Daily Gold News: Thursday, July 16 – Gold Still Going Sideways Along $1,800 Price level

The gold futures contract gained 0.02% on Wednesday, as it further extended a short-term consolidation following last week’s Wednesday’s advance to new long-term high of $1,829.80. The recent economic data releases have been better than expected. Gold broke above medium-term local highs in June, as we can see on the daily chart:

Gold is 0.4% lower this morning, as it continues to trade close to $1,800 price level. What about the other precious metals? Silver advanced 1.18% on Wednesday and today it is trading 1.1% lower. Platinum gained 0.76% and today it is 0.7% lower. Palladium gained 1.23% and today it is 0.75% lower. So precious metals’ prices are going down this morning.

Yesterday’s U.S. Industrial Production and China’s GDP releases have been better than expected. Today the markets are waiting for the Retail Sales number release at 8:30 a.m., among others.

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

Thursday, July 16

  • 7:45 a.m. Eurozone – Main Refinancing Rate, Monetary Policy Statement
  • 8:30 a.m. U.S. – Retail Sales m/m, Core Retail Sales m/m, Unemployment Claims, Philly Fed Manufacturing Index
  • 8:30 a.m. Eurozone – ECB Press Conference
  • 8:30 a.m. Canada – ADP Non-Farm Employment Change
  • 10:00 a.m. U.S. – Business Inventories m/m, NAHB Housing Market Index
  • 11:10 a.m. U.S. – FOMC Member Williams Speech

Friday, July 17

  • 8:30 a.m. U.S. – Building Permits, Housing Starts
  • 10:00 a.m. U.S. – Preliminary UoM Consumer Sentiment

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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.

 

Johnson & Johnson Q2 Profit Plunges Over 35% as COVID-19 Hurts Sales; Analysts Still Optimistic

Johnson & Johnson, well known for consumer products like Band-Aids, reported that its earnings fell more than 35% in the second quarter as hospitals and patients deferred urgent purchases of medical devices due to the ongoing COVID-19 pandemic slowdown.

The world’s largest and most comprehensive manufacturers of healthcare products, said its net earnings fell to $3.63 billion, or $1.36 a share, compared with $5.61 billion, or $2.08 a share a year earlier.

Johnson & Johnson reported sales of $18.3 billion reflecting a decline of 10.8%, operational sales decline of 9.0% and adjusted operational decline of 8.8%, primarily driven by the negative impact of the COVID-19 pandemic.

The company, which is expected to start human trials of the COVID-19 vaccine this month, upgraded its full-year adjusted profit forecast to $7.75 to $7.95 a share, from its previous forecast of $7.50 to $7.90 a share.

Executive comment

“Our second-quarter results reflect the impact of COVID-19 and the enduring strength of our Pharmaceutical business, where we saw continued growth even in this environment,” Alex Gorsky, Chairman and Chief Executive Officer said in a press release.

“Our global footprint and our sophisticated supply chain technology to deliver on our commitment to provide the vaccine on a not-for-profit basis for emergency pandemic use, globally. We know the need is urgent, and every day we commit to doing our part to find a solution for the global good.”

Johnson & Johnson stock forecast

Eight analysts forecast the average price in 12 months at $169.33 with a high forecast of $182.00 and a low forecast of $160.00. The average price target represents a 14.21% increase from the last price of $148.26. From those eight, five analysts rated ‘Buy’, three rated ‘Hold’ and none rated ‘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. Johnson & Johnson had its target price raised by Barclays to $182.00 from $173.00. Several other equity research firms have also updated their outlook.

Credit Suisse maintained a “Buy” rating and issued a $161.00 price target. Citigroup lifted their price target on shares of Johnson & Johnson from $150.00 to $165.00 and gave the company a “buy” rating.

We second Morgan Stanley and Barclays on Johnson & Johnson stock outlook. We also think it is good to buy at the current level and target at least $170 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Litigation liability has been more than reflected in Johnson & Johnson 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,” said David Lewis, equity analyst at Morgan Stanley.

“Our price target of $170 for Johnson & Johnson 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 an in-line multiple with S&P 500 given defensive-oriented profile, growth acceleration in Pharma, and improving fundamentals in Consumer/MD&D, balanced by litigation overhang,” he added.

Upside and Downside risks

Pharmaceutical growth accelerates to the HSD sustainability; Opioid and talc litigations are settled and MD&D growth accelerates, Morgan Stanley highlighted as upside risks to Johnson & Johnson.

Litigation overhang persists / legal liabilities are greater than anticipated; Pharma pipeline is unable to offset biosimilar and competitive risks; COVID-19 impact to MD&D is more severe and Turnarounds in Consumer and MD&D fail to materialize or slower than expected, Morgan Stanley highlighted as downside risks.

U.S. Stocks Set To Open Lower Despite Solid Retail Sales Growth

Continuing Jobless Claims Decline To 17.34 Million

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

Initial Jobless Claims report showed that 1.3 million Americans filed for unemployment benefits in a week. Analysts expected Initial Jobless Claims of 1.25 million.

Meanwhile, Continuing Jobless Claims declined from 18.1 million to 17.3 million. The report was better than the analyst consensus of 17.6 million.

I’d note that Initial Jobless Claims remain stubbornly high but Continuing Jobless Claims are showing signs of improvement which means that some people who lost their jobs were able to find new employment opportunities.

S&P 500 futures are under pressure in the premarket trading session after the release of employment reports. Most likely, the market needs more catalysts to continue the current upside trend since stocks are at very high levels.

Retail Sales Report Shows Solid Growth

U.S. Retail Sales grew by 7.5% month-over-month in June compared to analyst consensus which called for growth of 5%. On a year-over-year basis, Retail Sales increased by 1.1%.

A recent Reuters report suggested that people were spending more thanks to generous unemployment benefits so the strength of Retail Sales is not suprising.

In my opinion, the market will start evaluating the future scenario when the support from generous unemployment benefits will come to an end.

China GDP Grows By 3.2% Year-Over-Year In The Second Quarter

China GDP gained 3.2% in the second quarter after contracting by 6.8% in the first quarter. This news put pressure on Asian markets and also impacted the early trading of S&P 500 futures as traders hoped for bigger growth.

Retail Sales declined by 1.8% year-over-year in June while analysts expected that the report will show growth. China was the first country which was hit by coronavirus so analysts and traders watch its economic data closely to evaluate the potential recovery path for other countries.

The slowdown in consumer activity will be more problematic for developed Western countries which heavily rely on the services industry which was severely hit by coronavirus-related restrictions.

At this point, economic data from China does not promise a swift recovery of consumer activity. However, investors should keep in mind that China focused on helping industries rather than on providing direct support to citizens.

