The Dow Jones futures are trading modestly lower as traders fail to shake off the biggest one-day surge in coronavirus cases in the US and how it has constrained the re-opening process.
There is no doubt that the news of a second coronavirus wave has been glum, and it may maintain this narrative for some time. Still, the fact is that smart money does see the Texas governor’s recent action of halting the further re-open efforts as a positive sign. For them, this step is the right direction to stamp out the current spike in Covid-19. Measures like this have put an end to the drumbeat of negative coronavirus news
The S&P 500 futures, along with Dow Jones futures, are likely to remain sensitive to the lack of a clean re-opening of the US economy, and this particular event is going to adversely influence the recovery efforts. Geopolitical tensions between the US and China continue to simmer in the background.
Gold prices continue to retrace from their recent high of $1,779 as investors reward riskier assets and betray gold. Investors are likely to focus on the upcoming US personal spending and income data, and both numbers are likely to determine the future course of the gold price for the rest of the day. Other risk-off assets such as the VIX index have also shown retracement, and the index dropped over 5% yesterday.
The global stock market has been encouraged by the late rally on Wall Street, and most of the Asian markets have closed positive today. European futures are also building on this optimism, although it is critical to point out that bulls are back in town for a vengeance.
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Traders work during the opening bell at the New York Stock Exchange (NYSE) on March 19, 2020, at … [+]
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S&P 500 Stocks In Trouble?
The S&P 500 chart below shows large hedge funds (net non-commercial) have increased their short positions to the highest level in nearly nine years. This switch indicates two things: firstly if they are right, the stock market could experience a wild and sharp move to the downside. Finally, if the hedge funds are wrong, we could see some serious capitulation taking place. That can provide rocket fuel for the coronavirus stock market rally.
S&P 500 chart shows stock market rally could crash as hedge funds hold largest short positions on … [+]
DJIA Index And S&P 500 Index: Market Breadth
The stock market rally breadth has improved. The DJIA index market breadth confirms further improvement as 33% stocks trade above their 200-day moving average yesterday. The number of Dow stocks that traded above this moving on Wednesday was 27%.
The S&P 500 index doesn’t show any significant change in bull strength yesterday. The difference between Wednesday’s close and Thursday’s close was only 1%.
Dow Jones And S&P 500 Futures Today
The Dow Jones futures are trading lower by 100 points while the US stock market continues to struggle to post weekly gains. Once again, the Dow Jones futures have seesawed between gains and losses during the early morning price action.
The Dow Jones futures chart shows that the Dow ’s price has bounced from its 50-day moving average, but the DJ30 index is still below its 200-day moving average on a daily time frame. Bulls may struggle to keep this stock market alive if the Dow Jones is unable to move above the 200-day moving average.
The DJIA index’ weekly chart shows that bears still command the control on a bigger time frame, and the bigger time frame always has more importance in trend analysis. The Dow index is trading below the 50 and 100-week smooth moving averages. But, bulls are likely to hold on to their long bets because the price has dropped below the 200-week average.
The S&P 500 index found its strength near the 50-day moving average on a daily time frame, and as long as the S&P 500 futures price stays above this average, we have strong chances for the coronavirus stock market rally to continue its upward journey.
Dow Jones Chart. Dow Jones futures have found support near the 50-day moving average. Stock market … [+]
Stock Market Rally
The US stock market rally isn’t giving up hopes. Speculators are ready to jump in to support the price and bag some bargain. For these investors, the coronavirus situation is not a new issue. They know that we have gone through the worst period, and the current Covid-19 spikes, which are labelled as second coronavirus waves, are a small hiccup for the economy.
Traders liked the fact that the US unemployment initial claims data is maintaining its downward trend, and there is also an echo of this in the continuous claims data. The US durable orders number have made them more optimistic about the future of the economy as they know that orders are there, and it is up to consumers and workers to start supporting the economic activity. However, the jury is still out, and it may be immature to think that we are out of the woods.
The S&P500 index recovered its losses yesterday and finished the day with decent gains, with S&P stocks closing with a gain of 1.10%. The information technology sector led the gains for the index. Bank stocks also flew higher on a regulatory rollback that will free up capital. The S&P 500 index is 9.13% below its 52-week high formed on Feb.19, 2020, and it is up 40% from its Covid-19 low formed on March 23. The index’s dividend yield is 1.96% on a trailing 12-month basis.
The Dow Jones index made a remarkable comeback yesterday. It closed higher by scoring 299 points or 1.18%.
The tech-savvy index, the NASDAQ composite jumped by 0.99% yesterday.
Biggest One-day Coronavirus Spike In US
Coronavirus cases reached their most significant single-day surge in the US with 39,000 people testing positive for Covid-19 yesterday. Hospitalization reached their capacity levels in Arizona while the situation continues to remain stressful in other States such as Florida, California, Oklahoma, and Texas. The governor of Texas has halted efforts to further re-open the economy. North Carolina has also paused its plan to loosen restrictions any further, with an echo of this coming from Kansas and Louisiana.
Trump Ignores Record Covid-19 Spike
Donald Trump, president of the United States, hasn’t said much about the recent spikes of coronavirus cases in the country. However, he tweeted last night and pointed out that the deaths caused by the virus are “way down”. He believes that the economy is “roaring back” and “will NOT be shut down”. Vice president Mike Pence is expected to hold his first coronavirus meeting in nearly two months today.
Tensions Between Trump and Angela Merkel
President Trump’s recent threat of new tariffs on the EU has triggered a more favorable response from Europe. To appease Trump, Spain, Italy, UK, and France suggested curbing the breadth of a proposed global digital tax.
Tensions continue to simmer between US and Germany as the German Chancellor, Angela Merkel is preparing retaliatory measures if Trump continues to press on shutting down the Nord Stream 2 pipeline. Germany is likely not to act alone but will use the EU to maximize the blow, and as a result, tensions may escalate between the transatlantic allies.