through federal rescue programs, primarily one-time household stimulus payments of $1,200.

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

US Stock Market Overview – Stocks Closed Lower as China Concerns Rise

US stocks moved lower Thursday as worse than expected economic data, reversed the trend in the S&P 500 index. President Trump announced that he planned to have a press conference on Friday that would discuss issues related to China. That took the wind out of the sales of investor sentiment. GDP contracted by more than expected, Durable Goods Orders tumbled as demand for transportation equipment collapsed. Initial jobless claims have decelerated but it still climbed by 2.1 million. Most sectors in the S&P 500 index were lower, despite the rally in the broader markets. Utilities were are defensive, were the best performing sector, cyclical bucked the trend. US yields were nearly unchanged on Thursday while oil prices rose following news that oil production continued to decline in the US. This helped buoy energy shares.

GDP Shrank More than Expected

GDP which is the broadest measure of economic health, fell at an annual rate of 5% in the Q1 a bigger decline than the 4.8% drop first estimated a month ago. It was the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008.

Durable Goods Orders Fell

US durable goods, plunged 17.2% in April after dropping 16.6% in March. Demand for transportation equipment collapsed by 47.3%. New orders of capital goods tumbled in April and shipments declined. Orders for non-defense capital goods excluding aircraft, which is a proxy for business spending, dropped 5.8% last month, according to the Commerce Department. Data for March was revised lower to show these so-called core capital goods orders falling 1.1% instead of dipping 0.1% as previously reported. Expectations had been for core capital goods orders diving 10.0% in April. Core capital goods orders dropped 1.3% year over year in April.

Jobless Claims Rise

Initial jobless claims totaled 2.1 million last week, the lowest total since the coronavirus crisis began. Expectations were for 2.05 million. The total represented a decrease of 323,000 from the previous week’s upwardly revised 2.438 million. Continuing claims, numbered 21.05 million, a clearer picture of how many workers are still sidelined. That number dropped sharply, falling 3.86 million from the previous week.

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

US Stock Market Overview – Stock Rally Lead By Financials, Travel Shares Also Rise

US Stocks surged higher as traders rotated out of the high flying technology shares and into value share, pushing the S&P 500 index further above the 200-day moving average. The Dow Industrials was the best performing sector. All sectors in the S&P 500 index were higher, led by Financial and Cyclicals, Utilities were the worst-performing sector in an up tape. Energy shares also lagged, as oil prices eased. Additional stimulus from the European Union and the Japanese government helped buoy riskier assets. US Rates edged slightly lower, which continued to help buoy the US mortgage market. Mortgage applications continued to rise climbing 9% in the latest week. The rotation was out of some of the large-cap technology shares which took a breather as travel-related shares which have been pummeled, rebounded sharply.

More Stimulus

The EU and Japanese governments gave riskier assets a one-two punch, helping to lift global equity bourses. The European Union announced a $2 trillion coronavirus response plan, including a massive pooling of national financial resources that, would deepen the bloc’s economic union. The proposal composed of a $824 billion recovery plan and 1.4 trillion budget over the next seven years. This news followed the release of Japan’s new stimulus plan.

Japan announced a stimulus package totaling $1.1 trillion as economic woes and eroding support for Prime Minister Abe’s government, pushed the government for aggressive measures.  Capital will be used to helping companies that are in trouble as well as, rent subsidies, and healthcare assistance.  It will be funded by a second supplementary budget.

Mortgage Applications Rise

Mortgage applications for new homes rose 9% last week from the previous week according to the Mortgage Bankers Association’s index. It was the sixth straight week of gains and a 54% recovery since early April. The 30-year fixed-rate mortgage has dropped 75-basis points since January. Homebuyers are getting a great deal over 30-years, The gains mirror an unexpectedly strong sales pace just reported for newly built homes in April. They were forecast to fall by 22% but instead rose nearly 1% for the month.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trend Up, But Momentum Shifted to Downside

June E-mini NASDAQ-100 Index futures are trading lower late in the session on Wednesday after traders hit the technology sector amid caution about simmering tensions between the United States and China at a time when governments are attempting to revive the economies in the midst of a coronavirus-driven recession.

Amazon.com, Microsoft Corp. and Facebook, Inc., which have led a recent rally, weighed on the tech-heavy NASDAQ, while healthcare and technology stocks – which outperformed in the coronavirus-led market slump – were among the S&P 500 sector indexes in the red.

At 18:42 GMT, June E-mini NASDAQ-100 Index futures are trading 9287.50, down 119.00 or -1.27%.

On a positive note, travel-related stocks beaten up by the government shutdowns, including airlines, cruise companies and hotel operators jumped between 2.4% and 4.5% after taking a beating earlier this year due to a virtual halt in global travel.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside on Wednesday. A trade through 9604.00 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 8847.00.

The minor trend is down. It turned down on Wednesday when sellers took out 9241.50. This move also shifted momentum to the downside.

The minor range is 8847.00 to 9604.00. Its 50% level at 9225.50 is controlling the price action on Wednesday.

The short-term range is 8556.25 to 9604.00. Its retracement zone at 9080.00 to 8956.50 is potential support. Since the main trend is up, buyers could come in on a test of this zone.

The main range is 9780.50 to 6628.75. Its retracement zone at 8576.50 to 8204.50 is controlling the longer-term direction of the index.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 9287.50, the direction of the June E-mini NASDAQ-100 Index into the close on Wednesday is likely to be determined by trader reaction to 9225.50.

Bullish Scenario

A sustained move over 9225.50 late in the session will indicate the presence of buyers. This is followed by 9388.25 then 9604.00.

Bearish Scenario

A sustained move under 9225.00 will signal the presence of sellers. This could trigger a further break into the short-term retracement zone at 9080.00 to 8956.50.

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

Midweek Market Drivers: Global Expand Of COVID-19, Situation In Europe, and US-China Tensions

The number of new COVID-19 cases across the globe has exceeded 5 million.

How the situation is evolving in the European Union?

Aside from Spain, which has had 1 blip of over  1,000, we’ve seen the most adversely affected see sub-1,000 new cases each day for 9 consecutive days. The most affected being France, Germany, Italy, and Spain.

We had some concerns over how quickly governments were easing lockdown measures. When we factor in the 2-week incubation period, these numbers are fairly positive. They should give the markets some hope that a 2nd wave can be avoided.

Governments are about a 4-5 day period and about a week out to convince the more pessimistic…

If we look at China as a base case that should also be supportive.

We can then also look at virus vaccine news that has also been market positive late last week and early this week.

It appears that the coronavirus crisis continues to hit the global economy dramatically.

In the meantime, are there any improvements?

From the economic data, shifting through May and June numbers, the focus remains on employment and business and consumer confidence figures.

In Germany this week, we saw both business and consumer confidence improve, coming off the back the easing of lockdown measures.

The key, however, remains labor market conditions, which need to materially improve to drive confidence and consumption.

Expect these to be the key areas of focus and to drive the market near-term.