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

Asia-Pacific Risk Appetite Wanes On Worries Over Escalating Dispute Between US and China

The major Asia-Pacific stock indexes finished lower on Thursday, pressured by concerns over deteriorating U.S.-China relations and the economic cost of a resurgence in coronavirus infections that is prompting some places to reimpose containment measures. Losses may have been contained, however, by a slew of Chinese economic data including a better-than-expected GDP report.

On Thursday, Japan’s Nikkei 225 Index settled at 22770.36, down 175.14 or -0.76%. Hong Kong’s Hang Seng Index finished at 24970.69, down 510.89 or -2.00 or South Korea’s KOSPI Index closed at 2183.76, down 18.12 or -0.82%.

China’s Shanghai index settled at 3210.10, down 151.21 or -4.50% and Australia’s S&P/ASX 200 Index finished at 6010.90, down 42.00 or -0.69%.

US Imposes Visa Restrictions on Huawei, Other Chinese Tech Companies, Citing Human Rights Abuses

U.S. Secretary of State Mike Pompeo, citing human rights abuses, said the U.S. will impose visa restrictions on Chinese technology firms, the latest move expected to strain relations between Washington and Beijing.

Pompeo, who has previously described Huawei and other Chinese state-backed businesses as “Trojan horses for Chinese intelligence,” said the actions should serve as a warning for other tech companies.

“State Department will impose visa restrictions on certain employees of Chinese tech companies like Huawei, that provide material support to regimes engaging in human rights violations and abuses globally,” Pompeo said.

In a statement to CNBC, Huawei said it was “disappointed by this unfair and arbitrary action.” The company also said it “operates independent of the Chinese government” and is a “private, employee-owned firm.”

Shares of China’s Biggest Chipmaker SMIC Surge Nearly 202% in Shanghai Debut

SMIC, China’s biggest chipmaker, saw its shares surge over 200% on its first day of trade in Shanghai. SMIC issued 1,685,620,000 shares at 27.46 Yuan per share, raising 46.28 billion Yuan ($6.62 billion).

The share sale is an important moment for the company but also China’s broader ambition to grow its domestic semiconductor industry, a push that has been accelerated by the trade war between the U.S. and China.

SMIC is seen as a key player in China’s ambition to boost its domestic chip industry. The company is known as a contract chip manufacturer, meaning it makes the semiconductors designed by other firms.

South Korea’s Central Bank Holds Rates at Record Low amid Push to Curb Home Price Surge

The Bank of Korea has held the base rate steady at a record low of 0.5%, it announced in a text message, in line with the forecasts of all 30 economists polled by Reuters.

The rate is at its lowest since the central bank adopted the current system in 1999, having slashed a total of 75 basis points since March this year to fight the economic fallout from the coronavirus pandemic.

The central bank has been working in tandem with the government to extend liquidity to businesses hit by the health crisis but is wary of rising debt and high property prices.

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

European Markets slip Ahead of the ECB

China Q2 GDP showed a 11.5% rebound, more than reversing the -10% fall in output seen in Q1, suggesting a nice v-shaped recovery in economic activity. The annualised number recovered to 3.2% from -6.8%.

If you had any doubts about the accuracy of China’s GDP numbers before this morning’s announcement, these figures only serve to reinforce that scepticism, as they appear to completely diverge from most of the data that has come out of China since April. In terms of the trade data, both imports and exports have been weak, while retail sales have also struggled.

Retail sales have declined in every month, by -7.5%, -2.8% and -1.8% in June, and with the Chinese consumer now making up around half of China’s economic output, I would suggest these numbers in no way reflect the real picture regarding China’s economy at this moment.

After yesterday’s strong session, markets here in Europe have taken their cues from the weakness in Asia markets and opened lower, as some of the vaccine optimism of yesterday starts to taper off.

On the results front Ladbrokes and Coral owner GVC Holdings have fallen back after reporting a decline in group net gaming revenue of 11%, in the first half of the year, largely down to the suspension of sporting events. The biggest falls in like for like revenues were in the UK and Europe with sharp drops of 86% and 90% in Q2, largely down to the wholesale closure of stores, though with the re-opening of shops in June these numbers are now starting to pick up again.

On the plus side, helping offset that weakness online gaming revenue rose, rose 19% in H1, with a 22% rise in Q2, with a strong performance in Australia. Management said they expect first half earnings to be within the range of £340m-£350m, while CEO Keith Alexander is set to retire and will be replaced by Shay Segev.

Energy provider SSE has said that coronavirus impacts on operating profits are in line with expectations, with profit expected to be in the range of £150m and £250m, though this could well change. The company has said it still expects to pay an interim dividend of 24.4p in November, in line with its 5-year plan to 2022/23.

In terms of renewable output, this came in below plan, but was still higher than the same period a year ago.

Purplebricks shares are higher after announcing the sale of its Canadian business for C$60.5m to Desjardins Group

Aviva announced that it has completed the sale of a 76% stake in Friends Provident to RL360 for £259m.

Royal Bank of Scotland also announced that from 22nd July 2020 it would henceforth be known as NatWest Group, subject to approval as it strives to draw a line under the toxicity of the RBS brand. This toxicity has dogged the bank since the 2008 bailout, along with the various scandals, around rate fixing, PPI and the GRG business, that have swirled around the bank since then. Investors will certainly be hoping so given the current share price performance, and hope that the change in name isn’t akin to putting lipstick on a pig.

Consumer credit ratings company Experian latest Q1 numbers have shown a large fall in revenue growth across all of its regions with the exception of North America, and which helped mitigate a lot of the weakness elsewhere.

The euro is slightly softer ahead of this afternoon’s ECB rate decision, which is expected to see no change in policy. At its last meeting the European Central Bank hiked its pandemic emergency purchase program by another €600bn to €1.35trn, with the time horizon pushed into the middle of June 2021. The ECB still needs to formally respond to the challenge of the German court irrespective of its insistence it is covered under the jurisdiction of the European Court.

Even where Germany is concerned optics are important, particularly if the ECB wants to be seen as a responsible arbiter of the economy across all of Europe, and the PEPP still remains vulnerable to a legal challenge, due to its difference with the previous program. The bank could also indicate if it has any plans to start buying the bonds of so called “fallen angels”. These are the bonds of companies that were investment grade, but have fallen into “junk” status as a result of the pandemic.

This morning’s UK unemployment numbers don’t tell us anything we don’t already know. The ILO measure came in at 3.9% for the three months to May, however the numbers don’t include those workers currently on furlough, and while a good proportion of these could well come back, there is still a good percentage that won’t.

On the plus side the reduction in jobless claims from 7.8% to 7.3% suggests that some workers did return to the work force in June, as shops started to reopen, however the number was tiny when compared to the claim increases seen in April and May, which saw the May numbers revised up to 566.4k.

