European Equities: A Week in Review – 25/09/20

The Majors

It was a particularly bearish week for the European majors in the week ending 25th September. The CAC40 and DAX30 slid by 4.99% and by 4.93% respectively, with the EuroStoxx600, falling by 3.60%.

Another banking scandal, a fresh spike in new COVID-19 cases, geopolitics, and economic data left the majors deep in the red.

The Stats

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

Key stats included consumer and business confidence figures and prelim private sector PMIs for September.

Eurozone and German consumer confidence saw marginal improvements but not enough to impress. From Germany, business confidence also improved, while coming up short of forecasts.

Key in the week, however, was the prelim PMIs.

While manufacturing sector activity picked up in September, service sector activity slumped, raising concerns over the economic recovery.

France, Germany, and the Eurozone saw a contraction in the services sector. Partially offset by a pickup in manufacturing sector activity, private sector activity stalled in the Eurozone at the end of the quarter.

The Eurozone’s services PMI fell from 50.5 to 47.6, with the composite PMI declining from 51.9 to 50.1.

With the stats raising some red flags, the spike in new COVID-19 cases across Europe also weighed on risk sentiment. Concerns over the possible need to reintroduce lockdown measures left riskier assets in the deep red for the week.

From the U.S

It was a relatively quiet week. Key stats included the durable goods and core durable orders, weekly jobless claims, and September’s prelim private sector PMIs.

The stats were skewed to the negative, adding downward pressure on the majors later in the week.

While manufacturing sector activity picked up in September, service sector growth slowed at the end of the quarter. While steering clear of the 50 mark, the marginal fall in the services PMI was a red flag mid-week.

On Thursday, the jobless claims figures also disappointed. In the week ending 18th September, initial jobless claims came in at 870k, which was up from 866k in the week prior.

At the end of the week, durable goods and core durable goods orders delivered more disappointing numbers.

Durable goods orders and core durable goods orders both increased by 0.4% in August, falling well short of expectations.

While the stats provided direction in the week, central bank commentary also garnered plenty of attention.

FED Chair Powell delivered testimony through the 1st half of the week, calling for support from all levels of government. Powell also stated that plenty of uncertainty remains, with the containment of COVID-19 key to a sustainable economic recovery.

The Market Movers

From the DAX, it was a particularly bearish week for the auto sector. BMW and Volkswagen slid by 5.94% and by 5.47% to lead the way down. Continental and Daimler saw more modest losses of 0.42% and 2.33% respectively.

It was an even more bearish week for the banking sector. Commerzbank and Deutsche Bank tumbled by 10.71% and by 10.69% respectively.

From the CAC, things were not much better for the banks. BNP Paribas and Soc Gen tumbled by 12.57% and by 13.70% respectively, with Credit Agricole sliding by 11.60%.

For the banking sector, yet another scandal rocked bank stocks across the major exchanges. HSBC and Standard Chartered were among the banks that were in the news for the wrong reasons.

The French auto sector also struggled in the week. Peugeot and Renault ended the week down by 1.87% and by 4.73% respectively.

Air France-KLM was among the worst performers, however, tumbling by 19.1%, with Airbus down by 12.51%.

Rising new COVID-19 cases weighed heavily on travel stocks in the week, as concerns over the possible reintroduction of lockdown measures weighed.

On the VIX Index

It was back into the green for the week ending 25th September. Partially reversing a 3.87% fall from the week prior, the VIX rose by 2.13% to end the week at 26.38.

A 4th weekly loss for the S&P500 delivered the upside for VIX in the week.

For the week ending 25th September, the S&P500 and the Dow ended the week down by 0.63% and by 1.75% respectively. The NASDAQ ended the week up by 1.11%, with a 2.26% rally on Friday delivering the upside.

The Week Ahead

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

Through the 1st half of the week, prelim inflation figures are due out of France, Spain, Germany, and the Eurozone.

Following market concerns over deflationary pressures last time around, expect the numbers to influence.

Alongside Eurozone prelim inflation figures on Wednesday, German and French consumer spending and German unemployment figures will also influence.

The focus will then shift to September manufacturing PMIs for Italy and Spain. Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring deviation from prelim numbers, expect Italy and the Eurozone’s PMIs to have the greatest impact on Thursday.

Economic data from the U.S and from China will also provide direction in the week.

U.S consumer confidence, finalized GDP numbers, weekly jobless claims, ISM Manufacturing PMI and nonfarm payrolls, and the U.S unemployment rate are due out.

From China, September’s private sector PMIs on Thursday will also influence market risk appetite. The market’s favored Caixin Manufacturing PMI will have the greatest impact.

Away from the economic calendar, COVID-19 news, Brexit, and U.S-China chatter will also need monitoring.

S&P 500 Price Forecast – Stock Markets Showing Signs of Stability

The S&P 500 has shown itself to be rather resilient over the last couple of trading sessions, and the 3200 level now looks to be significant support. Looking at this chart, you can see that the market has bounced a bit during the day, after forming a very neutral candlestick on Thursday. The 200 day EMA sits at the 3132 level, so that is also an area that you should be paying attention to for potential support. Longer-term, it is very likely that this market will continue to go higher, but the question is whether or not it is going to take up right away? I do not think so. I think we probably get a bit of grinding back and forth, which quite frankly is good because that builds confidence in the market.

S&P 500 Video 28.09.20

One of the biggest problems we have going forward as the fact that we are heading into the election, and there are a lot of concerns about the uncertainty of that situation. Beyond that, we also have the coronavirus figures to continue to cause issues, so I am not overly excited about putting a ton of money into the market right now. Buying short-term dips makes sense, as long as we can stay above the 3200 level but keep in mind that it might be a bit difficult to break above the 50 day EMA at 3314. If we do, then we have the ability to go looking towards the 3400 level, but I anticipate this is going to be more choppy behavior for the next several weeks.

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

Morgan Stanley Raised Darden’s Price Target to $112 from $71

American multi-brand restaurant operator, Darden’s price target was raised to $112 from $71 with ‘Equal-weight’ stock rating, according to Morgan Stanley equity analyst John Glass, who also upgraded their EPS estimates to $4.68/$6.35 for the next two fiscal years.