A pickup in consumption would drive a service sector recovery that would then filter through to the manufacturing sector.

Despite positive forecasts, the US-China conflict continues to be in the spotlight. Also, the Chinese government introduced a new HK Securities Law.

How did these events affect the markets?

There was some skepticism over the phase 1 trade agreement. We then saw accusations fly over the cause of the coronavirus pandemic leading to a deterioration in relations.

China has responded with the HK Securities Law and the U.S government is expected to respond in kind this week. This could include sanctions.

The markets have been almost Teflon in the early part of the week. On Wednesday morning, however, we saw risk appetite tested, as focus shifted back to the U.S – China tensions.

This shift in focus came as Trump announced that the U.S will respond to China’s plans for HK.

Let’s see what happens there. Beijing is not going to sit back this time around, not after the year-and-a-half that it took to come up with a phase 1 trade agreement.

Risk appetite will be tested. We do have COVID-19 news to keep the markets buoyed and there is also vaccine talk to provide support.

U.S China tensions, that relationship isn’t going to improve any time soon. Could you imagine a China-Russia alliance against the U.S and anyone else who wants to jump on Trump’s bandwagon?

That would certainly give the markets a rough time, particularly with Iran there in the Middle East as well.

It seems like the US-China tensions do not influence the markets significantly.

Meanwhile, is there anything else notable in regards to commodities and geopolitics?

Other than COVID-19, vaccines, and U.S China relations, there’s very little else to consider from a global financial market perspective.

There is one thing to consider, however, looking further down the track. Will the markets be as optimistic about the economic recovery once June stats begin to come out.

We saw May’s economic indicators show economic activity pickup from the depths of the abyss in April figures.

If we see June numbers fall off from May, then that optimism will come into question. May would have seen a larger pickup just due to the fact that economies were reopening.

I’m not convinced that the global economy will recover as quickly as the markets suggest. When you look at the equity markets and the rebound in the Aussie Dollar and Loonie. These are quite big moves when considering the doom and gloom ahead.

So, let’s see what happens when we begin to see June numbers…

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

U.S. Stocks Set To Open Higher As Optimism Prevails

Traders Hope For Recovery As Economies Continue To Reopen

S&P 500 futures are gaining about 1% in premarket trading as traders believe that the index will be able to settle firmly above the 3000 level and continue the current upside trend.

Yesterday, stocks experienced some pressure closer to the end of the trading day, and NASDAQ almost lost all the gains that it made at the beginning of the trading session. However, this sell-off did not turn into something more serious, and the market is in a good mood again.

The economic activity in the world continues to increase, and the hard-hit services sector sees some light at the end of the tunnel as more countries plan to open their borders for tourism.

While cross-border tourism is out of question for the leaders in the number of coronavirus cases like U.S., Brazil or Russia, Europeans will soon have a chance to travel to some of their favorite holiday destinations, increasing demand for energy and services.

EU Is Set To Present A Post-Coronavirus Recovery Plan

EU plans to distribute 500 billion euros in grants and 250 billion euros in loans to help its members recover from the coronavirus crisis.

This is a much-needed boost for the European economy as it faces a very tough year. Today, the European Central Bank President Christine Lagarde stated that the euro zone economy would shrink by 8 – 12% in 2020 due to the negative impact of the coronavirus pandemic.

The news of the EU recovery plan provided support to markets around the world since EU is heavily involved in trade and the improvement in its economy will benefit multinational companies.

Hong Kong Tensions Continue To Increase

At this point, the market completely ignores the rapid deterioration of the U.S. – China relations but the situation may change as China continues to press for the new legislation in Hong Kong.

On Wednesday, Hong Kong police arrested 300 protesters as tensions increased ahead of the vote for the new law which will further curb Hong Kong’s freedoms.

The U.S. has already promised to react, and the market awaits for the details of the U.S. response. In my opinion, stocks may experience a sell-off in case China announces significant counter-measures, while the U.S. sanctions alone may not be a sufficient catalyst for a correction.

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

European Shares Higher as New Stimulus Package Optimism Outweighs US-China Tensions

Asian shares finished mixed as investors focused on the regional turmoil in Hong Kong, but European shares are edging higher on Wednesday as investors eyed a fresh European Union stimulus plan. Meanwhile in the United States investors continue to remain optimistic over the reopening of the economy and progress toward a coronavirus vaccine. Nonetheless, the trade was a little tentative at all global exchanges on simmering U.S.-China tensions.

At 09:40 GMT, the UK’s FTSE 100 is trading 6160.20, up 92.44 or +1.52%. Germany’s Dax is at 11706.36, up 201.71 or +1.75% and France’s CAC 40 Index is trading 4699.60, up 93.36 or +2.03%.

Meanwhile, the pan-European STOXX 600 rose 0.3%, hovering near an 11-week high hit in the previous session, led by hard-hit banking, travel and leisure, and auto sectors.

The easing of lockdowns in many European countries and improving economic data have spurred buying in the growth-exposed cyclical sectors in recent weeks, putting European stocks on course for a modest 2.9% gain in May.

European Commission Prepares to Unveil New Stimulus Plan

Euro Zone stocks were also supported as the European Commission (EC) prepares to unveil a plan to help the EU economy recover from its coronavirus slump with a mix of grants, loans and guarantees exceeding 1 trillion Euros.

Hopes for a coordinated fiscal response to the coronavirus crisis have been boosted since France and Germany made proposals for a 500-billion-Euro Recovery Fund.

UK Midcaps Hit 11-Week High on Reopening Optimism

British midcaps hit an 11-week high on Wednesday as hopes of an economic recovery with the easing of coronavirus lockdowns offset concerns about growing political unrest in Hong Kong over Beijing’s proposed national security laws.

The domestically-focused FTSE 250 gained 1.2%, rising for an eighth straight session as thousands of retailers prepared to reopen from June 1 from a months-long shutdown that has crushed the UK economy.

UK Prime Minister Boris Johnson Faces Political Battle

In the U.K., pressure is mounting on U.K. Prime Minister Boris Johnson as a political battle over the position of his top aide Dominic Cummings, who is accused of breaking U.K. lockdown rules, intensifies. Cummings has refused to apologize and Boris Johnson has backed his advisor, despite widespread calls for Cummings to resign.

Dow Futures Surge in Pre-Market Trade

U.S. stock futures pointed to more gains at Wednesday’s open as optimism about the reopening of the economy and a potential coronavirus vaccine offset concerns about rising U.S.-China relations.

Dow futures pointed to an implied open of more than 400 points. The S&P 500 and NASDAQ futures also implied solid gains at the open.

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

S&P 500 Technical Analysis: Is A Blow-Off Top Setting Up

Our research team has become increasingly concerned that the US Fed support for the markets has pushed price levels well above true valuation levels and that a risk of a downside price move is still rather high.  Recently, we published a research article highlighting our Adaptive Dynamic Learning (ADL) predictive modeling system results showing the US stock market was 12% to 15% overvalued based on our ADL results.  Today, Tuesday, May 26, the markets opened much higher which extends that true valuation gap.