To get a better idea of where we are in the jobs market the ONS numbers do tell us that there are now around 650k fewer people on the payroll than before the March lockdown, and that number is likely to continue to rise as we head into the end of the year and the furlough runs off.

The pound is little moved on the back of the numbers, while gilt yields have edged slightly higher.

US markets look set to take their cues from the weakness seen here in European markets, with the main attention set to be on the latest June retail sales and weekly jobless claims numbers.

Retail sales are expected to rise 5% in June, some way below the 17.7% rebound seen in the May numbers which reversed a -14.7% fall in April. The strength expected in the June number seems optimistic when set aside the employment numbers, and the 13m people still not working since March. This suggests that this number could well be highly fluid and while a lot of US workers have managed to get their furlough payments, it doesn’t necessarily follow that they will spend it.

Weekly jobless claims are still expected to be above the 1m mark, with a slight reduction expected to 1.25m from 1.31m. Continuing claims are expected to fall further to 17.5m, however these could start to edge higher in the coming weeks as US states issue orders to reclose businesses in the wake of the recent surge in coronavirus cases.

Twitter shares lost ground lost night after the bell as it became apparent that the accounts of high profit individuals like Elon Musk, Warren Buffet and former US President Barack Obama were hacked by a bitcoin scammer. All verified accounts were shut down as a result as Twitter scrambled to get on top of the problem. It’s difficult not to overstate how embarrassing this is for Twitter given that the blue tick offers certainty that the user of the account is the person they claim to be. To have them hacked is hugely embarrassing, and undermines the integrity of the whole blue tick process.

American Airlines shares are also likely to be in focus after the company announced that 25,000 jobs could be at risk, when the furlough scheme runs its course. United Airlines has already said it could cut up to 36,000 people, up to 45% of its workforce.

Netflix Q2 earnings are also due after the bell with high expectations that the company can build on its blow out Q1 subscriber numbers of 15.8m. Q2 is expected to see 7m new subscribers added.

Bank of America is also expected to post its latest Q2 numbers with the main attention on how much extra provision for bad loans the bank will add to its Q1 numbers.

Dow Jones is expected to open 160 points lower at 26,710

S&P500 is expected to open 18 points lower at 3,208

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

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

Wednesday’s Lackluster Performance Leads to Early US Stock Market Weakness

The major U.S. cash and futures markets may have closed higher on Wednesday, but the price action was unimpressive with the indexes struggling most of the session to stay on the positive side after their initial thrusts higher. Lackluster is the best way to describe the trade especially with the groundwork for a major rally laid out early by positive coronavirus vaccine news and a blowout quarterly report from Goldman Sachs.

On Wednesday, the benchmark S&P 500 Index settled at 3226.56, up 29.04 or +0.97%. The blue chip Dow Jones Industrial Average finished at 26870.10, up 227.51 or +0.91% and the technology-based NASDAQ Composite closed at 10550.49, up 61.91 or +0.65%. All three markets gave up more than half of their earlier gains and at times were flirting with negative territory.

Does the price action indicate an imminent change in trend? It’s too early to tell although the NASDAQ’s technical closing price reversal top on July 13 is something to be worried about. Remember, the mostly technology driven index took the indexes higher, and it could take them straight down too.

The price action also indicates a “tired” trade, whereby investors seem to be getting a little aggravated chasing the market during the U.S. session after Asian and European investors drove prices higher by catching the bullish news earlier in the session. This type of trade suggests an overpriced market, which mean investors are switching from buying strength to looking for value. This is something we haven’t seen in a while.

Further evidence of a possible shift in investor strategy is the fact that the S&P 500 Index beat the technology-heavy NASDAQ Composite for a fourth straight session, a feat scored only twice since Wall Street launched its massive recovery last March.

Stock Market Winners and Losers

Gains for the NASDAQ were capped by online retail giant Amazon.com Inc, video streaming platform Netflix Inc and Microsoft Corp, which slipped after surging to record highs recently. Amazon slid 2.4%. Netflix fell 0.3%, Alphabet (Google’s Parent) and Microsoft also closed lower.

Apple, however, contributed to the gains Wednesday, rising 0.7% after a European Union court annulled a 2016 European Commission order for the tech giant to pay $15 billion in taxes.

Goldman Lifts Banks after Early Mixed Results from Major Banks

Goldman Sachs reported quarterly numbers that easily beat analyst expectations. The company’s results were driven by a 93% surge in trading revenue. Goldman shares gained 1.4%.

On Tuesday, JPMorgan Chase reported better-than-expected quarterly numbers, but Wells Fargo suffered a $2.4 billion loss and slashed its dividend to 10 cents per share.

Morgan Stanley and Bank of America gained ahead of their results on Thursday.

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

 

Western Digital Jumps After Bernstein Outperform Rating

Western Digital Corporation (WDC) gained 4.82% Wednesday after Bernstein initiated coverage of the data storage firm’s stock with an ‘Outperform’ rating and $60 price target. The bullish call indicates a 36% premium to Wednesday’s $44.07 close.

Analyst Mark Newman belies the company’s strategic diversification into NAND flash memory through its 2015 acquisition of SanDisk positions it to take advantage of a shift in data storage management from local storage to data centers. He sees NAND flash memory devices growing 35% a year on average over the next decade.

‘NAND will capture the majority of growth due to its performance, power and form-factor advantages over HDDs,’ Newman wrote in a note to clients cited by Barron’s. ‘Mission-critical data-center storage will shift to 100% NAND by 2024,’ he added.

The analyst argues the current stock price undervalues the company’s NAND business.  He says its implied valuation of $4.4 billion represents just 25% of the $19 billion the company forked out to acquire SanDisk. The firm trades around seven times future earnings, well below its five-year average multiple of nine times earnings. As of July 15, Western Digital stock has a $13.31 billion market capitalization and is down almost 30% this year.

Quarterly Earnings Approach

Analysts expect the company to disclose fiscal fourth-quarter earnings of $1.01 per share when it reports after the closing bell on Wednesday, Aug. 5. In the third quarter, the firm’s data center devices and solutions segment increased 22% year-over-year amid growing demand for enterprise SSDs and double-digit terabyte drives. Traders should watch for continued strength in this business after Bernstein’s bullish outlook on data storage growth.

Wall Street Outlook

Analysts overwhelmingly support the stock, with 18 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 11 ‘Hold’ ratings. Currently, no research firm advises selling the company’s shares. Price targets fluctuate between $45 and $90, with the consensus coming in at $61.45. Given the favorable Wall Street view, watch for a possible runup into Western Digital’s next earnings report as traders bet on a better-than-expected quarter.