On Thursday, Darden Restaurants reported total sales of $1.53 billion, a decrease of 28.4% driven by negative blended same-restaurant sales of 29.0% and partially offset by the addition of 14 net new restaurants. Reported diluted net earnings per share from continuing operations of $0.28 as compared to last year’s reported diluted net earnings per share of $1.38.

Darden reported adjusted diluted net earnings per share from continuing operations of $0.56, after excluding $0.28 related to corporate restructuring costs, as compared to reported diluted net earnings per share of $1.38.

The Company forecasts fiscal 2021 total sales of approximately 82% of prior year and EBITDA of $200 to $215 million.

“Best in class casual dining operator with a strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-COVID environment by improving margins and gaining market share. Lead brand Olive Garden (50% of sales) garners top consumer scores, and its comp sales have historically outpaced the industry,” Morgan Stanley’s John Glass added.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Industry uncertainty and relatively fairly valued shares, in our view, drive our EW rating weighed against DRI’s strong sales track record and operational leadership.”

At the time of writing, Darden stock traded 0.18% lower at $97.13 on Friday; however, the stock is down 10% so far this year.

Several other equity analysts have also updated their stock outlook. UBS raised their target price to $109 from $100; Wells Fargo upped their target price to $104 from $91; BofA Global Research upgraded their stock price forecast to $115 from $100; Truist Securities raised price target to $128 from $100; Stephens upped target price to $115 from $98; Guggenheim upgraded their stock price forecast to $133 from $119 and JP Morgan raised their target price to $105 from $82.

Twenty-four analysts forecast the average price in 12 months at $102.74 with a high forecast of $128.00 and a low forecast of $75.00. The average price target represents a 6.44% increase from the last price of $96.52. From those 24 equity analysts, 15 rated ‘Buy’, nine rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“In the last fiscal year pre-COVID, EBITDA margins were 14%. If/when sales recover to 100% of pre-COVID levels, there is theoretically another 100-150 bp of margin opportunity, subject to reinvestment needs and competitive intensity at that time,” Morgan Stanley’s Adam Jonas said.

“For now, we are comfortable underwriting the 15.5% by FY22, leading us to raise FY21/22 EPS estimates as described below, and raising our price target to $112, based on our CY22 estimate of $6.60 in EPS (or $1.4B EBITDA), and restoring the multiple to pre-COVID averages given this increased visibility. Our bull case factors in the case where EBITDA margins could reach 17%.”

Upside risks: 1) Company is able to significantly gain share. 2) OG/LH comps benefit from higher off-premise sales vs pre-COVID. 3) Margins expand above expected without compromising investments, highlighted by Morgan Stanley.

Downside risks: 1) Regional lockdowns and new virus outbreaks keep consumers from visiting dining rooms (by choice or mandate). 2) Off-premise margins deteriorate. 3) Cheddar’s integration remains challenged in a tough macro backdrop.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Trade Through 3268.25 Shifts Momentum to Upside

December E-mini S&P 500 Index futures are called lower based on the pre-market trade as investors remained skeptical of more fiscal stimulus needed to shore up a domestic economy hammered by the pandemic-driven recession.

At 13:24 GMT, December E-mini S&P 500 Index futures are trading 3226.75, down 11.25 or -0.35%.

After weeks of stalemate in talks over a fifth coronavirus relief bill, a key lawmaker said on Thursday Democrats in the U.S. House of Representatives were working on a $2.2 trillion package that could be voted on as early as next week.

Daily December E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but Thursday’s closing price reversal bottom is indicating a shift of momentum may be taking place.

A trade through 3198.00 will negate the closing price reversal bottom and signal a resumption of the downtrend.

A move through Thursday’s high at 3268.25 will confirm the closing price reversal chart pattern. This won’t change the main trend to up, but it could trigger the start of a 2 to 3 day counter-trend rally.

The main range is 2916.50 to 3576.25. The index is currently testing its retracement zone at 3246.50 to 3168.50. Trader reaction to this zone could determine the longer-term direction of the index.

The minor range is 3419.50 to 3198.00. Its 50% level at 3308.75 is the first upside target.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December E-mini S&P 500 Index on Friday is likely to be determined by trader reaction to the main 50% level at 3246.50.

Bearish Scenario

A sustained move under 3246.50 will indicate the presence of sellers. The first target is 3198.00. Taking out this level will signal a resumption of the downtrend which could lead to a quick test of a pair of main bottoms at 3184.75 and 3181.75, followed by the main Fibonacci level at 3168.50.

The Fib level at 3168.50 is a potential trigger point for an acceleration to the downside with the next target the main bottom at 3095.00.

Bullish Scenario

A sustained move over 3246.50 will signal the presence of buyers. This could lead to a quick test of 3268.25. Taking out this level will confirm the closing price reversal bottom. This could create the upside momentum needed to challenge the first minor 50% level at 3308.75.

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

U.S. Stocks Set To Open Lower As Durable Goods Orders Increase Less Than Expected

Coronavirus Aid Package Negotiations Are Set To Restart Again

U.S. Republicans and Democrats look ready to restart negotiations on the new coronavirus aid package. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi signaled that both sides were ready to discuss new proposals.

The U.S. economy clearly needs more stimulus to support consumer activity. However, traders are skeptical that a consensus can be reached, and S&P 500 futures are losing ground in premarket trading.

Previously, Republicans signaled that they were ready to vote for an aid package worth $1.3 trillion while Democrats proposed a package worth $2.2 trillion. There is a huge gap between the positions of two sides, and any deal will require big compromises from both parties.

WTI Oil Fails To Gain Upside Momentum Ahead Of The Weekend

Oil managed to stay close to the $40 level despite the recent market sell-off as declining inventories provided support to prices. At the same time, energy-related stocks had a terrible week, and S&P Energy Sector lost 8.5% in the first four days of this week.

The current market sentiment towards energy-related stocks is negative, and it looks like oil must go higher to provide some support to the beaten shares.

However, oil is under pressure due to problems with coronavirus in various parts of the world, and it remains to be seen whether traders will be willing to increase their bets on oil above the $40 level.