We understand that everyone expects the markets to go back to where they were before the COVID-19 virus event happened – and that is likely going to happen over time.  Our research team believes the disruption of the global economy over the past 70+ days will result in a very difficult Q2: 2020 and some very big downside numbers.  Globally, we believe the disruption to the consumer and services sector has been strong enough to really disrupt forward expectations and earnings capabilities.  We’ve been warning our friends and followers to be very cautious of this upside price trend as the Fed is driving prices higher while the foundations of the global economy (consumers, services, goods, and retail) continue to crumble away.

Our biggest concern is a sharp downside rotation related to overvalued markets and sudden news or a new economic event that disrupts forward expectations.  Obviously, Q2 data will likely be a big concern for many, yet we believe something else could act as a catalyst for a reversion event.  Possibly global political news?  Possibly some type of extended collateral damage related to the global economy? Possibly something related to earnings expectations going forward through the rest of 2020 and beyond?  We believe things are not “back to normal” at this stage of the recovery and we believe the markets are moderately over-extended at this time.

ES ADL PREDICTIVE MODELING WEEKLY CHART

This Weekly ES (S&P500 E-Mini Futures) chart shows our ADL predictive modeling system’s expected future price level targets which suggest the current market price level is 12% to 15% (or more) above these target levels. Remember, the ADL system uses a custom price mapping technology that is designed to identify “price/technical DNA markers” within historical data – then attempt to map out future price level activity and track the highest probable outcomes of these price DNA markers.  The objective of this research tool is to show us what type of price activity is highly probable based on historical data and predictive modeling research.  This unique trigger on the ES chart consisted of 5 historical DNA markers and suggests a future probability of 70% to 87% regarding future price target levels.

One aspect of our research while using the ADL predictive modeling system and our other tools it the concept of “price anomalies”.  These are rallies or sell-offs that extend beyond support or resistance levels and when price levels trend away from ADL predicted target levels.  We created the term “price anomaly” and explain it to our members as “some external force is pushing the price above or below the projected target level.  Once this force abates or diminishes, the price will likely move, very quickly, to levels near the ADL predicted target levels.”.

Currently, the US Fed is engaging in a moderate support effort for the US stock market and it is reportedly buying $5+ billion a day in bonds and assets.  Although it may seem impossible to fight the fed, we believe the markets (like nature) are almost impossible to fool and control.  We believe that price will react to market conditions and that future price rotation (both up and down) will continue to be more volatile than many traders expect.

CUSTOM VOLATILITY INDEX WEEKLY CHART

This Custom Volatility Index chart highlights the extremely low levels recently established by the COVID-19 market sell-off.  These new low levels have created the deepest sell-off levels on this chart in 20+ years.  It has also established a new, highly volatile, downward price channel that our researchers are following to help us determine where resistance will likely be found.

We believe a new downward price rotation is setting up for some time in the near future that will establish a tighter price channel and assist us in determining when and where the ultimate price bottom will setup and complete.  With the VIX levels still near 27~29, we are certain that volatility has not decreased even though price levels have attempted a solid recovery over the past 8+ weeks.

CUSTOM SMART CASH INDEX WEEKLY CHART

This Weekly Custom Smart Cash Index chart highlights the true function of price within the US stock market and highlights the overall weakness still at play within the current markets.  Even though the NQ has rallied to near all-time highs, the Smart Cash Index is showing the broader market is still rather weak and that recent price activity has stalled into a sideways/flag formation.  The broader market buying that took place near the end of March 2020 and throughout April 2020 has stalled.  The Fed became the market for the past 8+ weeks and as the Fed diminishes its activity, it will be up to the markets to manage trends and future expectations going forward.

Our researchers are concerned that a sudden breakdown in the Smart Cash index may prompt a bigger downside price move in the global markets.  Our research team has continued to issue warnings to our members to run protective stops on any open long positions, to properly size trades to avoid excessive risks and to properly hedge your trading using precious metals, miners, and Bonds.  In short, these risks are very real.  You can still make a profit trading the long side of the markets, but we suggest that you take all the necessary steps to protect your trades.

CUSTOM US STOCK MARKET INDEX WEEKLY CHART

This last Weekly Custom US Stock Market chart highlights two very important levels related to our Fibonacci Price Amplitude Arcs.  These arcs represent critical Fibonacci support and resistance levels that arc across time and price levels.  It is important to understand these levels will present very real inflections in price – at least we expect them to create price inflections.

Currently, there is the YELLOW Fibonacci price arc that is acting as resistance near the current highs and the MAGENTA Fibonacci price arc that is much longer-term.  This longer-term Fibonacci price arc may be stronger than the current shorter-term arc.  Our researchers believe the current Fibonacci arc levels on this chart will prompt price to “flag out” in a sideways price channel before potentially breaking downward.

As we continue to watch for weakness across these charts and trends, we urge skilled technical traders to be prepared for a sharp spike in volatility over the next 4+ weeks.  It appears we are only 2 to 4+ weeks away from reaching these major price inflection points.  Currently, we believe a downside move is the most probable outcome based on our ADL predictive modeling system results as well as the technical patterns seen on these charts.

Overall, we believe the increased volatility levels in the US stock market will present some incredible trading opportunities for technical traders.  Big swings, near-perfect technical patterns and setups, quick profits, and broader sector rotations.  This is the type of market where skilled technical traders can really enjoy a target-rich environment.  We just have to be selective in how we determine when to enter trades and to not take excessive risks.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Has to Close Over 9406.25 to Avoid Trouble

June E-mini NASDAQ-100 Index futures surged early in the session on Tuesday before backing off from their highs shortly after the mid-session. The rally was powered by optimism about a potential coronavirus vaccine and a rebirth in business activity that helped nervous investors shrug off festering U.S.-China tensions. The technology-based index was also charged by a jump in the benchmark S&P 500 Index over the psychological 3000 level.

At 18:19 GMT, June E-mini NASDAQ-100 Index futures are trading 9456.50, up 50.25 or +0.53%.

NASDAQ stock U.S. biotech group Novavax Inc. climbed 13.3% as it joined the race to test coronavirus vaccine candidates on humans and enrolled its first participants. Merck & Co. Inc. added 1.9% as it announced plans to develop two separate vaccines.

Despite the solid two month rally there are still skeptics. With macroeconomic data pointing at a deep recession, analysts warned the financial markets could be betting on too fast a recovery.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. It was confirmed earlier on Tuesday when buyers took out last week’s high. The trend will change to down on a move through 8847.00.

The minor trend is also up. A trade through 9241.50 changes the minor trend to down. This will also shift momentum to the downside.

The main range is 9780.50 to 6628.75. Its retracement zone at 8576.50 to 8204.50 is the longer-term support.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 9456.50, the direction of the June E-mini NASDAQ-100 Index into the close is likely to be determined by trader reaction to Friday’s close at 9406.25.