Technical Outlook

Despite sitting under a death cross, the stock has remained in a trading range since late March. More recently, a descending triangle has formed over the past six weeks to establish crucial support and resistance areas. Yesterday’s breakout above the pattern’s upper trendline may see bulls test the downward sloping 200-day SMA around $51. Conversely, a breakdown below the triangle could trigger a decline to the trading range’s lower boundary at $37.5.

WDC Chart

AstraZeneca Promising Result on COVID-19 Vaccine to Boost Stock; Target Price GBX 10,970

The promising result on early-stage trials of AstraZeneca’s potential COVID-19 vaccine, which is expected to be announced as early as today, could boost demand for the stock.

The potential candidate is in large-scale Phase 3 human trials to see the vaccine helps protect against the deadly coronavirus; however, the company is yet to publish its Phase 1 results which would explain whether it is safe and can induce strong immune responses to fight the virus. However, many will eye the response of T cells in research as it is expected to be an important defence against coronavirus.

Earlier this month, the British-Swedish multinational pharmaceutical and biopharmaceutical company, said that they were satisfied by the immune response they witnessed during the trials and were anticipating to officially publish the outcome by the end of the month.

Also, the WHO’s chief scientist said last month that AstraZeneca’s COVID-19 vaccine, known as AZD1222, was the most advanced in terms of development.

Moderna started its Phase 2 trial in May and expects to start a Phase 3 trial on July 27. Our call is to buy Moderna as COVID-19 vaccine showed promising result; target price $112 in a best-case scenario.

At the time of writing, AstraZeneca shares traded 5% higher pre-market.

AstraZeneca stock forecast

Morgan Stanley target price is GBX 9,000 with a high of GBX10,970 under a bull scenario and GBX 6,314 under the worst-case scenario. JPMorgan set a GBX 9,500 target price on AstraZeneca and has a ‘Buy’ rating on the biopharmaceutical company’s stock.

Several other equity research firms have also updated their outlook AstraZeneca. Jefferies reissued a hold rating; Bryan, Garnier & Co increased their price objective to GBX 9,100 from GBX 8,780 and gave the company a ‘Buy’ rating. Liberum Capital maintained a ‘Buy’ rating on shares of AstraZeneca. In April, HSBC upped their target price on AstraZeneca from GBX 6,450 to GBX 6,690 and gave the company a reduce rating.

We second Morgan Stanley and JP Morgan on AstraZeneca stock outlook. We also think it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“AstraZeneca has the highest sales and EPS growth within EU biopharma over 2019-22, with the shift to speciality care driving underlying margin expansion. Our analysis shows a 52% price deflation for drugs initially impacted by the 4+7 Centralised Procurement Scheme in China and that >40% of AstraZeneca’s emerging market revenues could face generic pressures before 2025,” said Mark Purcell, equity analyst at Morgan Stanley.

“Enhertu (DS-8201), the ADC drug partnered with Daiichi Sankyo, has very high sales potential. We forecast 2028 risk-adjusted sales of $7.4bn, including >50% probability in various breast cancer indications and a low probability for gastric, colorectal and NSCLC indications,” he added.

Upside and Downside risks

Positive pivotal data from the pipeline including Imfinzi+treme, tezepelumab and Enhertu, growth acceleration in EM ex-China, Morgan Stanley highlighted as upside risks to AstraZeneca.

Regulatory hurdles for roxadustat, broader pipeline failure (Enhertu), operating costs exceed expectations, competitive risks to the pharma pipeline and growth platforms. Impact of China VBP reform on the legacy portfolio and impact from COVID-19 global on operations, Morgan Stanley highlighted as downside risks.

Morgan Stanley forecast sales to increase by +0.5% in 2020 and between +0.8% and +0.7% in 2021-26; EPS is expected to remain unchanged in 2020 and rise between +0.8% and +0.5% in 2021-26.

Mixed China Data, ECB in Focus

On the home front, the University of Oxford and AstraZeneca are working together on a potential vaccine, and yesterday there was chatter that things are going in the right direction. Nothing was announced, but it was speculated that there could be confirmation about the progress in the near-term, and that verification might even come today. Equity benchmarks on both sides of the Atlantic enjoyed decent gains, and some hit multi-week highs, while others set multi-month highs.

The pharma angle gave stocks a new lease of life as lately market participants have been fixated on the rate of new cases and the fatality rate. In the past week, we have also heard positive news from Gilead Sciences, Pfizer and BioNTech. Gilead’s, Remdesivir, can reduce the death rate by 62%, so that is being touted as a possible treatment. While two of the four drugs that Pfizer and BioNTech are working on as potential vaccines have been fast-tracked for FDA approval.

The optimism surrounding the drug stories overshadowed the news that China’s relationship with the US and the UK has deteriorated this week. The British government has banned Huawei from its 5G network. President Trump passed legislation that has removed Hong Kong’s special status, so the territory will lose out in terms of tariffs. In addition to that, the US government might seek to target individuals or organisations that are seen to be helping the Chinese government to impose itself on Hong Kong.

The moves by the UK and the US stem from the decision by the Beijing administration to introduce a law that has chipped away at Hong Kong’s autonomy. Traders will be keeping an eye on the situation, but it seems that the Donald doesn’t want to spark a big economic conflict with China, probably because he has an election to fight in November and his approval ratings are not great.

The US economy continues to rebound. The industrial production rate for June increased by 5.4%, and that was a big improvement from the 1.4% that was posted in May. The New York Fed manufacturing index jumped to 17.2 in July, a 14 month high. The reports suggest there is a lot of pent up demand, and that is being released as the economy is reopening. That level of growth is likely to taper off as it is unsustainable.

Overnight, China released a number of economic reports. The yearly GDP reading for the second quarter was 3.2%, and the consensus estimate was 2.5%. In the first quarter, the GDP reading was -6.8%. Retail sales in June were -1.8%, undershooting the 0.3% forecast, while the previous reading was -2.8%. Industrial production last month showed growth of 4.8%, and economists were expecting 4.7%.

The May report was 4.4%. Fixed asset investment fell by 3.1%, and the forecast was -3.3%, keep in mind the last reading was -6.3%. Equity markets in Asia are in the red as there are concerns that spending and investment in China remains weak. Indices in Europe are expected to open a little lower.

The ECB meeting will be in focus today. The refinancing rate and the deposit rate are tipped to hold steady at 0.0% and -0.5% respectively. Last month, the pandemic emergency purchase programme (PEPP) was upped by €600 billion to €1.35 trillion, and the scheme was extended from the end of 2020 until June 2021. The inflation and growth forecasts were trimmed. It is worth noting that there has been an impressive rebound in certain economic indicators, such as services and manufacturing.