Durable Goods Orders Increase By 0.4%

U.S. has just provided Durable Goods Orders report for August which indicated that Durable Goods Orders increased by 0.4% month-over-month. The analyst consensus called for growth of 1.5%.

Excluding Transportation, Durable Goods Orders grew by 0.4% compared to analyst consensus of 1.2%.

Together with yesterday’s Initial Jobless Claims report, Durable Goods Orders report painted a picture of an economy that is slowing down after the initial rebound.

The key question is whether traders will bet that disappointing economic reports will push Republicans and Democrats to reach consensus on the new aid bill. If this happens, stocks may have material upside from current levels.

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

Daily Gold News: Short-Term Consolidation Following Recent Declines

The gold futures contract gained 0.45% on Thursday, as it fluctuated following the decline after breaking below the price level of $1,900. The market reached the lowest since late July. Gold keeps retracing its rally from around $1,800 to August 7 record high of $2,089.20 in reaction to U.S. dollar rally, among other factors. Gold also broke below its mid-August local low, as we can see on the daily chart (the chart includes today’s intraday data):

Gold is 0.5% lower this morning, as it is trading within yesterday’s daily trading range. What about the other precious metals? Silver gained 0.39% on Thursday and today it is 2.0% lower. Platinum lost 0.59% and today it is 1.1% lower. Palladium lost 1.39% yesterday and today it’s 2.0% lower. So precious metals are extending their downtrend this morning.

Yesterday’s Unemployment Claims release has been slightly worse than expected at 870,000 and the New Home Sales number has been better than expected at 1,011 million. The main stock market indexes went sideways following the recent decline.

Today we will get the Durable Goods Orders release at 8:30 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, September 25

  • 8:30 a.m. U.S. – Durable Goods Orders m/m, Core Durable Goods Orders m/m
  • 3:10 p.m. U.S. – FOMC Member Williams Speech

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

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

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

ConocoPhillips Forecasts a Recovery in Global Oil Demand; Stock Price Target $51

ConocoPhillips, an independent oil and gas exploration company, forecasts global demand for oil recovering to 100 million barrels per day and increasing from there on, a senior executive said on Thursday, Reuters reported.

According to the latest Reuters report, senior vice president Dominic Macklon said during a Question and Answer session with Raymond James said, “The view stands in contrast to that of rival BP Plc, which sees the coronavirus pandemic leaving a lasting effect on global energy demand, though ConocoPhillips still expects “quite a bit of uncertainty next year”.

Macklon added that ConocoPhillips’ capital spending for next year will be “somewhat below” its previously expected this year’s level of $6.6 billion.

ConocoPhillips shares closed 2.06% higher at $33.60 on Thursday. However, the stock is still down about 50% so far this year.

ConocoPhillips stock forecast

Twelve analysts forecast the average price in 12 months at $51.45 with a high forecast of $62.00 and a low forecast of $45.00. The average price target represents a 53.13% increase from the last price of $33.60. From those 12 equity analysts, 11 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $47 with a high of $69 under a bull scenario and $23 under the worst-case scenario. Wells Fargo raised their price target to $56 from $54; MKM Partners lowered their target price to $55 from $57 and Susquehanna cuts target price to $52 from $54.

A number of other equities research analysts have also recently issued reports on the stock. MKM Partners increased their target price on ConocoPhillips to $58 from $57 and gave the stock a “buy” rating in May. UBS Group increased their target price to $62 from $50 and gave the stock a “buy” rating in June. Raymond James increased their target price to $48 from $46 and gave the stock an “outperform” rating.

Analyst views

“COP 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 prices remain low,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

“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

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) Worse than expected well results in the Eagle Ford, Permian, and Bakken.

Check out FX Empire’s earnings calendar

European Equities: A Quiet Economic Calendar Leaves Geopolitics and COVID-19 in Focus

The Majors

It was a bearish day for the European majors on Thursday. The CAC40 and EuroStoxx600 fell by 0.83% and by 1.02% respectively, with the DAX30 ending the day down by 0.29%.

Economic data and the latest uptrend in new COVID-19 cases weighed on the majors, with the markets now expecting further stimulus to counter the sputtering economic recovery.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Germany’s IFO Business Climate Index and sub-index figures were in focus early in the European session.

In September, the Business Climate Index rose from 92.5 to 93.4. Economists had forecast a rise to 93.8. The current assessment sub-index rose from 87.9 to 89.2, with the expectations index up from 97.5 to 97.7.

By sector:

Manufacturing: The Business Climate Index saw a sizeable increase, with significantly fewer companies assessing their current business situation as difficult. More companies also expected that their business situation will improve.

Services: By contrast, the index fell for the 1st time in 5-months, as a result of weaker optimism. Firms viewed their current situation as marginally better.

Trade: Companies were considerably more satisfied with the current business situation, with many being more optimistic about the near-term.

Construction: The index was on the rise once more, with the current situation indicator hitting its highest level since March. While pessimism persisted, firms were less pessimistic than back in August.

From the U.S

It was a relatively busy day on the economic calendar. August new home sales and the weekly jobless claims figures were in focus late in the European session.

In August, new home sales rose by 4.8%, following a 13.9% spike in July. Economists had forecast a 0.1% decline, month-on-month.

More significantly, however, were the jobless claims figures.

In the week ending 21st September, initial jobless claims stood at 870k, which was up from 866k from the previous week. Economists had forecast 840k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Continental rallied by 3.53% to lead the way, with Daimler and Volkswagen rising by 1.60% and by 1.90% respectively. BMW saw a more modest 0.48% gain on the day.

It was a mixed day for the banks after the scandal-driven sell-off. Deutsche Bank rose by 0.46% while Commerzbank ended the day down by 0.87%.

From the CAC, bank stocks saw more losses. Credit Agricole and Soc Gen slid by 1.83% and by 2.61% respectively. BNP Paribas saw a relatively modest 0.94% loss, however.

It was also a bearish day for the French auto sector. Peugeot and Renault ended the day down by 0.55% and by 0.36% respectively.

