Daily Market Wrap
Looking at the volume in the S&P500 so far todays data is leaning towards slightly less volume traded than the previous 3 trading days. However, on this thin market we are heading back up after once again finding dynamic support on the daily 50 exponential moving average. The earnings out this evening include Texas Instruments, Johnson and Johnson, Coca-Cola Co and Verizon Communications.
The rally could be put at the door of investors optimism that the infrastructure bill that has been widely debated and amended is entering the final stages. Senator Manchin said “We’re close. We’re getting close.” So, I guess they are close to signing it off? They need to get a shift on as they all go on holiday soon and there is also the debt ceiling to organise.
The US dollar continues to rally and is now above the $93.00 handle. Today’s housing data from the USA showed that housing starts jumped 6.3% month-on-month to an annual rate of 1.643 million in June. This reading is the highest in 3 months and above forecasts of 1.59 million. Unfortunately, US building permits fell 5.1% and came in under expectations.
Fixed income markets have corrected lower towards the breakout level. Yields rising and US dollar rising has also put a stop to the appreciation in precious metals. Gold has come back to its opening price and silver is now trading lower than the rising support. The shift in sentiment is now moving back towards the Fed and away from the coronavirus. It certainly keeps you on your toes. Sentiment amongst analysts suggest that the market correction yesterday was overdone. We talked about this on Monday in the Week Ahead video, where Joel and I said that the vaccines are a game changer. Any correction will be short lived. What may happen is that we have many small corrections that cumulatively bring the market down. But generally, the world should be able to cope with the virus if the death rate stays lower than this time last year.
The stronger US dollar has lifted the USDJPY, and the price action is positively divergent to the stochastic indicator, showing that the bottom of the correction could be in. The move out of the yen as a safe haven comes as the Delta coronavirus variant is declared responsible for 83% of all new coronavirus cases in the United States and the Tokyo Olympics organising committee CEO Toshiro Muto said that he has not rules out cancelling the games at the last minute.
Oil is back into a range we saw before the latest OPEC+ meetings. We should find support at this balance area. If we do not and the daily 200 ema gives way, the correction is probably going to be deep and maybe all the way back towards $40 per barrel. Consensus is still for $80+ oil in the coming months.