Bullish Scenario

Holding above 9406.25 will indicate the presence of buyers. If this can create some upside momentum late in the day then look for a retest of the intraday high at 9604.00. Taking out this level will indicate the buying is getting stronger with the February 20 top at 9780.50 the next likely upside target.

Bearish Scenario

A sustained move under 9406.25 will signal the return of sellers. A close under this level will form a potentially bearish closing price reversal top. If confirmed then look for the start of a 2 to 3 correction. It won’t change the main trend but it will shift momentum to the downside and could lead to a 50% correction of the rally from 8847.00.

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

Optimism Prevailed Last Week, but Have US Stocks Moved Too Far, Too Fast?

The major U.S. stock indexes finished higher last week on optimism over the reopening of the states’ economies and some positive developments in the quest to find a vaccine for coronavirus. That was in the beginning of the week. Later in the week, prices retreated as caution returned due to geopolitical tensions as China announced a plan to impose a new security law on Hong Kong and as a U.S. Senate bill was introduced that could force Chinese firms to delist from U.S. exchanges.

Over the short-run, it looks as if these issues are going to be a source of volatility, but longer-term, the huge government fiscal and Federal Reserve monetary stimulus packages should help investors weather the storm. However, traders do face headwinds due to simmering U.S.-China relations that could lead to a new “Cold War”. Furthermore, there is also the possibility of a second-wave of coronavirus cases that would wreak havoc on the already devastated economy.

Last week, the benchmark S&P 500 Index settled at 2955.45, up 91.75 or +3.20%. The blue chip Dow Jones Industrial Average finished at 24465.16, up 779.74 or +3.29% and the technology-based NASDAQ Composite closed at 9324.59, up 310.03 or +3.44%.

The World Has Changed Just Three Months Since the All-Time Highs Were Reached

The world is very different now, and the key fundamental conditions investors were watching in February have changed. At that time, investors were worried about whether the economy could stand to continue to add upwards of 200K new jobs each month to sustain the longest expansion in history.

Some experts saw the economy as “too hot”, but no one foresaw a global pandemic and ensuing unprecedented health-crisis-driven recession. Just like no one predicted the markets would turn from bull to bear in a matter of weeks, no one forecast solid week after week gains of more-than-30% over the past two months. This move has prompted the analysts at Morningstar Direct to call the rally since March 23, the strongest “bear-market rally” in the last 75 years and the sharpest two-month gain for the S&P 500 since before 1990.

Looking Ahead …

This weekend, the analysts at Edward Jones asked the question:  Has the market come too, too fast? Here are their three takeaways to consider:

This rally is based on the future, not the present.

The stock market is forward-looking. The market sold off in February and March because of the uncertainty around the growing pandemic and anticipation of a resulting recession. Stocks are now rallying on expectations that have leaped forward to the reopening of the economy and a rebound in GDP and corporate profits. Furthermore, the incoming economic data has been somewhat backward-looking.

Recoveries Take Time.

The stock market can and will move faster than the economy, but the two are connected, and over time, the path for the economy sets the foundation for market performance over the broader term.

It took 3.5 years for GDP to recover following the Great Recession of ‘08/’09, corporate profits rebounded more quickly, supporting solid stock market gains in 2009 and 2010.

There is reason to be optimistic while also realistic.

The pendulum of market sentiment has swung decidedly more positive lately. The market is pricing in a somewhat smooth re-opening of the economy. This essentially means that evidence of setbacks or slower progress pose potential risks in the near-term.

While we acknowledge that the size and duration of the current rally has been a pleasant surprise, we don’t expect it to persist at the same pace or magnitude uninterrupted. We anticipate headlines on the coronavirus, economic and earnings data to display a mixture of encouraging green shoots as well as periodic setbacks. This being said, continue to have appropriate and realistic expectations for near-term market swings and longer-term returns.

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

The Week Ahead – Geopolitics, Central Banks and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 22nd May. In the week prior, 57 stats had also been in focus.

For the Dollar:

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

A quiet 1st half of the week leaves May consumer confidence figures in focus on Tuesday. The markets will be looking for a pickup in confidence as the government eases lockdown measures. A continued rise in jobless claims, however, may lead to softer than anticipated numbers.

In the 2nd half of the week, April durable goods orders and weekly jobless claims will be in focus on Thursday.

While the markets may be able to stomach a slide in durable goods order, the weekly jobless claims will need to slide back considerably.

At the end of the week, April inflation figures, personal spending, and May’s Chicago PMI will also be in focus.

Barring any downward revision, we would expect 2nd estimate GDP numbers to have a muted impact on Thursday.

Other stats in the week include the April housing sector and trade data and finalized Michigan consumer sentiment figures. Expect the markets to also brush these numbers aside in the week.

Outside of the numbers, we will expect chatter from Capitol Hill and COVID-19 numbers to remain key drivers. On the monetary policy front, FOMC members will also draw more attention. At the end of the week, FED Chair Powell delivers a speech to wrap things up.

The Dollar Spot Index ended the week down by 0.54% to 99.863.

For the EUR:

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

In the 1st half of the week, key stats include German business and consumer confidence figures and 2nd estimate GDP numbers on Monday.

Barring a downward revision from 1st estimates, expect the consumer and business confidence figures to have a greater impact.

The markets will then need to look ahead to a relatively busy Friday.

Key stats include German and French retail sales figures for April and 2nd estimate GDP numbers from France.

The data is unlikely to have a material impact on the EUR, however. With the Eurozone in lockdown throughout April, the markets should be able to look beyond any dire numbers.

Over the course of the week, prelim May inflation figures are also due out but will have little influence.

For the EUR, a continued easing in lockdown measures and a downward trend in new COVID-19 cases is a must.

From the ECB, ECB President Lagarde is due to speak on Wednesday ahead of the ECB Financial stability review. Expect EUR sensitivity.

The EUR/USD ended the week up by 0.75% to $1.0901.

For the Pound:

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

There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and COVID-19 news updates.

We’ve seen the Pound under tremendous pressure as a result of the lack of progress on Brexit.

Boris Johnson has stated that, in spite of the lockdown, there would be no extension to the transition period. Based on progress to date, the chances of a hard Brexit have increased as a result. A change in stance by the British PM and the Pound would find support, else expect a reversal of last week’s gains.

Brexit news from the weekend was Pound negative…

The GBP/USD ended the week up by 0.47% to $1.2173.

For the Loonie:

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

For the Loonie, however, the markets will need to wait until Friday for economic data.

Key stats include 1st quarter GDP numbers and April’s RMPI.

We’ve seen GDP numbers from elsewhere. Will Canada see a similar contraction? Economists think so. It may be for that very reason that BoC Governor Poloz is scheduled to speak on Tuesday and Wednesday…

Away from the calendar, the upward trend in crude oil prices and a continued easing in lockdown measures remain Loonie positives. It remains to be seen whether crude can continue on the road to recovery, however.

Downside risks do remain. These include any signs of a 2nd wave pandemic and the U.S and China moving beyond words…

The Loonie ended the week up by 0.80% to C$1.3996 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another quiet week ahead for the Aussie Dollar.