In late June, the bond purchases made as a part of the PEPP, cooled to its lowest level since the stimulus package was expanded. That could be a sign the ECB want to rein in the easing programme as the economy is recovering at a quicker rate than initially expected. Even if the central are happy with the economic rebound, they won’t want to spook the markets. They will probably play it safe and state they are monitoring the situation, and that they are ready to act, should they feel it is required. The rate decision will be revealed at 12.45pm (UK time) and the press conference will start at 1.30pm (UK time).

The US dollar index fell to its lowest level in over one month yesterday as dealers dropped the greenback in favour of riskier assets, such as stocks. The euro benefitted from the slide in the greenback and it hit its highest level since March.

Metals were a mixed bag yesterday. Gold had a muted move, but it held above the $1,800 mark. Silver, benefitted from the softer greenback and it hit a new 10 month high. On the other hand, copper lost over 1.5%. The red metal had a great run from late March until now, and it is possible that dealers squared up their books ahead of the Chinese data being reported.

The Fed’s Beige Book was posted last night and almost all of the 12 districts saw an increase in economic activity as lockdown restrictions were eased. The outlook remains very uncertain, especially in light of the fact that some states are undoing the reopening of their economies.

Oil rallied yesterday on the back of the EIA report, it showed that US oil stockpiles dropped by nearly 7.5 million barrels, while the consensus estimate was for a draw of 2.25 million barrels. Gasoline inventories fell by 3.14 million barrels, and that was a larger drop than expected. The readings paint a picture of a US economy that is consuming more energy, hence the positive move in WTI and Brent crude.

At 7am (UK time) the UK labour reports will be released. The claimants count for June is tipped to fall to 250,000 from 528,900 in May. The unemployment rate is anticipated to rise to 4.2% in May, up from 3.9% in April. The average earnings reading that excludes bonuses to expected to fall to 0.5% in May, from 1.7% in April.

French CPI is tipped to slip to 0.1% in June from 0.4% in May. The report will be posted at 7.45am (UK time).

Traders will be keeping an eye on the various economic reports from the US. Initial jobless claims are tipped to fall from 1.31 million to 1.25 million. The continuing claims reading is anticipated to be 17.6 million, and keep in mind the previous reading was 18.06 million. The retail sales report for May was 17.7%, a record reading, and the June level is tipped to cool to 5%. The retail sales report that strips auto-sales is expected to be 5%, and that would be a fall from the 12.4% registered in May. The Philly Fed manufacturing index is tipped to be 20. The reports will be posted at 1.30pm (UK time).

EUR/USD – since late June it has been in an uptrend, and a break above the 1.1400 zone might put 1.1495 on the radar. A break below the 1.1168 area might pave the way for 1.1053, the 200-day moving average, to be targeted.

GBP/USD – has been trading sideways in the past few sessions. A move higher might run into resistance at 1.2694, the 200-day moving average. A move through that level should put 1.2813 on the radar. Should it move lower, it might find support at 1.2424, the 100 day moving average.

EUR/GBP – Monday’s candle has the potential to be a bullish reversal, and if it moves higher it could target 0.9239. A break below the 50-day moving average at 0.8963, could put the 0.8800 zone on the radar.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 18 points lower at 6,274

DAX 30 is expected to open 67 points lower at 12,863

CAC 40 is expected to open 19 points lower at 5,089

By David Madden (Market Analyst at CMC Markets UK)

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

Economic Calendar:

Thursday, 16th July

French CPI (MoM) (Jun) Final

French HICP (MoM) (Jun) Final

Eurozone Trade Balance (May)

Deposit Facility Rate (Jul)

ECB Interest Rate Decision (Jul)

ECB Press Conference

Friday, 17th July

Eurozone Core CPI (YoY) (Jun) Final

Eurozone CPI (MoM) (Jun) Final

Eurozone CPI (YoY) (Jun) Final

The Majors

It was back into the green for the European majors on Wednesday, which managed to reverse Tuesday’s pullback.

The CAC40 rallied by 2.03%, with the DAX30 and EuroStoxx600 gaining 1.84% and 1.76% respectively.

Following the market jitters over moves across California to contain a new spread of the virus, it was vaccine hopes that delivered the upside.

The race to find an effective vaccine is on, with a number of contenders delivering positive news to the markets this week. An introduction of an effective vaccine and treatment would support a more rapid global economic recovery.

The Stats

It was a quiet day on the Eurozone economic calendar. Key stats included finalized inflation figures out of Italy that had a muted impact on the majors.

In June, consumer prices rose by 0.1%, partially reversing a 0.2% decline from May. Economists had forecast a 0.1% rise.

From the U.S

It was a busier day on the U.S calendar. The NY Empire State Manufacturing Index jumped from -0.20 to 17.20, with industrial production rising by 5.4% following a 1.4% increase in May.

Both sets of numbers supported the optimism over a speedier economic recovery amidst the COVID-19 spikes across parts of the U.S.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Daimler and Volkswagen led the way, with gains of 1.20% and by 2.53% respectively. BMW rose by a more modest 0.19%, while Continental fell by 0.65%.

It was another bullish day for the banks. Deutsche Bank rose by 1.74%, with Commerzbank ending the day up by 1.49%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rallied by 2.73% and by 2.74% respectively to lead the way. Credit Agricole saw a more modest gain of 1.33%.

The French auto sector also found support, with Peugeot and Renault rising by 1.46% and by 3.76% respectively.

Air France-KLM jumped by 6.7%, A COVID-19 vaccine would material shift the outlook for the sector. Airbus SE wasn’t far behind, rallying by 4.63%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Wednesday. Following on from an 8.29% slide on Tuesday, the VIX fell by 5.96% to end the day at 27.76.

News of solid progress towards an effective COVID-19 vaccine and better than expected earnings delivered the upside.

The S&P500 rose by 0.91%, with the Dow and NASDAQ seeing gains of 0.85% and 0.59% respectively.

VIX 16/07/20 Daily Chart

The Day Ahead

It’s another relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to finalized June inflation figures from France and trade data from the Eurozone.

The numbers are unlikely to have too much impact, with the ECB in action later this afternoon.

Expect the ECB press conference to be the main event of the day, with the markets still in need of assurances from central banks.

From the U.S

It’s a busy day on the economic calendar. Philly FED Manufacturing and U.S retail sales figures are due out along with the U.S weekly jobless claims.

We can expect the stats to influence, with retail sales and the jobless claims needing to impress.

Ultimately, however, any further chatter on progress towards a COVID-19 vaccine could be enough for the bulls.

From earlier in the day, 2nd quarter GDP numbers from China will likely set the tone going into the European session.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 215,144 to 13,669,634 based on figures at the time of writing. On Tuesday, the number of new cases had risen by 218,739. The daily increase was lower than Tuesday’s rise and 222,368 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 1,523 new cases on Wednesday, which was up from 1,110 new cases on Tuesday. On the previous Wednesday, 986 new cases had been reported.

