US markets struggled on Friday with a mixed closed. Investors were waiting on the sidelines as they await further fiscal stimulus to help the unemployed. Trump intervened over the weekend pushing through a second wave of supplemented unemployment measures. At this stage it is unclear on how this will affect markets as we do not know if he will be met with legal challenges delaying things further.
US earnings are almost finished. Most companies are beating expectations, out of the 435 in the SP500 that have reported 346 (79.54%) beat expectations and 89 (20.46%) missed.
This week it will be all eyes on reporting. CBA will be one of the more important reports as it gives an insight on how things are going in the economy. It will a true test to see if Keepers’ allowance has been able to save a lot of businesses or not. Residential real estate at this stage is expected to be ok with loan holidays and increased Seeker allowance.
Australian Outlook
The XJO is set to have a positive open as we once again continue to hold 6000. This level has acted as both a resistance/support and magnet as the XJO is not very willing to move too far from it since June.
Our market still has a lot of catching up to do to the U.S which we have disconnected from over the past few weeks. We are still heavily influenced by their leads and their futures during our sessions, but we have not been fortunate enough to share in their strong rallies. Instead we are being squeezed once more into the point of a triangle pattern between key resistance at 6175, a short term counter trend, and the underlying uptrend line. There is not much room left, and when we do see a break, don’t expect strong movement that would typically occur from a breakout, for sideward movement has been dominating our trading over the past few months.
The U.S rally has helped keep our market buoyed against falls coming from Covid related issues with VIC in stage four and NSW with very early signs of a potential second wave. Stimulus across the board remains on the markets’ minds, and until that stops we should continue to move sidewards to higher.
Our reporting season is underway which could help move our market one way or the other. Many companies have already given hints, warnings, and updates of what is to come during their earnings. The market won’t be looking at their current performance, but instead to their future guidance.
Notable companies this week include GPT today; CBA tomorrow; TLS and TCL Wednesday; QBE, WPL, AGL, EVN, and TWE Thursday; and finally NCM on Friday. There are plenty more, but these stocks you can trade strangles on, a type of Option trade where you make money with a large movement up or down. This is a great strategy for a report as we often see big movement.
US Markets
US shares pushed higher again on Friday, their sixth straight day of gains. Unemployment and jobs numbers from the US were largely better than expected on Friday. Equity markets in the US have continued to rally with optimism around further fiscal stimulus, vaccine hopes, and a weak US dollar. Markets are also being buoyed by a earnings season that has seen around 75-80% of US companies exceed their earnings expectations. However, delays to the stimulus announcement, as well as rising US-China tensions, are giving some investors concerns. Technology was the only major sector to close lower in the US on Friday, while Utilities, Telecoms, and Financials all saw strong gains.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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