Air France-KLM hit reverse once more, sliding by 6.77%, with Airbus SE ending the day down by 3.46%.

On the VIX Index

The VIX fell by 0.24% on Thursday. Following a 6.40% gain on Wednesday, the VIX ended the day at 28.51.

Disappointing economic data from the U.S weighed on the majors, while FED Chair Powell’s talk of more support provided a cushion for the U.S markets on the day.

The NASDAQ and S&P500 rose by 0.37% and by 0.30% respectively, with the Dow ending the day up by 0.20%

VIX 25/09/20 Hourly Chart

The Day Ahead

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

Late in the session, U.S durable goods and core durable goods will garner some interest, however.

With no stats to influence early on, geopolitics and COVID-19 will be the key drivers on the day. On the COVID-19 front, any talk of a reintroduction of restrictions would test support.

U.S – China tensions and Brexit chatter will also need monitoring.

The Futures

In the futures markets, at the time of writing, the Dow was up by 116 points, with the DAX up by 82.5 points.

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

Asia Pacific Indexes Chase Wall Street Higher in Early Trade on Friday

The major Asia Pacific stock indexes are expected to open steady to better on Friday in a cautious trade as investors react to the better-than-expected performance on Wall Street on Thursday. This follows steep losses the previous session.

Thursday Recap

The Asia-Pacific markets saw losses on Thursday, following an overnight drop on Wall Street.

Hong Kong’s Hang Seng Index fell 1.82% to close at 23,311.07. Mainland Chinese stocks slipped on the day, with the Shanghai Composite down 1.72% to approximately 3223.18 while the Shenzhen Component declined 2.238% to about 12,816.61.

The Taiex in Taiwan dropped 2.54% to close at 12,264.38. In Japan, the Nikkei 225 fell 1.11% to finish its trading day at 23,087.82 while the Topix Index shed 1.08% to close at 1,626.44.

Over in Australia, the S&P/ASX 200 declined 0.81% on the day to 5,875.90.

Tech Shares Led the Decline

Technology shares in Asia took a hit on Thursday, following losses seen by their counterparts stateside.

In Japan, conglomerate Softbank Group saw its stock drop 4.52%. Kakao in South Korea also fell 3.69%. In Hong Kong, shares of Chinese smartphone maker Xiaomi slipped 4.84% while Tencent declined 1.75%, with the Hang Seng Tech Index falling 3.35% on the day to 7,054.28. Meanwhile, Taiwan Semiconductor Manufacturing Company shares in Taiwan shed 2.42%.

Friday’s Early Forecast

Asian stocks were set to open steady to higher as a late Wall Street rally supported global sentiment although weak U.S. data and uncertainty about a stimulus package in Washington have kept a lid on confidence.

U.S. stocks ended positive in choppy trading on Thursday, led by a dogged comeback in the technology sector, having initially sold off on higher than expected unemployment claims.

In early Asian trade, Australia’s S&P/ASX 200 futures rose 0.12% and Japan’s Nikkei 225 futures added 0.13%. Hong Kong’s Hang Seng Index futures rose 0.45%.

In the U.S., Democrats in the U.S. House of Representatives are working on a $2.2 trillion coronavirus stimulus package that could be voted on as soon as next week, with House Speaker Nancy Pelosi reiterating she is ready to negotiate on it with the White House.

Keep An Eye on South Korea

Asia Pacific investors will be keeping an eye on South Korea after stocks fell on Thursday as tensions on the Korean Peninsula reignited.

The index lost 2.59% following reports that South Korea’s defense ministry said North Korea had killed a missing official from the South earlier this week.

Traders will be watching to see if the situation gets diffused or if it escalates. Although the broad-based index fell sharply, shares of South Korean defense firm Victek soared 25.13%.

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

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Small “W” Formation Suggests Bottom May Have Formed

Tech stocks are lifting the December E-mini NASDAQ-100 Index into the close on Thursday, suggesting a short-term bottom may be forming. Technically, the “W” formation is encouraging for bullish traders.

The tech-driven index is being supported as beaten-down shares gained favor after data showing a surge in the sale of new homes revived faith in the economic recovery even as U.S. jobless claims rose unexpectedly.

At 20:17 GMT, December E-mini NASDAQ-100 Index futures are trading 10893.25, up 64.25 or +0.59%.

Apple Inc, Amazon.com Inc, Nvidia Corp and Facebook Inc, among stocks which have outperformed at a time of increased economic uncertainty, all rose at least 9.0%.

Daily December E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 10656.50 will signal a resumption of the downtrend. A move through 11222.00 will change the main trend to up.

The main range is 9390.50 to 12444.75. The index is currently testing its retracement zone at 10917.50 to 10557.22. Trader reaction to this zone could determine the near-term direction of the index.

The minor range is 11539.00 to 10656.50. Its retracement zone at 11094.75 to 11199.75 is the next upside target. A trade through this zone could trigger an acceleration to the upside.

Short-Term Outlook

Although the December E-mini NASDAQ-100 Index did not form a closing price reversal bottom on Thursday, the price action was impressive enough to suggest a shift in momentum may be taking place. Currently, the market is in a position to close higher for the session, but it still has to overcome a number of retracement levels at 10917.75, 11094.75 and 11199.75 before challenging the main top at 11222.00.

The fact that buyers are trying to form a support base indicates the importance of the retracement zone at 10917.75 to 10557.25. Keep this in mind if seller eventually take out the bottom of this zone. It could trigger the start of a steep break.

So let’s just say the price action is impressive and could be the start of a support base and a potential change in trend over the short-run. However, keep in mind that the trend is still down and the index is vulnerable to an extreme breakdown under 10557.25.

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

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Watching 26685 – 26714 into Close

December E-mini Dow Jones Industrial Average futures are trading mixed late in the session on Thursday after posting a choppy, two-sided trade most of the session. The blue chip average was pressured early in the session as a surprise rise in weekly jobless claims signaled a slowdown in economic growth, but bargain-hunters stepped in to gobble-up cheap technology-related stocks to fuel a turnaround the market.

At 19:13 GMT, December E-mini Dow Jones Industrial Average futures are trading 26689, up 4 or +0.01%.