From the U.S, the total number of cases rose by 66,528 to 3,611,605 on Wednesday. On Tuesday, the total number of cases had increased by 65,594. On Wednesday, 8th July, a total of 62,416 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the Dow up by a modest 18 points.

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

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Reaction to 10708.50 – 10791.25 Sets the Tone

September E-mini NASDAQ-100 Index futures are barely holding on to gains on Wednesday after an early rally failed to attract enough buyers to sustain the move. The price action suggests that investors who bought stocks that would benefit from another shutdown of the economy due to the coronavirus pandemic are booking profits.

At 20:25 GMT, September E-mini NASDAQ-100 Index futures are trading 10684.50, up 38.25 or +0.36%. This is down from a high of 10766.50.

Investors showed a limited reaction to the news that Moderna, Inc reported a small-scale study showed its experimental COVID-19 vaccine produced high levels of virus-killing antibodies.

Gains for the NASDAQ were capped by online retail giant Amazon.com Inc, video streaming platform Netflix Inc and Microsoft Corp which slipped after surging to record highs recently.

Apple shares rose after the communications giant won a landmark court case Wednesday against the European Commission over a dispute concerning 13 billion Euros ($14.9 billion) in Irish taxes.

Daily September 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 following Tuesday’s closing price reversal top and today’s subsequent confirmation of the potentially bearish chart pattern.

A trade through 11058.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 9728.75.

The minor trend is also up. A trade through 10358.75 will change the minor trend to down. This will confirm the shift in momentum to down.

The minor range is 11058.50 to 10358.75. Its retracement zone at 10708.75 to 10791.25 is potential resistance. It stopped the rally on Wednesday at 10766.50.

The short-term range is 9728.75 to 11058.50. Its 50% level at 10393.50 is support. This level stopped the selling on Tuesday.

The second short-term range is 9368.25 to 11058.50. Its retracement zone at 10213.25 to 10014.00 is the next potential downside target.

Short-Term Outlook

Wednesday’s price action was significant because it indicated that counter-trend sellers were coming in on the test of 10708.75 to 10791.25. They are trying to produce a potentially bearish secondary lower top that could eventually lead to a change in the trend.

Traders should continue to watch the price action and read the order flow on a test of 10708.75 to 10791.25. This will tell us if the buying is strong enough to resume the rally, or if the market is setting up for a short-term pullback.

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 – Weakening into Close on Profit-Taking

September E-mini Dow Jones Industrial Average futures are trading higher shortly before the cash market close on Wednesday despite giving back most of its earlier gains.

The blue chip average surged at the opening to nearly a four-month high following promising early data for a potential COVID-19 vaccine and a strong quarterly showing by Dow component Goldman Sachs.

At 19:07 GMT, September E-mini Dow Jones Industrial Average futures are at 26627, up 122 or +0.48%.

Moderna Inc rose 5.8% after a small-scale study showed its experimental COVID-19 vaccine produced high levels of virus-killing antibodies. Goldman Sachs rose 0.6% as its trading revenue doubled in the second quarter, driven by big swings in stock and bond markets since March.

Dow component UnitedHealth Group Inc fell 1.8% after warning of rising costs later this year as Americans catch up on less urgent surgeries halted by the coronavirus pandemic.

Microsoft Corp slipped after hitting a record high recently. Shares of Apple rose after the company won a landmark court case Wednesday against the European Commission over a dispute concerning 13 billion Euros ($14.9 billion) in Irish taxes.

Daily September E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade over the intraday high at 27063 will reaffirm the uptrend. The main trend will change to down on a move through the last swing bottom at 25293.

The minor trend is also up. A trade through 25874 will change the minor trend to down. This will also shift momentum to the downside.

The short-term range is 27466 to 24409. Its retracement zone at 26298 to 25938 is the nearest support zone.

Short-Term Outlook

Wednesday’s price action was awful. The news about Moderna and Goldman Sachs should’ve been enough to encourage investors to hold on to earlier gains. Instead, the Dow is in a position to form a potentially bearish closing price reversal top.

Watch the price action and read the order flow if 26491 is tested during the last hour of trading. A close below this level will form a closing price reversal top. If confirmed on Thursday, this could lead to a 2 to 3 day correction.

More importantly, trader reaction to a test of 26298 to 25938 will set the tone for the rest of the week.

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

S&P 500 Price Forecast – S&P 500 Testing Recent Highs Again

The S&P 500 has gapped higher to kick off the trading session on Wednesday, as we continue to see a lot of noise in general. With that being the case, it is likely that we will eventually break out and go looking towards the 3400 level, an area that has been the most recent all-time high. I do think that we get there given enough time, but quite frankly there is a lot of noise out there in the short term that is going to continue to be an issue.

S&P 500 Video 16.07.20

With the Federal Reserve doing everything it can to lift the Wall Street, I do think that it is only a matter of time before we see this market break out. We are in the midst of earnings season, so you may have the occasional “knee-jerk reaction”, but at the end of the day fundamentals do not matter beyond liquidity. The other thing that can help of course is anything virus related that is positive. With that being the case, I think that this market will eventually find one reason or another to rally, as it is a one-way trade.

I believe that the 3000 level underneath is a massive floor, assuming that we can even get down to that level as the 50 day EMA has also offered a lot of support. All things being equal, I think that we are going much higher over the longer term, as long as we continue to see central banks keep everything afloat.

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

Top COVID Play Moderna Reverses After Hitting All-Time High

Moderna Inc. (MRNA) rocketed more than 14% overnight, hitting a 2-month high after the New England Journal of Medicine reported positive results in Phase 1 trials of an investigational vaccine designed to protect against SARS-CoV-2, better known as COVID-19. The former small cap, now valued at $31 billion, has garnered greater interest than dozens of other vaccine-focused biotech and pharmaceutical plays due to encouraging early test results. Investors and speculators have taken note of their progress, lifting the stock more than 400% so far in 2020.

Moderna Encouraging Phase 1 Results

In a Wednesday interview, Moderna Chief Medical Officer Dr. Tal Zaks said the vaccine had produced antibodies that blocked the ability of the virus to enter the cell. More importantly, it’s induced a ‘rapid and strong immune response’, producing antibodies at or above the level of those previously diagnosed with the infection. He indicated the compound was well-tolerated by Phase 1 subjects but admitted a series of ‘adverse events’ that included arm soreness, flu-like symptoms, fatigue, and headache.

