June 19, 2020

US Futures Set To Record Weekly Gains

US Futures Set To Record Weekly Gains

The Dow Jones futures are trading higher, while investors continue to worry about the rise in coronavirus cases in the US. As the numbers keep spiraling up, investors fear that the current coronavirus hot spots such as Texas and Florida may hamper the recovery. At the same time, each state continues to battle with the process of keeping their economies open. Civil unrest triggered by a Trump tweet may have some correlation with the recent spike as I said before. Nonetheless, investors have a new battle to fight: threats of partial shutdown like in Beijing.

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In addition to this, the stock market rally has another significant problem: earnings. No one can accurately say how earnings will look like going forward or even if we have bottomed out. This makes it more difficult for bulls to fight the stock market’s current pessimism, as many feel the S&P 500 to be overvalued or out of touch with reality.

The market breadth of the S&P500 suggests that the bull momentum isn’t that . However, bulls have returned to the commodity space, which is one of the reasons we have seen life return for the black gold, oil. Both WTI and Brent prices are up today. The precious metal, gold, is struggling to hold on to its weekly gain. However, the fact that the US economic numbers are not sending a firm message signaling economic recovery is on track keeps hopes alive for the gold price to continue its climb towards the $1,800 mark.

Several options will expire today on Wall Street, and this usually translates into more volatility.

Here is more on these topics:

Dow Jones Futures Today

The Dow Jones futures are trading higher as Dow stocks attempt to keep the bullish momentum alive. The chart below shows the Dow Jones price has moved below the 200-day moving average on a daily timeframe, but the battle is still not over as the Dow price retested this average again today. 

The Dow Jones industrial average index returned to its mean as the price is close to its 20-day moving average and within the Bollinger Band.

Also, the Dow Jones is still above the 100 and 50-day SMAs, and while it remains above them, the door is open for the index to turn positive for this year. 

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Stock Market Rally

 The US stock market rally is set to post gains for this week despite the fading of investor enthusiasm. Investors continue to shave profit off the table due to inconsistency in the economic numbers. There is no doubt that we have seen some big surprises in specific economic numbers this week, such as the US retail sales data, but US weekly jobless claims have once again failed to confirm any optimism. Therefore, traders remain on-edge, and smart money still sits on the sidelines. The S&P 500  and Dow Jones stocks need to improve performance to attract more capital, which currently seems a little unlikely.

The S&P500 index closed higher by 0.06%, and the Dow Jones industrial average fell 0.15% yesterday. Energy stocks led the S&P 500 index higher, while 4 out of 11 sectors closed in positive territory. So far, the index is up 2.4% this week, and for the quarter, S&P 500 stocks have led the index to a gain of 21%.  

The tech index, NASDAQ, closed above the 10,00 mark with a gain of 0.30%. 

Stock Market Breadth

The stock market breadth shows that there has been a major shift in favor of bearish momentum

The S&P stocks breadth

                25% stocks trading above the 10-day smooth moving average- difference from yesterday -45%

                85% stocks trading above the 50-day smooth moving average- difference from yesterday -11%

                41% stocks trading above the 200-day smooth moving average- difference from yesterday -8%

The Dow Jones stocks breadth

                10% stocks trading above the 10-day smooth moving average- difference from yesterday -80%

                80% stocks trading above the 50-day smooth moving average- difference from yesterday -13%

                30% stocks trading above the 200-day smooth moving average- difference from yesterday -13%

The NASDAQ stocks breadth

41% stocks trading above the 100-day smooth moving average-difference from yesterday -25%

                76% stocks trading above the 50-day smooth moving average-difference from yesterday -12%

                42% stocks trading above the 200-day smooth moving average- difference from yesterday -2%

Coronavirus Cases Spike  

Coronavirus cases have increased in the US, and the situation looks a lot grimmer in Texas. Hospitalization rates increased for seven consecutive days there. California has recorded 4,084 new virus cases, the most significant daily increase since the crisis. New York Governor Andrew Cuomo said yesterday that he might order a quarantine for visitors from Florida as the situation worsens.

Still, it’s not easy to think how such policies can work in reality. The public is tired of lockdowns, and they started to celebrate once economies began to reopen. However, we still need to respect the seriousness of the coronavirus situation because the consequence of being careless and not adapting to a new reality are lethal.

Trump News: DACA And Decoupling From China  

In another major blow for President Trump, the US Supreme Court blocked his administration’s plan to destroy an Obama-era program, the Deferred Action for Childhood Arrivals program, or DACA. DACA recipients celebrated the ruling as the program protects more than 650,000 so-called DREAMers from deportation.

Chief Justice Jon G. Roberts Jr., called the administration attempt “arbitrary and capricious” while speaking for the 5-4 majority. The stock market seemed to like the Supreme Court decision as there was a visible bounce for the S&P 500 around the time of this news.

However, something that is keeping traders’ concerned is the US-China relation.  Tensions have increased once again after Trump said that the US could pursue a “complete decoupling from China.” This is one of the most forceful statements by Trump, and traders are concerned about the possibility of this materializing into an actual reality.

Donald Trump is not “fit for office” were the comments of former national security adviser Jon Bolton. His book “The Room Where It Happened” has created more obstacles for Donald Trump, and this comes at a critical time when the US elections are just around the corner.

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