Dow constituents, considered a barometer of economic confidence, lagged the S&P 500 on Thursday as data showed 870,000 Americans applied for jobless benefits in the week-ended September 19, up from 866,000 in the previous week.

Daily December E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but the price action suggests momentum may be shifting to the upside.

A trade through 26407 will signal a resumption of the downtrend, but a close over 26685 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but it could signal the start of a 2 to 3 day counter-trend rally.

The main range is 24377 to 29050. The Dow is currently testing its retracement zone at 26714 to 26162. Trader reaction to this area could determine the near-term direction of the futures contract.

Short-Term Forecast

The direction of the December E-mini Dow Jones Industrial Average into the close will be determined by trader reaction to Wednesday’s close at 26685.

Bearish Scenario

A sustained move under 26685 will indicate the presence of sellers. This could lead to a late session retest of 26407, followed by the main Fibonacci level at 26162. This price is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 26685 will signal the presence of buyers. Overcoming the 50% level at 26714 will indicate the buying is getting stronger, leading to a possible rally into the short-term Fibonacci level at 27027.

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 – Reaction to 3231.25 Sets Tone into Close

December E-mini S&P 500 Index futures are edging higher late in the session on Thursday, led by a bounce in shares of Amazon.com and Apple, while uncertainty over more U.S. fiscal stimulus kept trading most issues muted.

Prices retreated early in the session as a surprise rise in weekly jobless claims signaled a slowdown in economic growth, but the move attracted enough buyers to turn the market higher with investors returning to the perceived safety of technology-related stocks.

At 18:40 GMT, December E-mini S&P 500 Index futures are trading 3249.75, up 18.50 or +0.57%.

Nine of the 11 major S&P 500 indexes were trading higher, with information technology leading gains. The S&P 500 briefly fell 10% below its intraday record high hit on September 2. If the benchmark index closes at that level, it will enter correction territory.

Daily December E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but there are signs that momentum may be getting ready to shift to the upside.

A trade through the intraday low at 3198.00 will signal a resumption of the downtrend. The main trend will change to up when buyers take out 3419.50. This is unlikely, however, the market is currently in a position to post a potentially bullish closing price reversal bottom. The chart pattern won’t change the trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.

The main range is 2916.50 to 3576.25. The index is currently testing its retracement zone at 3246.25 to 3168.50. This zone is likely to control the near-term direction of the index. Trader reaction to this zone will set the tone into the close.

The minor range is 3419.50 to 3198.00. Its 50% level or pivot at 3308.75 is the first potential upside target.

Short-Term Outlook

Based on the early price action, the direction of the December E-mini S&P 500 Index into the close will be determined by trader reaction to Wednesday’s close at 3231.25.

Bullish Scenario

A sustained move over 3231.25 will indicate the presence of buyers. Overcoming the main 50% level at 3246.50 will indicate the buying is getting stronger. If this creates enough late session momentum, we could see a test of the minor pivot at 3308.75.

Bearish Scenario

A sustained move under 3231.25 will signal the presence of sellers. This could lead to a retest of the intraday low at 3198.00, followed by a pair of main bottoms at 3184.75 and 3181.75 and the main Fibonacci level at 3168.50.

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

S&P 500 Price Forecast – Stock Markets Trying to Find Bottom

The S&P 500 went back and forth during the trading session on Thursday, as we have reached towards the 3200 level before bouncing a bit. That is a large, round, psychologically significant figure, and of course is an area that people have seen both buyers and sellers again. The 200 day EMA sits underneath there as well and is starting to grind to the upside. Looking at the candlestick so far, the market does look a bit supportive, but I think given enough time we will find plenty of reasons to get involved. As things stand right now, it has been all about the US dollar, and the inverse correlation.

S&P 500 Video 25.09.20

Looking at the chart, if we were to break down below the 200 day EMA it then opens up the possibility of reaching down towards the 3000 level. However, if we turn around and rally a bit during the trading session, we could go looking towards the 50 day EMA, which I think also offers resistance. You need to pay attention to the US Dollar Index more than anything else, as the correlation has been almost exact over the last several weeks. If the US dollar rallies, that means that the stock market should more than likely selloff.

On the other hand, if the US dollar starts to fall apart, that could have people looking towards the stock market and risk appetite in order to get involved. We are still in an uptrend, so keep that in mind but there is a lot of concern out there over the last couple of weeks. As we get closer to the election, we will probably have more noise.

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

AMC Entertainment Shares Plunge Over 4% as Company Eyes to Sell 15 Million Shares

Pandemic-hit AMC Entertainment Holdings’ shares fell more than 4% on Thursday after it said that it has reached an agreement with some banks to sell nearly 15 million shares as COVID-19 pandemic hurt business, sending its shares down over 4%.

The world’s largest movie theater operator said in a filing that postponement of major releases slated for the Thanksgiving and Christmas holidays until next year would significantly impact its liquidity in the fourth quarter, Reuters reported.

Following this announcement, AMC Entertainment shares fell over 4% to $4.57 on Thursday. However, the stock is still down over 30% so far this year.

AMC Entertainment stock forecast

Five analysts forecast the average price in 12 months at $4.63 with a high forecast of $7.00 and a low forecast of $2.00. The average price target represents a 0.33% increase from the last price of $4.62. From those five equity analysts, none rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

AMC Entertainment had its price target raised by B. Riley to $5.50 from $4. B. Riley currently has a neutral rating on the stock. Wedbush raised their price objective to $7 from $4 and gave the company a neutral rating. Credit Suisse Group downgraded AMC Entertainment from a neutral rating to an underperform rating and cut their target price for the stock to $2 from $4.

A number of other equities research analysts have also recently issued reports on the stock. Barrington Research reaffirmed a hold rating on shares of AMC Entertainment. Citigroup raised their target price to $4.00 and gave the stock a sell rating. At last, Zacks Investment Research cut their target price on to $3.50.

Analyst views

“With future capital returns forecasted to fall short of the cost of capital, AMC is expected to continue to be a major Value Eraser. With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing very contradictory signals. AMC has a slightly positive Appreciation Score of 68 but a very low Power Rating of 4, triggering the Negative Value Trend Rating,” noted Price Target Research.

