Stock Market Breadth
This week has been mainly about US corporate earnings and their results have driven the price action. There is no doubt that we have seen a large number of companies beating Wall Street expectations and this has supported the sentiment among investors and traders. Looking at the US futures, especially the NASDAQ, tech investors are still disappointed with Snap’s results which sent the social media stock plunging yesterday. The shares tanked over 26% in the aftermarket and are likely to see more punishments today.
Today, traders are likely to maintain a somewhat cautious approach as today is the last trading day of the week and next week, we have the FOMC decision coming out. Given the fact that inflation readings are running red hot, we are likely to see the Fed showing more of its aggressive side.
On the geopolitical front, major progress was made in Turkey, where important news came out that made investors and traders a lot more comfortable and likely to make them to take on more risk. Ukraine and Russia will sign a deal to restart their grain exports, a matter which has been haunting many in the market and causing a serious threat to the soft commodities’ supply.
The Euro is sitting on decent gains this week, and it is set to close higher for the first time in three weeks as the ECB not only brought out its big bazooka but also increased the interest rate much more than the market expectations. The ECB increased the interest rate by 50 basis points yesterday when the market players were expecting an interest rate hike of 25 basis points. It was the first time in nearly 11 years that the ECB increased the interest and the region, its banks and consumers will now need to adjust to a new reality of higher rates.
Many traders are worried that the Eurozone’s economy isn’t strong enough to withstand higher rates, and to ease those concerns, the ECB introduced its new anti-fragmentation tool, which is designed to help the countries in the Eurozone where there are concerns for lofty debt piles such as Italy.
Oil prices are moving higher on the final day of the week as investors are concerned about rising Covid cases in China. However, we think that the upside here may be limited as the gasoline consumption in the US isn’t showing promising numbers and the demand side of the equation is getting hit adversely.
On the supply side, there has been a call between Russia’s President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman where they discussed cooperation within the boundaries of OPEC+, and the emphasis has been on a further corporation. The OPEC meeting is only two weeks away, and traders are concerned whether the cartel is going to release more oil or not, as prices are still painfully high.
Bitcoin’s price action is giving up some strength after breaking its one-month consolidation period. Looking at the price action, things are still positive, and this is because the price action has broken to the upside from its one-month range.
On the fundamental side, there is plenty to worry about such as the Fed’s monetary policy decision coming next week. Remember, it is the Fed’s monetary policy that broke the back of bitcoin’s price. Next week, we are expecting an interest rate of 75 basis points from the Fed and that could take the current sting out of the bitcoin price.
The crypto king is still up 22% this month and it is still on track to post its best monthly performance since October last year.
The Asian stock market traded mostly higher on the last trading day of the week. The Nikkei index gained 0.51%. The HSI index increased by 0.23%, while the KOPSI index declined by 0.41%. The Shanghai index also dropped by 0.23%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth gained further momentum. 37% of the Dow Jones stocks are trading above their 200-day moving average.
The S&P 500 stock breadth also confirmed some more strength in its momentum. 39% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading higher today. In terms of economic data, investors will be looking at the US Flash Services PMI and Flash Manufacturing PMI numbers and both of them are coming out at 13:45 GMT. The forecast for the Flash Services PMI is 52.6 and Flash Manufacturing is 52.
The Dow Jones futures are trading lower, and the index has finally succeeded in breaking above the 50-day SMA on the daily time frame, which is a bullish signal. The fact that the price has crossed above the 50-day SMA is a sign of encouragement for the bulls and as long as this lasts, the path of the least resistance remains skewed to the upside.
As for the RSI, it indicates that prices are not oversold on the daily time frame. Currently, the RSI is trading at 56.
The near-term support is 30,922 while the resistance is 32,346.
Stock Market Rally
The S&P 500 stock index closed higher on Thursday; the index increased by 0.99%. The consumer discretionary sector led the index lower, and four sectors closed lower yesterday.
The Dow index increased on the second last trading day of the week; the Dow stocks moved the index higher by 0.51%. 22 shares advanced, while 8 shares closed lower.
The NASDAQ composite, the tech-heavy index, closed higher by 1.36% yesterday.
S&P 500 Leaders and Laggards: Tesla and Carnival Group
Tesla stock contributed the most significant gains, soaring 9.7%. Carnival group stock was the most considerable drag; it fell by 11.8%. The S&P 500 stock index is down 21% so far this year.
Dow Jones Leaders and Laggards: Boeing and Verizon
Boeing provided the most significant help for the Dow Jones; it advanced by 1.91%, while Verizon was the largest decliner, it fell by 2.87%.