Key stats include 1st quarter construction work done and private new CAPEX on Wednesday and Thursday.

On Friday, April private sector credit figures will also be in focus.

With the economy in meltdown going into April, however, we would expect the numbers to have a muted impact.

The RBA has talked of material contraction in the 2nd quarter, so don’t expect 1st quarter and April stats to do too much damage.

Expect COVID-19 updates and any U.S or China move to influence, however.

The Aussie Dollar ended the week up by 1.93% to $0.6537.

For the Kiwi Dollar:

It’s another relatively quiet week ahead on the economic data front.  Key stats include April trade figures on Tuesday and May business confidence figures on Thursday.

The RBNZ downplayed the market optimism in its last policy statement. That should limit any material upside for the Kiwi Dollar from the stats.

While trade data has stood up well considering the economic lockdown, will business confidence see some improvement?

Concerns over global trade terms and tourism will certainly be two major issues that businesses will continue to face.

Outside of the numbers, the RBNZ Financial Stability Report Wednesday will draw attention. The Kiwi will also be sensitive to any chatter or action from Beijing and Capitol Hill.

The Kiwi Dollar ended the week up by 2.68% to $0.6094.

For the Japanese Yen:

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

The markets will need to wait until Friday for the numbers, however.

Key stats include May inflation figures and April industrial production and retail sales numbers.

With the Japanese government only just lifting the COVID-19 state of emergency, April figures are likely to be dire… There shouldn’t be too many surprises, however.

May inflation figures will also have little influence on the Yen. A pickup in crude oil prices will provide support but unlikely to be material, with consumption having tanked…

Outside of the numbers, risk sentiment will continue to influence, though it may be too soon for the Dollar to give up the safe-haven mantle…

The Japanese Yen ended the week down by 0.54% to ¥107.64 against the U.S Dollar.

Out of China

It’s another quiet week ahead on the economic data front. Economic data is limited to April’s industrial profits. No one is expecting any major rebound, which leaves the markets exposed to any accelerated decline…

Ultimately, the market focus will remain on COVID-19 news and moves by Beijing and Washington amidst the latest spat.

Beijing’s plans to impose a security law on HK will also need close monitoring… U.S President Trump has promised a strong U.S response to any such move.

The Chinese Yuan ended the week down by 0.39% to CNY7.1294 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit and lockdown measures remain the key areas of focus in the week ahead.

While the Pound found much-needed support last week, a lack of progress on Brexit will be an issue.

News hit the wires over the weekend of the EU beginning to prepare for a hard Brexit. This may price out the element of hope that has continued to support the Pound.

COVID-19 news will also be of influence, as the UK government struggles to contain the spread of the virus.

U.S Politics:

Rising tensions between the U.S and China will likely be a key driver in the week ahead.

If Trump signs the Bill to target Chinese companies, expect China to target U.S companies with heavy reliance on China…

The markets will also be watching to see how the U.S responds should China formally introduce the security law for HK.

The Coronavirus:

Easing measures will continue in the week.

We’ve yet to see a marked increase in the number of COVID-19 numbers across the EU or the U.S, though concerns will linger over what lies ahead. Some comfort will be taken from the fact that China reported zero new cases on Saturday.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. The downward trend in new coronavirus cases continues.
  3. Governments continue to progress with the easing of lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence and consumption… U.S Jobless claims figures released last week were disappointing, raising some doubt over how quickly the job markets will recover.

At the time of writing, the total number of coronavirus cases stood at 5,396,972, with the U.S reporting 1,666,246 cases to-date.

The Weekly Wrap – Optimism Delivered Riskier Assets a Boost as Lockdown Measures Eased

The Stats

It was a particularly busy week on the economic calendar, in the week ending 22nd May.

A total of 57 stats were monitored, following the 61 stats from the week prior.

Of the 57 stats, 28 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, however, just 24 of the stats reflected an upward trend from previous figures. Of the remaining 33, 31 stats reflected a deterioration from previous.

For the Greenback, it was the 1st week in the red out of 3. The U.S Dollar Spot Index fell by 0.54% to end the week at 99.863. In the previous week, the Dollar had risen by 0.67%.

COVID-19 news, geopolitics, and central bank chatter continued to be key drivers in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 5,297,959, rising from last Friday’s 4,617,740 total cases. Week-on-week, the total number of cases was up by 680,119, on a global basis. This was higher than the previous week’s increase of 616,865 in new cases.

In the U.S, the total rose by 163,260 to 1,645,094. In the week prior, the total number of new cases had risen by 163,330.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 19,110 to bring total infections to 872,494. In the previous week, the total number of new cases had risen by 29,514.

Out of the U.S

It was a relatively busy week on the economic calendar. On the economic calendar, however, the main area of focus was on the weekly jobless claims figures for the week ending 15th May.

Another 2.438m jump in jobless claims in the week tested risk sentiment and weighed on the Dollar.

While May’s prelim private sector PMIs were also out in the week, the numbers had a muted impact on the Dollar.

Housing sector conditions deteriorated drastically in April, by contrast, though much of this was attributed to the lockdown.

Existing new home sales slumped by 17.8%, in spite of U.S mortgage rates sitting at record lows.

FED Chair Powell had managed market expectations going into the week, talking of a slow economic recovery.

While the FOMC minutes and the FED Chair spoke of plenty of ammunition left to support the economy, rising tension between the U.S and China pressured the Dollar.

In the week, the House of Representatives passed a Bill to oust and ban Chinese companies from U.S exchanges.

China warned of retaliation and the rhetoric failed to ease over the course of the week.

In the equity markets, the Dow rose by 3.29%, with the NASDAQ and S&P500 gaining 3.44% and 3.20% respectively.

Out of the UK

It was a busy week on the economic calendar. April employment, inflation, and retail sales figures pinned the Pound back in the week.

A slower rate of contraction across the private sector failed to support a late rally in the Pound, with geopolitics in focus.

A lack of progress on Brexit and an extended lockdown were negatives for the Pound in the week. In spite of this, support kicked on off the back of Dollar weakness and hopes of a pickup in economic activity.

In the week, the Pound rose by 0.47% to $1.2173. The FTSE100 ended the week up by 3.90%, reversing a 2.29% loss from the previous week.

Out of the Eurozone

It was also a relatively busy week economic data front, with the stats skewed to the positive for once.

ZEW’s May economic sentiment and consumer confidence figures were in focus in the 1st half of the week.

In Germany and the Eurozone, economic sentiment amongst economists improved, with consumer confidence also improving across the Eurozone in May.

May’s prelim private sector PMIs also pointed to a possible bottoming out in April, which supported the EUR.

Positive stats, progress towards a COVID-19 recovery fund and a continued easing of lockdown measures delivered the upside in the week.

From the ECB, the monetary policy meeting minutes had a muted impact. There were no surprises, with the minutes continuing to call for fiscal support from member states.