Check out FX Empire’s earnings calendar

U.S. Stocks Set To Open Lower As Initial Jobless Claims Unexpectedly Increase

Stocks Look Ready To Continue Yesterday’s Downside Move

S&P 500 futures are losing ground in premarket trading as traders are worried about the future pace of the economic recovery.

Leading tech stocks are also under pressure in the premarket trading session. Tesla is set to continue yesterday’s sell-off as it is already down by more than 3%.

Today, France and Germany reported that business sentiment improved for the fifth month in a row but this news did not provide any material help to global markets as traders remained focused on the second wave of coronavirus.

Initial Jobless Claims Increase To 870,000

U.S. has just provided Initial Jobless Claims and Continuing Jobless Claims reports.

Initial Jobless Claims increased from 866,000 (revised from 860,000) to 870,000 while analysts expected that Initial Jobless Claims would decline to 840,000.

Continuing Jobless Claims declined from 12.75 million (revised from 12.63 million) to 12.58 million compared to analyst consensus of 12.3 million.

The employment reports were materially worse than expected and put additional pressure on S&P 500 futures.

U.S. Dollar Strength Indicates That Investors Are Seriously Worried About The Pace Of Recovery

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, managed to rebound from a low of 91.75 that was reached at the beginning of September to 94.50.

This rebound happened despite the Fed’s pledge to keep the rates at the bottom until the end of 2023. The strength of the current rebound indicates that investors are seriously worried about the perspectives of the world economic recovery.

The Volatility Index, VIX, has also rebounded from lows reached in August. VIX is often called a fear index since it rises when traders are worried about economic perspectives.

U.S. dollar upside has already put significant pressure on commodities. Silver and gold have suffered a sell-off while copper declined from recent highs. Only WTI oil managed to stay near the $40 level thanks to the support from the hurricane season.

If the U.S. dollar continues its upside move, commodities will remain under pressure, and commodity-related stocks will likely decline to lower levels.

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

Daily Gold News: Gold Breaking Lower, as Correction Deepens

The gold futures contract lost 2.05% on Wednesday, as it extended its short-term downtrend following breaking below the price level of $1,900. The market is the lowest since late July. Gold keeps retracing its rally from around $1,800 to August 7 record high of $2,089.20 in reaction to U.S. dollar rally, among other factors. Gold also broke below its mid-August local low, as we can see on the daily chart:

Gold is 0.6% lower this morning, as it is trading along yesterday’s low. What about the other precious metals? Silver lost 5.78% on Wednesday and today it is 2.8% lower. Platinum lost 1.7% and today it is 0.2% lower. Palladium gained 1.29% yesterday and today it’s 0.5% lower. So precious metals are mixed this morning.

Yesterday’s Flash Manufacturing/ Services PMI releases have been overall better than expected. But markets continued going risk-off as stocks extended their short-term downtrend.

Today we will have a Testimony from the Fed Chair Powell at 10:00 a.m. and a speech from Treasury Secretary Mnuchin. We will also get the Unemployment Claims release at 8:30 a.m. and New Home Sales number at 10:00 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Thursday, September 24

  • 8:30 a.m. U.S. – Unemployment Claims
  • 10:00 a.m. U.S. – Fed Chair Powell Testimony, Treasury Secretary Mnuchin Speech, New Home Sales
  • 2:00 p.m. U.S. – FOMC Member Williams Speech

Friday, September 25

  • 8:30 a.m. U.S. – Durable Goods Orders m/m, Core Durable Goods Orders m/m
  • 3:10 p.m. U.S. – FOMC Member Williams Speech

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

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

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

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

 

Johnson & Johnson Begins Final Stage Trial of COVID-19 Vaccine; Target Price $170

Johnson & Johnson, one of the world’s largest and most comprehensive manufacturers of healthcare products, said on Wednesday that it has begun its large-scale, pivotal, multi-country Phase-3 trial for its COVID-19 vaccine candidate, sending shares as high as 2%.

The company expects the first batches of the COVID-19 vaccine, JNJ-78436735, to be available for emergency use authorization in early next year, if proven to be safe and effective.

Following this announcement, Johnson & Johnson shares closed 0.16% higher at $144.44 on Wednesday. However, the stock is still down about 1% so far this year.

The company, which is well-known for consumer products like Band-Aids, said it will enrol up to 60,000 volunteers across three continents and will study the safety and efficacy of a single vaccine dose versus placebo in preventing COVID-19.

Johnson & Johnson added that the vaccine, if successful, is estimated to remain stable for two years at -20°C and at least for three months at 2-8°C. This makes the vaccine candidate compatible with standard vaccine distribution channels and would not require new infrastructure to get it to the people who need it.

Johnson & Johnson stock forecast

Seven analysts forecast the average price in 12 months at $166.86 with a high forecast of $175.00 and a low forecast of $158.00. The average price target represents a 14.23% increase from the last price of $146.07. All those seven equity analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley target price is $170 with a high of $204 under a bull scenario and $110 under the worst-case scenario. SVB Leerink reiterated an “outperform” rating on shares of Johnson & Johnson. Zacks Investment Research lowered shares of Johnson & Johnson from a “hold” rating to a “sell” rating and set a $150 price target for the company.

A number of other equities research analysts have also recently issued reports on the stock. Stifel Nicolaus lowered shares of Johnson & Johnson from a “buy” rating to a “hold” rating. Bank of America reissued a “buy” rating. At last, Credit Suisse Group reissued a “buy” rating.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a mild selling opportunity.

Analyst views

“Our price target of $170 for JNJ is based on a 19.0x multiple off of our base case 2021e EPS, supported by our SOTP analysis. We assume J&J trades at a mid-single-discount multiple with S&P 500 given defensive-oriented profile, growth acceleration in Pharma, and improving fundamentals in Consumer/MD&D, balanced by litigation overhang,” said David Lewis, equity analyst at Morgan Stanley.

