Stock futures are struggling to score any gains today and traders are very much picking up the moment where they left off on Friday. There is no doubt that the US equity markets are in a retracement mode, traders have decided that it is the best time to start taking some chips off the table as there is no significant stimulus package that is going to hit the US economy.
Basically, the stock market and its players are addicted to stimulus, and the fact that there will be no new stimulus coming, it is taking some steam out of the current stock market rally. In fact, traders are concerned that the help which was provided during the pandemic may began to roll back as global economy continues to recover and this has made investors lose their appetite for riskier assets.
On the fundamental side, one factor that is still making traders worried, and they are ready to back riskier assets, is also the rise in Delta variant cases. Coronavirus cases are increasing in the US and also in the UK during the past few days. However, it is important to keep in mind that two thirds of the population in the UK has received their second shot of coronavirus vaccine, and the ratio in the US is also fairly strong as well. So, it is likely that we may continue to see coronavirus cases continue to rise, but it is highly unlikely that we will another major lockdown like the ones before. Thus, smart traders may actually consider the current selloff as an opportunity to get back in the market and bag some bargains.
In addition to this, stock traders should also remember that historically, this time of the year is when there is lower activity, less risk-taking, and a decline in trading volume, and hence they should not be too worried.
The S&P 500 and the Dow fell 0.97% and 0.52% last week, respectively. The Nasdaq Composite dropped 1.87% and posted its worst week since May.
As the earnings season continues, the growth of average earnings per share for companies listed on the S&P 500 is expected to be 66% in the second quarter on a year-on-year basis. This growth shows how corporations are rapidly recovering from the dip caused by the pandemic and will continue to outperform in coming months as well. Having said that, investors should keep in mind the surge in inflation and its effect on the policy rate in coming months.
Following an increased crackdown by financial regulators across the globe, the price of Bitcoin has nearly halved. Based on the Bitcoin price chart, it can be deduced that $30,000 is very likely to be the support level moving forward. As seen in the options activity for July and August, the most sold downside strike price is $30,000, implying that this level would provide support to the market. Crypto traders have been taking advantage of the digital currency’s range-bound price by purchasing it between $30,000 and $32,000 and selling it for anywhere between $34,000 and $36,000.
Crypto traders should also keep in mind that institutional investors are still heavily invested in cryptocurrencies, and the price would have to fall below $20,000 for these companies to be concerned about the legitimacy of the blockchain space.
The gold price has lost its mojo once again and prices are on the back foot to begin the week. This is mainly due to some strong economic numbers out of the US more recently. The fact is that every single strong economic reading is a threat for the gold price because it makes traders nervous. The reason is that if the economic numbers continue to improve, the Fed will have no other option left but to react and the Fed’s monetary policy meeting is next week and that is the most important event for gold traders.
For now, we do see more strength for the dollar index and this is pushing the gold price lower. From a technical price perspective, bulls are still somewhat in control of the price and the reason is that the price is trading above the 100-day SMA on the daily time frame and it is also trading above the 1,800 price mark. Both of these factors are giving hope that the bull run that we have seen more recently may continue for the time being. However, if the price drops below the 100-day SMA on the daily time frame and stays below it, we are likely to see more sell off.
The OPEC+ members’ standoff ended over the weekend after discussions in which it was agreed to revise production baselines for Saudi Arabia, Kuwait, Russia, the United Arab Emirates, and Iraq.
Brent crude oil settled at $72.68 per barrel and U.S. West Texas Intermediate settled at $70.95 per barrel as of 11:33 p.m. EST.
Investors should understand that the cartel has agreed to boost oil production and has decided to restore all supply removed from the market during the coronavirus pandemic by the end of 2022. The group will initially add 400,000 barrels per day each month starting in August, to 2 million barrels per day by the end of 2021. OPEC+ has announced that it has extended the agreement from April 2022 to December 2022.
The outcome of the arrangement would mean a surge in the supply of oil after oil prices reached their highest in nearly 3 years because of rising demand and production cuts. However, traders should keep in mind that the slow pace of production growth indicates that producers are comfortable with current oil prices and are likely concerned about the pace of economic recovery as new coronavirus variants emerge. Therefore, it is uncertain whether the planned rise in oil supply will hinder a rise in oil prices as demand continues to rise.
Asian Stock Markets
The Nikkei 225 index in Japan fell 1.65% in morning trade, and the Shanghai Composite Index declined 0.49%. As of 10:29 p.m. EST, the ASX 200 index dropped 1.02%, while Seoul’s Kospi fell 1.20%. Hong Kong’s Hang Seng index dipped 1.75%.