For the week, the EUR rose by 0.75% to $1.0901, reversing a 0.18% loss from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 5.82%, with the CAC30 and EuroStoxx600 gaining 3.90% and 3.63% respectively.

Elsewhere

It was a particularly bullish week for the Aussie Dollar and the Kiwi Dollar, with a Friday pullback being the only day in the red.

In the week ending 22nd May, the Aussie Dollar rose by 1.93% to $0.6537, with the Kiwi Dollar up by 2.68% to $0.6094.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front.

There were no material stats to provide the Aussie Dollar with direction. That left the Aussie Dollar in the hands of market risk sentiment and the RBA meeting minutes from Tuesday.

While the minutes painted a grim picture, however, upbeat sentiment towards an easing of lockdown measures delivered the upside.

The gains came in spite of rising tensions between the U.S and China. There was also talk of positive results in early COVID-19 vaccine trials…

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included 1st quarter wholesale inflation and retail sales figures.

While the numbers were skewed to the negative, there was little interest in the Q1 figures.

Rising demand for commodities from China and an easing of global lockdown measures delivered the upside.

For the Loonie

It was a busy week on the economic calendar. Economic data was limited to March and April stats, however, that garnered little attention.

As expected, inflationary pressures eased further, with consumer prices on the slide in April.

The effects of COVID-19 were evident in March retail sales figures as well, which disappointed on Friday.

Ultimately, a jump in crude oil prices in the week, fueled by news of a jump in demand and falling output delivered the upside.

The markets are expecting demand to pick up as lockdown measures ease further. This was also positive for the Loonie in the week.

A sharp pullback on Friday limited the upside, however, as the Loonie slid back from C$1.38 levels.

The Loonie rose by 0.80% to end the week at C$1.3996.

For the Japanese Yen

It was a busy week on the data front. Key stats included 1st quarter GDP and April trade figures, and May private sector PMIs.

At the end of the week, April inflation figures were also in focus. It was a mixed bag on the data front, leaving the Yen in limbo.

While the economy contracted at a slower pace, trade data going into the 2nd quarter was particularly dire. Exports tumbled by 21.9%, with imports also in decline.

Private sector PMIs delivered little confidence on Thursday, with manufacturing sector activity contracting at a faster pace.

Adding more angst was the return of deflation in April, with core consumer prices falling by 0.2% year-on-year…

In spite of a pickup in market risk appetite in the week, the Yen failed to find support.

The Japanese Yen fell by 0.54% to end the week at ¥107.64. In the week prior, the Yen had fallen by 0.38% against the U.S Dollar.

Out of China

There were no stats in the week for the markets to consider. On the monetary policy front, the PBoC also left loan prime rates unchanged, leaving geopolitical risk in focus.

There was plenty to consider in the week as a Bill to oust Chinese firms from U.S exchanges progressed.

China responded with threats of its own before the news hit the wires on Friday of a new security law heading HK’s way. The law is set to ban acts against the government in a bid to end future protests. Unsurprisingly, the threat of more protests and riots weighed heavily on risk sentiment at the end of the week…

In the week ending 22nd May, the Yuan fell by 0.39% to CNY7.1294 against the Greenback.

The CSI300 and Hang Seng ending the week down by 2.27% and by 3.64% respectively. A Friday sell-off left the pair in the red as the markets responded to the news of China’s proposal to impose the security law on HK SAR.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Reversal Tops Indicating Top Heavy Market

June E-mini NASDAQ-100 Index futures settled higher on Friday after clawing back all of its earlier losses. Volume was extremely low as most major players took off early ahead of the long U.S. holiday. For the week, the cash market NASDAQ Composite rose more than 3%.

The NASDAQ Composite Index is down about 5% from its February 19 record high, helped in recent weeks by gains in Microsoft, Amazon, Facebook and other heavyweight companies seen coming out of the economic downturn stronger than their smaller rivals.

At Friday’s close, June E-mini NASDAQ-100 index futures were trading 9421.50, up 65.75 or +0.70%.

Prices were lower early in the session on Friday as investors gauged China-U.S. tensions and amid ongoing uncertainty about the pace of economic recovery from the coronavirus.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower with the formation of the closing price reversal top on Thursday and its subsequent confirmation earlier on Friday.

A trade through 9510.75 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 8847.00.

The minor trend is down. This is also a sign of a shift in momentum.

The minor range is 8847.00 to 9510.75. Its 50% level at 9178.75 is the next downside target.

The short-term range is 8556.25 to 9510.75. Its retracement zone at 9033.25 to 8920.75 is the second downside target.

Short-term Outlook

Last week there were two closing price reversal tops formed on the daily chart. One was negated, the other is still intact. The chart pattern isn’t indicating a change in trend, but it does suggest that the selling is greater than the buying at current price levels. This could lead to a two to three day counter-trend correction.

Simmering US-China Tensions Drag Wall Street Lower

The major U.S. stock indexes were down across the board on Thursday, a day after hitting two-month highs, on simmering U.S.-China trade relations, raising doubts about the trade deal reached early this year between the world’s two largest economies.

While earlier beefs with China centered on its responsibility in the spread of the coronavirus, this one is over Hong Kong. President Donald Trump said the United States would react strongly if China imposes national security laws for Hong Kong in response to last year’s often violent pro-democracy protests.

In the U.S. cash market on Thursday, the benchmark S&P 500 Index settled at 2948.51, down 23.10 or -0.88%. The blue chip Dow Jones Industrial Average finished at 24474.12, down 101.78 or -0.46% and the technology-based NASDAQ Composite closed at 9284.88, down 90.90 or -1.17%.

Earlier, Secretary of State Mike Pompeo criticized Beijing’s handling of the coronavirus outbreak, while a Chinese official said the country will not flinch from any escalation in tensions.

The current squabble between the world’s two largest economies over the coronavirus pandemic has raised doubts about the Phase 1 trade deal signed earlier this year, interrupting a rally on the U.S. stock market, Reuters reported.

“It seems like China is going to be used as a punching bag for the upcoming elections,” said Bob Shea, CEO and co-chief investment officer at TrimTabs Asset Management in New York.

“The White House has resolved to itself that it is more effective to swing at China than to salvage what was going to already be a watered-down Phase 1 trade deal. You don’t score any points for that,” Shea said.

The Internals

Advancing issues outnumbered declining ones on the NYSE by a 1.11-to-1 ratio; on NASDAQ, a 1.02-to-1 ratio favored decliners.

The S&P 500 posted five new 52-week highs and no new lows; the NASDAQ Composite recorded 51 new highs and four new lows.

Discount Retailer TJX Biggest Boost to S&P 500

Although the S&P 500 Index settled lower on Thursday, its losses were offset by an upbeat outlook from retailer TJX.

The discount chain’s shares jumped 7.6% to a more than two-month high and were the biggest boost to the benchmark S&P 500 after it flagged strong sales at its stores that had reopened post-coronavirus lockdowns.

Fall in Unemployment Claims Lifts Sentiment

A fall in unemployment claims from the previous week also lifted sentiment as the reading reaffirmed views that the worst of the pandemic’s damage on the labor market was over.