“Litigation liability has been more than reflected in J&J shares, in our view, creating a meaningful valuation disconnect vs. the S&P. Pharma-driven acceleration is poised to drive the multiple higher in 2020 led by blockbuster franchises, pipeline launches and easing comparables. Momentum in MD&D and Consumer segments should drive a more balanced growth profile which is less reliant on Pharma,” Lewis added.

Upside and Downside Risks

Upside: 1) Pharmaceutical growth accelerates to the HSD sustainabily. 2) Opioid and talc litigations are settled. MD&D growth accelerates – highlighted by Morgan Stanley.

Downside: 1) Litigation overhang persists / legal liabilities are greater than anticipated. 2) Pharma pipeline is unable to offset biosimilar and competitive risks. 3) COVID-19 impact to MD&D is more severe. Turnarounds in Consumer and MD&D fail to materialize or slower than expected.

Check out FX Empire’s earnings calendar

US Stocks Tumble from Extremes as Investors Search for Sweet Spot that Represents Value

The major U.S. stock indexes finished lower on Wednesday after fresh economic data revealed a cooling of U.S. business activity and the stalemate in Congress over more stimulus elevated concerns about the strength of the economy while the number of global coronavirus cases continued to rise.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3236.92, down 78.65 or -2.31%. The blue chip Dow Jones Industrial Average finished at 26763.13, down 525.05 or -1.88% and the tech-driven NASDAQ Composite closed at 10632.99, down 330.65 or -2.95%.

Economy is Leveling Off

From March 23 to September 2, hopes of a strong recovery and mountains of fiscal and monetary stimulus measures fueled a rally that took the S&P 500 and NASDAQ Composite to all-time highs. But doubts over another stimulus bill and a sell-off in overvalued heavyweight technology-related stocks have weighed on investor sentiment since the market peaked the first week of the month.

Meanwhile, Federal Reserve Chair Jerome Powell said on Wednesday that the central bank was not planning any “major” changes in its Main Street Lending Program, while saying that both the Fed and Congress need to “stay with it” in working to bolster the economic recovery.

Before Powell made his statement, data from IHS Markit showed gains at factories were offset by a slowdown in the broader services sector in September, suggesting a loss of momentum in the economy at a time when concerns are rising about a potential surge in COVID-19 cases heading into the colder months.

Wednesday market six months to the day that U.S. stocks on March 23 hit their lowest point during the pandemic-induced sell-off. The historic rally from that low was fueled by the notion that the U.S. economy would post a “V-shaped” recovery.

Recent economic data and other developments, however, suggest the economy is now leveling off about 80% of activity before the pandemic and won’t get back to pre-pandemic levels until a vaccine against COVID-19 is in place.

The price action suggests that investors believe the economy is going to struggle recovering that last 20%. Investors believe the economy will eventually get there, but the process is going to be much slower than it was in the first three months of the reopening.

Sectors and Stocks

The S&P 500 slid to lows last seen in late July and is now down 9.6% from its record high hit three weeks ago. That puts it less than half a percentage point from entering corrective territory, as the NASDAQ did last week.

On Wednesday, the benchmark and tech-driven indexes fell more than 2%, and all 11 of the major S&P sectors closed lower. Energy already the worst-performing sector this year – led the rout in its biggest single-day decline since July 9.

Additionally, Wall Street favorites including Apple Inc, Google-parent Alphabet Inc and Amazon.com Inc, which have borne the brunt of recent losses, again declined at a rate exceeding losses of the benchmark S&P 500. A decline in Facebook Inc came in below the S&P decline.

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

European Equities: Economic Data, COVID-19 News, and Geopolitics in Focus

Economic Calendar:

Thursday, 24th September

German IFO Business Climate Index (Sep)

The Majors

It was a relatively bullish day for the European majors on Wednesday, with the CAC40 rising by 0.62% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 0.39% and 0.55% respectively.

A sharp pickup in manufacturing sector activity in September delivered support on the day, with the Eurozone Manufacturing PMI hitting a 25-month high. Service sector activity waned, however, limiting the upside for the majors.

Adding to the upside on the day was a continued slide in the EUR, which fell back to $1.16 levels.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Ahead of the European open, German consumer confidence figures were in focus.

For October, Germany’s GfK Consumer Climate Index rose from a revised -1.7 to -1.6. Economists had forecast an increase to -1.0.

According to the GfK Survey,

  • Both economic and income expectations were on the rise, while propensity to buy tumbled.
  • The indicator for consumer income expectations rose by 3.3 points to 16.1 points.
  • There was an even sharper rise in consumer sentiment towards the German economic outlook. Economic expectations rose by 12.4 points to 24.1, logging a 5th consecutive monthly increase.
  • The propensity to buy indicator fell by 5.3 points to 38.4, however.

Later in the morning, prelim private sector PMI numbers for September were in focus.

France’s manufacturing PMI rose from 49.8 to 50.9, while the services PMI declined from 51.5 to 47.5. Economists had forecast PMIs of 50.5 and 51.5 respectively.

For Germany, the Manufacturing PMI increased from 52.2 to 56.6, while the services PMI slid from 52.5 to 49.1 Economists had forecast PMIs of 52.5 and 53.0 respectively.

In September, the Eurozone’s Services PMI slid from 50.5 to 47.6, while the Manufacturing PMI rose from 51.7 to 53.7. Economists had forecast PMIs of 51.9 and 50.5 respectively.

According to the prelim September survey,

  • The prelim Eurozone composite output index fell from 51.9 to a 3-month low 50.1.
  • On the slide was the Service PMI Activity Index that slid from 50.5 to a 4-month low 47.6.
  • By contrast, the Manufacturing PMI rose to a 25-month high 53.7.
  • For the manufacturing sector, a surge in new orders drove the PMI, with Germany’s private sector leading the way.
  • A general trend was seen across the bloc, however, with the service sector sounding the alarm bells.
  • On employment, the private sector reported a 7th consecutive month of job cuts, albeit at a slower pace.

From the U.S

It was a busier day. September’s prelim Makit private sector PMIs provided direction later in the session.

The Services PMI slipped from 55.0 to 54.6, while the Manufacturing PMI rose from 53.1 to 53.5. Economists had forecast PMIs of 54.7 and 53.1 respectively.