According to the U.S. government’s National Institutes of Health, the Phase 1 trial had no participants over the age of 55, which is COVID-19’s most affecting age group, dampening investor enthusiasm after the opening bell. In addition, Moderna has yet to fully evaluate the durability of the immune responses. The company has already begun enrollment in Phase 2 and will launch a Phase 3 efficacy trial later this month. Even so, few analysts or epidemiologists expect a safe and effective commercial vaccine before the start of 2021, at the earliest.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Strong Buy’, based upon 14 ‘Buy’ and just 2 ‘Hold’ recommendations. It isn’t surprising that no analysts are recommending that shareholders sell their positions, given massive upside potential. Of course, there’s also tremendous risk in holding this stock because a roadblock or setback could trigger a high percentage decline, especially if the delay provides a time-to-market advantage to a major competitor.

Moderna’s technical outlook looks extremely bullish but biotech plays have the power to ignore classic rules of price action when major catalysts hit the headlines. The stock broke out above the 2019 high near 30 in March and nearly tripled in price into the May at 87.00.  It traded just above that level at the start of Wednesday’s U.S. session, setting its sights toward triple digits. However, heavy speculation routinely attracts ‘weak hands’, raising odds for multiple whipsaws.

UnitedHealth Q2 Profits Double Amid COVID-19 Slowdown; Buy With Target Price $384

UnitedHealth Group Inc, an American for-profit managed health care company based in Minnesota, reported that its second-quarter profits doubled to $6.64 billion from $3.29 billion a year earlier as COVID-19 pandemic halted less urgent surgeries.

The world’s largest healthcare company by revenue anticipates these results will be offset in the quarters ahead by the assistance measures already taken, the resumption of deferred care and future COVID-19 cost and economic impacts.

The Company maintained its full-year earnings per share outlook for 2020 of net earnings of $15.45 to $15.75 share and adjusted net earnings of $16.25 to $16.55 a share. The second-quarter medical care ratio was impacted by the temporary deferral of care due to the pandemic, declining to 70.2% from 83.1% last year. The company reported earnings per share of $7.12.

At the time of writing, UnitedHealth shares gained 0.5% to 310 before Wednesday’s open.

Executive comment

“Our 325,000 dedicated team members, including the 120,000 clinicians serving on the front lines of care, have tirelessly responded to COVID-19 with agility, innovation and compassion,” David S. Wichmann, chief executive officer of UnitedHealth Group said in a press release.

“We moved swiftly to assist the people we serve and their care providers, including the provision of $3.5 billion in proactive voluntary customer assistance and accelerated care provider funding. We remain committed to taking further actions to address any future imbalances as a result of the pandemic.”

UnitedHealth stock forecast

Fourteen analysts forecast the average price in 12 months at $337.07 with a high forecast of $384.00 and a low forecast of $293.00. The average price target represents a 9.25% increase from the last price of $308.52. From those 14, 13 analysts rated ‘Buy’, one rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $371 with a high of $449 under a bull scenario and $183 under the worst-case scenario. Jefferies raised the target price to $295 from $283 and SVB Leerink initiates with outperform, $360 target price.

We second Morgan Stanley and SVB Leerink on UnitedHealth stock outlook. We also think it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with ~20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A,” she added.

Daily Gold News: Wednesday, July 15 – Gold Going Sideways After Last Week’s Rally

The gold futures contract lost 0.04% on Tuesday, as it extended a short-term consolidation following last Wednesday’s advance to new long-term high of $1,829.80. The recent economic data releases have been better than expected and financial markets have been going risk-on. Gold broke above medium-term local highs in June, as we can see on the daily chart:

Gold is 0.2% lower this morning, as it continues to trade along $1,800 price level. What about the other precious metals? Silver lost 1.30% on Tuesday and today it is unchanged. Platinum lost 3.04% yesterday and today it is 1.2% higher, palladium lost 2.71% and today it is 0.2% higher. So precious metals are mixed again this morning.

Yesterday’s U.S. Consumer Price Index release has been basically as expected at +0.6%. Today the markets are awaiting the U.S. Industrial Production number at 9:15 a.m. Then we will get Beige Book at 2:00 p.m. There will also be China’s GDP announcement at 10:00 p.m.

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

Wednesday, July 15

  • 2:30 a.m. Japan – BOJ Press Conference
  • 8:30 a.m. U.S. – Empire State Manufacturing Index, Import Prices m/m
  • 9:15 a.m. U.S. – Industrial Production m/m, Capacity Utilization Rate
  • 10:00 a.m. Canada – BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate
  • 11:00 a.m. Canada – BOC Press Conference
  • 12:00 a.m. U.S. – FOMC Member Harker Speech
  • 2:00 p.m. U.S. – Beige Book
  • 9:30 p.m. Australia – Employment Change, Unemployment Rate
  • 10:00 p.m. China – GDP q/y

Thursday, July 16

  • 7:45 a.m. Eurozone – Main Refinancing Rate, Monetary Policy Statement
  • 8:30 a.m. U.S. – Retail Sales m/m, Core Retail Sales m/m, Unemployment Claims, Philly Fed Manufacturing Index
  • 8:30 a.m. Eurozone – ECB Press Conference
  • 8:30 a.m. Canada – ADP Non-Farm Employment Change
  • 10:00 a.m. U.S. – Business Inventories m/m, NAHB Housing Market Index
  • 11:10 a.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.

 

U.S. Stocks Set To Open Higher On Vaccine Hopes

Moderna COVID-19 Vaccine Shows Promising Results In Phase 1 Trial

Moderna shares are up more than 15% in premarket trading as the company’s vaccine for coronavirus produced antibodies in all patients that participated in the current phase 1 trial.

Other vaccine-related stocks are also gaining ground during the premarket session. Pfizer is up about 1.5% while BioNTech SE is gaining about 4%.

As the coronavirus situation in the world gets worse day by day, market participants realize that an effective vaccine is the only way to get back to normal life and business.

Therefore, any positive news on the vaccine front boost stocks. Not surprisingly, S&P 500 futures are gaining ground in premarket trading and stocks look ready to test multi-month highs.

U.S. Ends Preferential Treatment Of Hong Kong

Meanwhile, U.S. – China tensions continue to increase. U.S. President Donald Trump revoked Hong Kong’s special status due to the implementation of a new national security law.

This move means that Hong Kong will no longer get special economic terms and will not have access to certain technologies.

In turn, China promised to impose sanctions on U.S. individuals and entities. At this point, the details of these sanctions are not known.

The deterioration of U.S. – China relations continues as countries start to implement various measures against each other on a weekly basis. For now, the market ignores the risks of a new round of trade war between U.S. and China because it is preoccupied with coronavirus.

Oil Will Likely Try To Break Out Of The Current Range

Oil has been stuck near the $40 level for many trading sessions. It made several attempts to settle below this level but these attempts were met with increased buying activity.