First-time filings for unemployment insurance totaled 2.44 million last week, about in line with economist estimates. That brings the total filings during the coronavirus pandemic to 38.6 million.

The report showed the trajectory of job losses has come down dramatically. Furthermore with states starting to reopen, we will see some jobs come back. We may actually see a few more weeks of bad jobless claims before we start to see things bottom out.

US Stock Market Overview – Stocks Slip on Weak Jobless Claims Data

US stocks were lower on Thursday as stocks took a break from their mid-week rally. Some of the drivers like Facebook and Amazon, which made fresh highs on Thursday, eased slightly into the close. Retail stocks were solid performers on Thursday as better than expected financial results buoyed the discretionary sector. Most sectors in the S&P 500 index were lower, led down by technology, cyclical bucked the trend. Initial jobless claims came out higher than expected while existing home sales tumbled in April. The Chinese tif with the United States continues to grow. Senators look to pass a bipartisan bill that would force Chinese firms to admit they are not controlled by the Chinese government for them to list their shares on a US exchange. The US pledge 1-billion dollars to AstraZeneca to help the company create a vaccine and distribute it.

Jobless Claims Rise

New Jobless Claims in the US  totaled 2.44 million last week according to the labor department. Expectations were for a rise of 2.4 million. Last week’s numbers were revised lower from 2.98 million to 2.69 million. In the nine weeks since the coronavirus-induced lockdown has closed large parts of the U.S. economy, some 38.6 million workers have filed claims.

Existing Home Sales Tumble

The US Existing home sales fell 17.8% month over month, and were down 17.2% year over year according to the National Association of Realtors. That puts the annualized pace at 4.33 million units, the slowest sales rate since September 2011. The supply of homes for sale fell 19.7% annually to 1.47 million units for sale at the end of April. That is the lowest April inventory figure ever.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Close Under 9485.50 Forms Reversal Top

June E-mini NASDAQ-100 Index futures are trading mixed on Thursday shortly after the cash market opening. The index traded lower early in the session on worries about simmering tensions between the United States and China, but recovered those losses after the release of the latest weekly jobless claims data. The numbers were still bad, but smaller than previous weeks, suggesting the curve may be flattening.

In other economic news, US Flash Manufacturing PMI and Flash Services PMI came in higher than expected, but remained in contraction territory. The Conference Board’s Leading Index was also lower, but better than the estimate. Existing Home Sales plunged but hit the forecast.

At 14:34 GMT, June E-mini NASDAQ-100 Index futures are trading 9412.00, down 82.00 or -1.05%.

Earlier in the session, Facebook rose 1.8% and reached a fresh record high. Amazon also hit an all-time high before falling from that level.

Daily June E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed earlier in the session. A trade through 9510.75 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 8847.00.

The minor trend is also up. A trade through 9273.00 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 8847.00 to 9510.75. Its 50% level at 9178.75 is the next downside target.

The short-term range is 8556.25 to 9510.75. Its retracement zone at 9033.50 to 8920.75 is the second downside target zone.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 9412.00, the direction of the June E-mini NASDAQ-100 Index the rest of the session on Thursday is likely to be determined by trader reaction to yesterday’s close at 9485.50.

Bearish Scenario

A sustained move under 9485.50 will indicate the presence of sellers. This will put the index in a position to form a potentially bearish closing price reversal top. This won’t change the trend to down, but it could trigger the start of a two to three day correction.

The first downside target is the minor bottom at 9273.00. Taking out this level will shift momentum to the downside with the next target the minor 50% level at 9178.75.

Bullish Scenario

A sustained move over 9485.00 will signal the presence of buyers. Taking out today’s intraday high at 9510.75 will signal a resumption of the uptrend with the February 20 main top at 9780.50 the next major upside target.

Critical Price Level Could Prompt A Big Move After The Holiday Weekend

As technical traders and researchers, we’ve been paying very close attention to the GREEN ARC Fibonacci resistance level on the SPY as a key level for the US stock market and any hope of a continued upside price rally.  The SPY has traded near this level for the past three weeks and appears to be attempting a bit of an upside breakout right now.  Yet, we understand a long holiday weekend is upon us in the US, Memorial Day, and after a big upside GAP on Monday, the US stock market has stalled over the past few days.

SPDR S&P500 ETF WEEKLY CHART

Our researchers believe this GREEN ARC is still acting as critical price resistance and believe the SPY may sell off into the end of the week resulting in a failed attempt to breach this key resistance level.  If this happens, the failed attempt to break this resistance could prompt a change in price trend and initiate a new downside price trend.  If this resistance level is broken by the end of this week, then we have a pretty solid indicator that continued bullish price trending may continue.

Absent of any real news that may drive the market trend this holiday weekend and with most of the US still in shutdown mode, we believe the US stock market has continued to trade within this no man’s land area for many weeks now.  From the end of April till now, we’ve seen moderate upside price action in certain sectors, yet other sectors continue to show signs of weakness.

TRANSPORTATION INDEX WEEKLY CHART

This Transportation Index Weekly chart is a perfect example of the weakness that is evident away from the S&P500, NASDAQ, and Dow Industrials.  Compare the last 6+ weeks of trading on this TRAN chart to the SPY chart above.  Notice that the TRAN chart shows a very congested sideways price channel (highlighted in YELLOW) as well as a much deeper upside price move from the lows near March 20.  While the US major indexes have rallied substantially, the broader market indexes are not experiencing the upside price advance and continue to suggest overall weakness.

This disconnect in the markets suggests speculation is driving the US major indexes higher and not real fundamental appreciation based on earnings and revenues.  When this speculation ends, typically when speculators realize the price has been driven a bit too high compared to reality, then the trend can change in an instant.

ISHARES RUSSELL 2000 ETF WEEKLY CHART

This IWM Russell 2000 ETF Weekly chart highlights a similarly week upside price rally since the March 20th bottom.  The WHITE LINE on this chart represents a support/resistance level from early trading low price levels in 2017.  Our research team believes these levels represent a very important support/resistance level for the Russell 2000 ETF as this level coincides with the GAP in price that was generated within the recent selloff on March 9, 2020.  That GAP cleared this key support/resistance level with a very big downside price move.  We believe this level will act as intense resistance as price attempts to fill the GAP.

Concluding Thoughts:

Overall, the US stock market has continued to trade within this no man’s land recently.  There have been some pretty decent upside price moves in certain sectors over the past few weeks.  Precious metals, certain travel/leisure stocks, and, of course, technology and services stocks.  Yet, we continue to warn our friends and followers to be very aware that the US stock market is far from immune to more downside price activity.  A deep selloff like we experienced will very often react with a “recovery move” – a dead cat bounce type of move.  While the NQ has been a big mover, these other sectors suggest we may be nearing a tipping point and we urge technical traders to stay very aware of the risks as we head into this long holiday weekend.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

US Recovery? Some Americans Spent Stimulus Money on Toys While 4 Million Skipped Mortgage Payments

U.S. stimulus checks were supposed to be spent on basic needs such as groceries, mortgage or rent. However, there is evidence that many Americans also spent their money on non-essentials including electronics, clothes and toys, according to major retailers. At the same time, the Mortgage Bankers Association reported that more than 4.1 million homeowners are temporarily skipping their mortgage payments.

Americans Stocked Up on Essentials Initially

During the first wave of stimulus checks, Americans used the money to stock up on essentials. In mid-April when the number of coronavirus cases was still climbing and the payments were initially distributed, “most people immediately spent on groceries,” said Stuart Sopp, CEO and founder of Current, a New York City-based mobile-banking startup.

In the next wave of payments, which occurred towards the end of April, more people used the funds “for everyday means.” That includes ordering more food delivery and takeout, and gas.

Some Americans Spent Stimulus Money on Non-Essentials

Both Walmart and Target saw increased consumer demand for discretionary goods in mid-April as the stimulus payments from the $2.2-trillion CARES Act flowed into Americans’ bank accounts, the companies’ CEOs said this week. Apple saw an uptick in demand for its products “across the board,” CEO Tim Cook said April 30.

At Walmart and Target, shoppers bought more TVs, electronics, gaming equipment and apparel. Walmart also saw increased demand for adult-sized bikes, MarketWatch reported.

“Call it relief spending, as it was heavily influenced by stimulus dollars, leading to sales increases in categories such as apparel, televisions, video games, sporting goods and toys,” Walmart CEO Doug McMillon said during the company’s earnings call Tuesday.

Target Corp. also experienced “a rapid increase in traffic and sales” for discretionary goods driven by the distribution of stimulus checks, CEO Brian Cornell said on the company’s Wednesday earnings call. “We certainly saw an uptick as we reported starting on April 15, as those checks arrived across America,” Cornell said on the company’s call.

Customers, he said, are “still seeing the benefits of the stimulus check.” People are shopping across all categories including apparel, which has been especially hard hit by the coronavirus-driven economic downturn.

Over Four Million Americans Skip Mortgage Payments as Coronavirus Hammers Finances

More than 4.1 million homeowners are temporarily skipping their mortgage payments as the coronavirus pandemic batters Americans’ finances, but the number of people needing assistance is beginning to slow.

A weekly survey from the Mortgage Bankers Association released Monday found that 8.16 percent of total loans are now in forbearance plans, up from 7.91 percent as of May 3. It was the smallest increase in forbearance since March 10, when the outbreak of the virus first paralyzed the nation’s economy.

Half of Working-Age Americans Might Not Have a Paycheck in May as Layoffs Surge

Fewer than half of working-age Americans could earn a paycheck in May as the coronavirus pandemic triggers millions of job losses.

Layoffs in April alone could push the unemployment rate to 16 percent, James Knightley chief international economist at ING, wrote in an analyst note last week. If an additional 10 million Americans file for benefits in May, that would push the unemployment rate to 22 percent – just below the peak of 25 percent in 1933 during the Great Depression.

How Will This Affect the Recovery

The past is the past and how Americans want to spend their money is nobody’s business, but the data may offer clues as to what the U.S. recovery will look like once the entire country ends its lockdown restrictions.

The current price action in the stock market suggests that investors are betting on a swift recovery. The fact that some consumers spent their stimulus checks on non-essentials suggests they were prepared for unemployment and all the other economic issues being caused by the spread of the virus.

If investors guessed right and the economy recovers quickly then it will look as if the government was right when it issued $2.2 trillion in stimulus. This may have actually stabilized the economy.

This implies that a second stimulus package, currently being debated in Congress, may be enough to solidify the economy and could put it on path for the widely anticipated swift recovery.

This sounds great on paper, however, there are still some unknowns that could delay or derail the recovery. They include a second wave of infections and the possibility of mortgage defaults.

A second wave of infections could be devastating to the economy because healthcare resources are already being taxed. Furthermore, this time, we may not see as many Americans willing to go back to practicing social distancing, which has been proven to be an effective method to control the spread of the virus.

A swift recovery will also be contingent upon whether homeowners can make up their skipped mortgage payments in a timely manner. If they continue to skip payments or even default on their mortgages then this could delay or derail the recovery.

In my opinion, a successful reopening of the economy and another round of stimulus checks will be necessary to keep the economy stable. Rising employment and more help from the Fed will be another necessity.

Falling short in any of these factors – a successful reopening, more stimulus from the government, rehiring the unemployed, Fed stimulus – could hurt the economy. This would increase the odds of a “W” recovery. Right now, investors are betting on a “V” recovery.

US ‘Re-Opening Stocks’ Attracting Buyers; Amazon, Facebook Hit Record Highs

The three major U.S. stock indexes posted their fourth gain in five sessions on Wednesday as investors continued to bet on a swift economic recovery from coronavirus-driven lockdowns and the potential for more stimulus measures from the Federal Reserve. The move took place despite a medical watchdog group downplaying the upbeat coronavirus results from Moderna Inc. that earlier in the week was a catalyst by a spectacular rally.

In the cash market, the benchmark S&P 500 Index settled at 2971.61, up 48.67 or +1.85%, the blue chip Dow Jones Industrial Average finished at 24575.90, up 369.04 or +1.65% and the technology-based NASDAQ Composite closed at 9375.78, up 190.68 or +2.45%.

The Internals

Gains were broad-based, with each of the 11 major S&P sectors on the plus side. The small-cap Russell 2000 Index, which usually leads gains out of a recession, outperformed the large-cap indexes, according to Reuters.

Advancing issues outnumbered declining ones on the NYSE by a 4.05-to-1 ratio; on the NASDAQ Composite, a 3.53-to-1 ratio favored advancers.

The S&P 500 posted 13 new 52-week highs and no new lows; the NASDAQ Composite recorded 74 new highs and nine new lows.

Money Moving into Growth, ‘Re-Opening Stocks’

Since the markets bottomed in late March, technology sector growth stocks have been the catalysts leading the rally. We are now seeing demand for the stocks of companies expected to benefit from the economy re-opening.

Amazon rose 1.98% to hit an all-time high to lead the market higher. Facebook gained 6.04% and reached record levels as well. Stocks that would benefit from the economy reopening also advanced Wednesday. MGM Resorts closed 8.84 higher while United Airlines rose 5.19%.

As states across the country begin to loosen restrictions, hopes for an economic rebound have grown. The NYSE Arca airlines index jumped 5.35% as Delta Air Lines Inc.’s chief executive officer said he was confident travel will return in the next 12 to 18 months.

Moderna Responds to Criticism of Its Coronavirus Results

Moderna would never put out data on its potential vaccine for the coronavirus that was different from “reality,” the biotech firm’s chairman told CNBC on Wednesday.

The comment came a day after health-care publication STAT News reported that some vaccine experts were skeptical of Moderna’s new vaccine data, saying it did not provide critical information to assess its effectiveness. The report sent Moderna’’ stock and the broader U.S. market lower.