FED Chair Powell was also in focus on Tuesday, delivering a 2nd day of testimony on Capitol Hill. Powell talked of the need for more policy to support economic recovery. The FED Chair also noted that there is still a long way to go and that the recovery would be faster if support came from both the FED and from Congress…

The Market Movers

For the DAX: It was back into the red for the auto sector on Wednesday. BMW and Volkswagen fell by 1.08% and by 1.34% to lead the way down. Continental and Daimler saw more modest losses of 0.42% and 0.70% respectively.

It was yet another day in the red for the banks. Deutsche Bank fell by 0.83%, with Commerzbank ending the day down by 2.60%.

While there was plenty of red across the DAX, Adidas rallied by 2.68%. Better than expected Nike earnings delivered support on the day.

From the CAC, bank stocks also continued to struggle in the wake of the latest scandal. BNP Paribas fell by 2.60%. to lead the way down. Credit Agricole and Soc Gen saw more modest losses of 0.76% and 1.18% respectively.

It was another bullish day for the French auto sector, however. Peugeot and Renault ended the day with gains of 1.77% and 3.41% respectively.

Air France-KLM found much-needed support, rising by 0.12%, while Airbus SE slipped by 0.93%.

On the VIX Index

The VIX rose by 6.40% on Wednesday. Reversing a 3.31% fall from Tuesday, the VIX ended the day at 28.58.

Market reaction to dovish chatter from the FED weighed on the majors mid-week. FED Chair Powell talked of the need for more support to sustain the economic recovery.

On the economic data front, service sector activity saw marginally slower growth in September, raising further questions over the economic outlook.

The NASDAQ and S&P500 slid by 3.02% and by 2.37% respectively, with the Dow ending the day down by 1.92%

VIX 24/09/20 Daily Chart

The Day Ahead

It’s a quieter day ahead on the Eurozone economic calendar. Key stats include Germany’s IFO Business Climate Index figures for September.

Expect the numbers to influence, though the latest spike in new COVID-19 cases across the EU could overshadow any upbeat numbers.

From the U.S, the weekly jobless claims figures will also draw plenty of attention later in the session.

Aside from the economic indicators, FED Chair Powell and U.S Treasury Secretary Mnuchin are also in focus…

The Futures

In the futures markets, at the time of writing, the Dow was up by 58 points, while the DAX was down by 95.5 points.

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

Gold Setting Up Just Like Before The COVID-19 Breakdown

RESEARCH HIGHLIGHTS:

  • Gold rebounded quickly and broke to higher prices after the COVID deep selling.
  • Our Fibonacci support levels for Gold are resting near $1,885, $1,815 & $1,790.
  • More downside pressure on price is possible, but if support is maintained at $1,885 then we could see a big upside recovery trend take Gold to $2,250.

Just before the COVID-19 collapse in the markets hit near February 25, 2020, Gold started a double-dip move after reaching $1,692 on February 24.  First, Gold dipped from $1,692 to $1,564, then recovered to new highs ($1,704.50) on March 10, 2020.  Then, as the deeper COVID-19 selling continued, Gold prices dipped again – this time targeting a low level of $1,450.90.

What we found interesting is how quickly Gold prices recovered and broke to even higher price levels after this deep selling.  Our belief is that when a crisis event first hits, which we sometimes call the “shock-wave”, all assets take a beating – including Gold and Silver.  This is the event where traders and investors pull everything to CASH (closing positions).  Then, as the shock-wave ends, traders re-evaluate the price levels of assets to determine how they want to deploy their capital.

GOLD BASING NEAR $1885 FOR A BIG RALLY

Our belief that this DIP or double-dip pattern in Gold because of crisis events presents a very solid opportunity for skilled traders to add-to existing positions or strategically target shorter-term upside price swings in precious metals.

This Daily Gold chart below highlights the first dip and the second dip in Gold prices as the COVID-19 price collapse took place.  Notice how Gold rotated lower, then recovered to new highs, then dipped even lower in early March 2020.  This last dip in price levels was the very deep selling before the March 21 bottom setup (US Fed induced).

Now, take a look at the current Gold Futures Daily chart. Notice the big price correction that started on August 7, 2020 – setting up the FLAG/Pennant formation in Gold.  Interestingly enough, this top in Gold also aligns with a moderately deep price correction in the NASDAQ – before continuing to rally even higher.  Silver also setup a price peak on August 7, 2020.  Now, as the Banking illegalities report has been released, the markets again fell into a shock-wave of selling on Monday, August 21.  This time Gold fell just over 3% throughout the day before starting to recover near the end of the day.

Currently, our Fibonacci support levels are resting near $1,885, $1,815 & $1,790 as you can see from the Gold Daily chart below. We believe more downside price pressure may continue in Gold and Silver over the next few days before a strong upside price move begins to take place.  The recent low price level in Gold, near $1,885, aligns perfectly with our Fibonacci projected price target (Support) level.  If Gold has already found support near this price level, then we may already be hammering out a bottom in Gold setting up a big upside recovery trend.

The question for gold traders right now is “does the $1,885 level hold as support or will gold break lower trying to fund support?”.  My researchers and I believe the current bottom in Gold is set up and the $1,885 price will hold as support.  We also believe the next move higher will prompt a rally targeting levels near $2,250.

Watch for the momentum base to continue to form near $1,885 before the breakout rally trend in Gold starts.  Once it breaks the $2,035 level, it should start to rally upward very quickly. If the price of Gold breaks down below $1,885 then we may experience a continuing bottom to the next support level of $1,815.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. Subscribers of my Active ETF Swing Trading Newsletter can ride my coattails as I navigate these financial markets and build wealth. My research and trading team are here to help you find better trades and navigate these incredibly crazy market trends.

While most of us have active trading accounts, our long-term investment and retirement accounts are equally at risk. We can also help you preserve and even grow your long term capital when things get ugly (likely now) with our Passive Long-Term ETF Investing Signals.  Don’t wait until it is too late – subscribe today!

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

Stay safe and healthy!

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

NOTICE AND DISCLAIMER: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.