March 27, 2020

US Futures Set To Open Lower

US Futures Set To Open Lower

US futures are trading lower today as investors are picking up the momentum from Europe. The European leaders have failed to iron out a concrete plan with all the necessary details to rescue the region’s economy from a disaster yesterday.

The key details have been left out to discuss further during the coming weeks. This is certainly not the time to act this way because the sentiment is immensely fragile and investors are barely getting their confidence together.   

Over in the US, the Fed’s efforts to ease the liquidity concerns in the short-term funding markets appear to bear fruit, and this has come in time when the markets could have suffered additional haywire due to the nature of the repo market towards the end of a quarter.

US markets finished the day on a high note yesterday despite the fact that we had a terrible reading of the weekly unemployment claims. Investors have learned to steer away from the noise, and they know that the fear-mongering headlines are chiefly noise.

To put things in perspective, the S&P500 index logged its first three-day rally since the intense market sell-off that was triggered back in February. The three-day percentage gains are the best since 1933, the S&P500 is up whopping over 18% while the Dow Jones is out of the bear territory. By definition, if an index rallies more than 20% from its recent low, it is officially out of a bear market.

If we look at the cause that triggered the bear market, the picture isn’t that rosy. The US has officially overtaken China with the most Coronavirus infections. China has 81,782 infected people and the number in the US stands at 85,840 (keep in mind that these numbers are changing constantly).

Back in the commodity markets, the gold price surged once again yesterday and touched the 1645 level, the highest since March 12th. The price has surged more than 13% from its recent 1455 formed on the 22nd of March.

If we look at the total gold ETF holdings, the chart shows they are off their all-time high, and there seems to be very little evidence of any recovery there. Nonetheless, I hold my view that any pullback in the gold price remains an opportunity as the path of the least resistance is skewed to the upside.

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