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Major US stock market indexes imply a rather cautious approach on behalf of market participants, as they correct lower over the past two days. Today we have a look at the fundamentals by analysing the release of the US November CPI rates later in today’s American session and the China worries of the market, yet we get more specific as we also have a look at Google’s new quantum chip. For a rounder view we are to conclude the report with a technical analysis of S&P 500’s daily chart.
The US November inflation report
We make a start with US financial releases by noting that the release of the US employment report for November on Friday showed a hotter than expected US employment market as the NFP figure rose surpassing market expectations, yet the tick up of the unemployment rate may have clipped the market’s enthusiasm. The data had little effect on US stock markets as index showed mixed reactions. We expect higher volatility at the release of the US inflation report for November in US stock markets as the combined employment and inflation info could provide a deeper insight regarding the Fed’s intentions in its upcoming meeting next week. Please note that for the time being the headline CPI rate is expected to tick up and the core rate to remain unchanged at relatively high levels, both on a year on year level. Should the actual rates meet their respective forecasts, we may see the Fed’s stance turning more hawkish given also the strong US employment report for the same month. Should we see the US CPI rates showing a persistence or even an acceleration of inflationary pressures in the US economy we may see the release weighing on US stock markets and vice versa.
Tariffs on US imports, China and NVIDIA
On an ongoing and a deeper fundamental level, market worries for Trump’s intentions about imposing tariffs on US imports, once inaugurated. Trump has clearly threatened to impose tariffs on US imports from Canada, Mexico and China, while market analysts also note Euro Zone countries as possible targets. The issue tends to create uncertainty and may be making traders more cautious, possibly clipping any gains for equities. Also China tends to show little signs of a confident economic recovery, despite the fiscal and monetary policy provided. It should be noted that PBoC is from now on expected to maintain an “appropriately loose” monetary policy and the Chinese government a more proactive fiscal policy. Furthermore we also note that China has launched an anti-trust probe into Nvidia with the FT stating that the investigation into Nvidia (#NVIDIA) was opened for suspected violations of the country’s anti-monopoly law. It should be noted that he China is Nvidia’s 3rd largest market by revenue, while a possible fine from the Chinese authorities could be ranging from 1-10% of its income. As long as market worries for the issue tend to be enhanced, we may see them having a continuous bearish effect on Nvidia’s share price, while should they ease it could support it. The investigation in our view, seems like a retaliatory measure by the Chinese Government as tensions between the USA and China over a potential trade war under the incoming Trump administration intensify. If actually so, then we may see other US companies like Apple for example, falling victims of the tensions between the two countries.
Google’s “wow” quantum chip
Google’s (#GOOG) share price jumped around 5% yesterday as the company unveiled its new generation chip “Willow”. Willow is a leap forward in quantum computer, with Google stating that Willow performed a standard benchmark computation in under five minutes that would take one of today’s fastest supercomputers 10 septillion years. The announcement appears to have already aided the company’s stock price and we would not be surprised if it continues to do so. On the other hand, it would take years for the full potential of the chip to develop and possibly Billions for the technology to be produced en mass, yet Google seems to have the edge right now. Given also the market’s frenzy for the potentials of AI and the breakthrough as presented by Google, we may see the support for Google’s share price being enhanced on a fundamental level.
التحليل الفني
US500 Daily Chart
- Support: 6030 (S1), 5890 (S2), 5675 (S3)
- Resistance: 6250 (R1), 6500 (R2), 6700 (R3)
For a rounder view we have a look at the S&P 500. Since our last repot the index’s price action initially rose forming new record highs, yet corrected lower later on reapproaching the 6030 (S1) support line. We tend to maintain our bullish outlook for the index, as the upward trendline guiding the index since the 8th of August remains intact. Also, the 20 moving average (MA) which is also the median of the Bollinger bands, continues to support the price action’s upward motion, also supporting a bullish outlook. The RSI indicator, despite correcting lower, remains above the reading of 50, implying the presence of a bullish predisposition among market participants. Should the bulls maintain control over the index’s direction, we set the next possible target for the bulls at the 6250 (R1) resistance line. Should the bears take over, we may see the index, breaking the 6250 (S1) support line, continue to break also the prementioned upward trendline, in a first signal that the upward motion has been interrupted and then reach if not breach the 5890 (S2) support level.
If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com
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JA 
