Equities Outlook – Stocks’ rise temporarily halted?

  were on the rise since our last report, with all three major equities indexes, being in the greens. Yet we must note that the ascending course sems to have been at least temporarily halted. Today we are about to take a more 基本的 approach which could have moved the markets in the past few days and move them in the coming days. For a rounder view the report is to finish with a 技术的 analysis of Dow Jones.

We make a first stop on last Wednesday the 27    of the month and the Fed’s interest rate decision. As was widely expected, the Fed delivered a 75 basis points rate hike unanimously and in its accompanying 资产购买保持在每月 the FOMC kept a rather confident, hawkish tone  citing a tight US employment market as well as inflationary pressures in the US economy. Fed Chairman Powell, in his press conference, which may have been the market moving element of the event, stated that inflation is much too 高 和 wage growth is elevated, while there is still upward pressure on inflation. Yet Powell also stated that the size of the next rate hike is going to be dependent on the data to be released, which may imply that the next rate hike may not be as wide as 75 basis points, yet the bank will not hesitate to repeat it if necessary. At the same time the Fed’s Chairman stated that he does not believe that the US economy is currently in a recession as the economy is doing well in a number of areas especially the employment market. All of the above tended to provide some support for US stockmarkets, as the prospect of an easing of the Fed’s rate hiking path could allow for some opportunities for growth for the US economy. Even yesterday Tuesday we had St. Louis Fed President Bullard stating his belief that the US economy can avoid a recession, while San Francisco Fed President Daly implied that he Fed is to continue to tighten its monetary policy in order to curb inflationary pressures in the US economy. Despite Powell’s sayings the GDP advance growth rate for Q2 was telling a different story on Thursday the 28   , as it failed to exit the negative territory 和 signalled that the US economy is in a recession, at least technically, given that it remained in the negatives for another quarter.

Also on a fundamental level, we cannot miss out on commenting on the escalation of tensions in the US-Sino relationships. It should be noted that US House speaker Nancy Pelosi visited Taiwan, the first of a high-ranking US politician in the past 25 years and the visit, causing an enraged response from China. The issue intensified market worries for the possible adverse effects on the US economy causing US stockmarkets to stall and even drop a bit.

The next big test for   is expected to be the US employment report for July, which is due out on Friday. The NFP figure is expected to drop if compared to June, while the unemployment rate is expected to remain unchanged at rather low levels. Overall the US employment market seems to remain tight should the actual rates 和 figures meet their respective forecasts, albeit the tightening seems to be losing some steam. Please note that at the time of the release there may be increased 波动率 for US stockmarkets, so some caution is advisable. Also please note that the earnings season is still on 和 the releases may sway market opinion. Should the earnings reports be better than expected we may see the positive, risk on attitude on behalf of investors intensifying 和 vice versa. We note the release of EBAY, Booking 和 Moderna today Wednesday,  Alibaba (#BABA), GoPro (#GPRO),Dropbox, New Fortress Energy (#NFE), LYFT on Thursday and CGC on Friday.

US 30 Cash, Daily Chart

Support: 32200 (S1), 31170 (S2), 29850 (S3)

Resistance: 33100 (R1), 34150 (R2), 35300 (R3)

Dow Jones corrected lower yesterday yet remained between the 33100 (R1) and the 32200 (S1) levels. We tend to maintain a bullish outlook for the index as long as it remains above the upward trendline incepted since the 15    of July. Please note that the price action tested the prementioned upward trendline today, yet at the same time the RSI indicator seems to remain comfortably near the reading of 70 implying some bullish sentiment. For the time being it seems that the distance created by the correction lower between the price-action and the upper Bollinger Band could allow buyers for some extra room to manoeuvre. Should the bulls actually maintain control over the index’s direction we may see Dow Jones breaking the 33100 (R1) resistance line and take aim of the 34150 (R2) resistance level. Should on the other hand the bears take over, we may see the index, breaking the prementioned upward trendline the 32200 (S1) support line and aim for the 31170 (S2) support level.    

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