Yesterday, API Crude Oil Stock Change report showed that crude inventories decreased by 8.32 million barrels. If this data is confirmed by today’s EIA Weekly Petroleum Status report, oil will likely try to get above the nearest resistance at $41.50 and continue the upside move.

This scenario will be bullish for oil-related equities which have been struggling to develop upside momentum since mid-June. In addition, an upside move in the oil market will help S&P 500 get to new highs.

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

Stock Pick Update: July 15 – July 21, 2020

The broad stock market has been advancing between July 1 and July 7. The S&P 500 index got closer to its early June medium-term local highs again. More than three months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value. Then we saw huge come-back rally, as the index got back above 3,200 mark.

The S&P 500 index has gained 1.27% between July 1 and July 7. In the same period of time our five long and five short stock picks have lost 1.43%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have lost 1.29% and short stock picks have resulted in a loss of 1.57%. However, the overall results remain relatively better than the S&P 500 index over last months.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • July 7, 2020
    Long Picks (July 1 open – July 7 close % change): INTC (-2.67%), F (+0.33%), PPG (+2.17%), DTE (-0.35%), AIG (-5.93%)
    Short Picks (July 1 open – July 7 close % change): XEL (+2.00%), BLK (+0.91%), EOG (-5.72%), MSFT (+2.52%), EBAY (+8.14%)Average long result: -1.29%, average short result: -1.57%
    Total profit (average): -1.43%
  • June 30, 2020
    Long Picks (June 24 open – June 30 close % change): WY (+0.36%), CTSH (+3.76%), HIG (-0.57%), BSX (-2.39%), COP (-2.28%)
    Short Picks (June 24 open – June 30 close % change): EW (-1.51%), WMB (0.00%), ETR (-0.27%), CCI (+2.04%), ADBE (-1.07%)Average long result: -0.23%, average short result: +0.16%
    Total profit (average): -0.04%
  • June 23, 2020
    Long Picks (June 17 open – June 23 close % change): BA (-3.41%), DLR (-0.81%), WLTW (+1.27%), BMY (+2.05%), HSY (-2.03%)
    Short Picks (June 17 open – June 23 close % change): DHR (-0.23%), CLX (+1.76%), AEP (-1.58%), MMM (-1.47%), PLD (-6.67%)Average long result: -0.58%, average short result: +1.64%
    Total profit (average): +0.53%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, July 15 – Tuesday, July 21 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (July 15) and sold or bought back on the closing of the next Tuesday’s trading session (July 21).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Materials, 1 x Technology, 1 x Consumer Discretionary
  • sells: 1 x Energy, 1 x Real Estate, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Real Estate
  • sells: 1 x Materials, 1 x Technology

Trend-following approach

Top 3 Buy Candidates

DOW Dow Holdings Inc. – Materials

  • Stock broke above over month-long downward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $46 (short-term upside profit target level)

INTC Intel Corp. – Technology

  • Stock remains above medium-term upward trend line
  • The resistance level and upside profit target level at $61-65
  • The support level is at $56

MCD McDonalds Corp. – Consumer Discretionary

  • Stock broke above downward trend line
  • The resistance level of $200 (short-term upside profit target)
  • The support level remains at $180

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Technology and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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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.

 

Commodities on The Rise!

Everything seems to be back to normal; stocks are moving higher again and the ‘risk on’ mode is back on the table. In today’s analysis, we will focus on commodities, as we can spot very interesting setups there, which should brighten your Wednesday trading.

We start with Gold, which had a great session yesterday, that allowed it to create a proper mid-term buy signal. The positive sentiment is coming from the fact that the price bounced from the combination of a horizontal and dynamic supports around the 1790 USD/oz. After the bounce, the AU moved higher and today, challenged the upper line of the flag formation. The first attempt looks successful for buyers but to make it legitimate, they need to hold the price above the upper line of the flag for the rest of the day.

Brent also started Wednesday with a bullish breakout. In the case of oil, we are talking about a symmetric triangle. The price closing the day above that resistance will be a proper mid-term buy signal for Black Gold.

I will finish this analysis with Natural Gas, where the price is fighting for the continuation of a new bullish trend. Recent optimism was coming from the inverse head and shoulders formation and the breakout of two down trendlines. Most recently, the price formed a flag, which is promoting a breakout to the upside and this is the breakout we are currently waiting for. The price closing the day above the upper line of the flag, will be an invitation to go long.

Moderna, S&P: Vaccine Hopes

Moderna

Source: Bloomberg

But it increasingly looks like by the time it is ready, most people indeed will already have immunity to the virus. In the meantime, Moderna is enjoying spikes of investor attention.

The latest update is that it got one step closer to the vaccine pushed its stock from the rage of $60 to $75. Needless to say, if the reports informed us tomorrow that another testing stage is cleared, we would see this stock already somewhere at its recently made all-time high above $85. Trajectory zone 2 would be the channel of movement in this case.

In fact, Moderna’s stock may well get to those highs anyways: fundamentally, the interest for anti-virus business will keep its momentum months or even years ahead, even if tomorrow is no virus at all. So Moderna will see its rise, just it will be a slow case scenario – the one that corresponds to trajectory zone 1.

S&P 500

For the stock market, the vaccine hope seems to be the only “joy” that keeps the optimism on the stage. With the S&P, currently, we are almost exactly at the previous high of 3 320, and in an obvious consolidation. Meaning, the market is not really sure what to look at more: still spreading infections in the US of the vaccine hopes. Today, it seems the latter is taking the upper hand. What the next step is going to be?

An optimistic scenario suggests we will see Trajectory 1 giving the green light to bulls and repeating the pattern of the previous upward wave the S&P followed in May. How probable is that? Quite probable, given that the reports about vaccine developments keep coming more often.

A pessimistic scenario as per Trajectory 3 suggests that we are actually at the tip of another “inside wave” which will bounce down from the resistance of 3 230. How probable is that one? Also very probable: clearing testing processes is good, but we don’t have the vaccine yet. It may take months before we finally see it.

A moderate scenario presumes that the market will overlook the absence of the vaccine and take on a more positive mood. That will be Trajectory 2.

The thing is that, indeed, it may be not until the very end of 2020 when the vaccine eventually gets done. Everyone knows that. If the S&P was only waiting for the vaccine to finally get developed, then it would be going sideways between 2 980 and 3 230 for months from now. Is that likely?

No. Regardless of the vaccine process, the more we move into the future, the more the market becomes insensitive to the reality of infections and, therefore, independent from the vaccine hopes. Why? Because with the vaccine or without it, life goes on. And even the virus is now on the rise in the US – again – it will slow down pretty soon. So the question is not “if” but “when”. And the market is bored waiting.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice.