Equities report: US Government on track to reopen after a historic shutdown period

Since the beginning of the week, all three major US stock market indexes notably the Dow Jones, Nasdaq and S&P 500 edged higher . On a technical level we are to provide a technical analysis of S&P 500’s daily chart for a rounder view, given the index’s broad spectrum.

US government shutdown to finally end?

The US Senate has voted and passed the bill required to end the ongoing US government shutdown. The vote passed with 60 Senators voting in favour of the bill and 40 voting to reject the proposal. The bill will now head to the US House of Representatives later on today. The House is controlled by the Republicans and thus in our view we expect the bill to be passed, where it will then head to President Trump’s office to be signed, and thus bringing an end to the US government shutdown. However, per Reuters “The deal would extend funding through January 30, leaving the federal government for now on a path to keep adding about $1.8 trillion a year to its $38 trillion in debt”, which could lead to heightened uncertainty with the start of the new year, as they will need to agree on another deal to prevent another Government shutdown post January 30th. Nonetheless, the passing of the bill and the anticipated favourable outcome from the House of Representatives may aid the US Equities markets as some form of normality returns. In our view, the possibility of the US government shutdown ending today may be seen as a positive for the US Equities markets and could provide support for the wider market. Although, the positive sentiment may last until the beginning of January where concern may rise again, should no progress be made to ensure long-term funding for the US government.

SoftBank offloads Nvidia stake

SoftBank has offloaded its entire stake in Nvidia. The company, announced that is had sold its entire stake in Nvidia for approximately $5.8 billion, in order to help SoftBank with their future artificial intelligence investments. In turn the announcement by SoftBank resulted in Nvidia’s stock price moving lower, as investors may have been spooked that this may be only the beginning of companies beginning to offload shares from tech companies. Under normal circumstances, such an exit may have spooked market participants initially, with the bearish sentiment slowly fading away, yet with the current situation where the discussions of an AI bubble are being discussed on the daily the bearish market sentiment may have been amplified. In our opinion, given the ongoing concerns from market participants and analysts alike that the tech-sector may be overvalued, we aren’t surprised that the market appears jittery and thus could lead to heightened volatility for the remainder of the month.

التحليل الفني

US500 Daily Chart

• Support: 6790 (S1), 6635 (S2), 6467 (S3)
• Resistance: 6925 (R1), 7100 (R2), 7280 (R3)

Since our last report S&P 500 has moved higher. We opt for a bullish outlook for the US500 and supporting our case is the RSI indicator below our chart which currently registers a figure near 60 implying a bullish market sentiment. Yet some concern still persists when looking at our MACD and ADX with DI indicators below our chart. For our bullish market sentiment to continue, we would require a break above our 6925 (R1) resistance line with the next possible target for the bulls being our 7100 (R2) resistance level. On the other hand, for a sideways bias we would require the index to remain confined between our 6790 (S1) support level and our 6925 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below our 6790 (S1) support level with the next possible target for the bears being our 6635 (S2) support line.

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