- July 29, 2019
- Posted by: Trading
- Category: Market Overview
U.S. equities are likely to open the week aiming higher ahead of a crucial Federal Reserve meeting, although weak technicals persist and investor exuberance, which is leading many traders to focus on positive news and disregard negative news, may be a sign of a market top.
Equities hit fresh all-time highs on Friday, with Alphabet (NASDAQ:) leading the charge on strong and U.S. numbers providing a solid backdrop. The GDP report and its signs of solid growth gave investors cheer, but that optimism is also being fueled by expectations of a Fed on Wednesday, a reduction that is in part a response to slowing global growth.
U.S. growth eased in the second quarter as trade and business investment weighed on growth, but it was still enough to beat expectations. Despite a soft patch in manufacturing, the service sector of the economy is holding steady, which, in combination with healthy consumer conditions, supports the view that the economic expansion will continue. That positive data was not enough to force investors to start back peddling over their expectations for a rate cut. Investors seem to be building their bullish case on a dichotomy: positive economic data and to promote slowing growth.
The advanced 0.74% with all sectors except (-0.51%) and Industrial (-0.22%) in the green. (+2.86%) surged with Alphabet the outperformer. For the week, the SPX advanced 1.65%, with all sectors but Utilities (-0.65%) and Energy (-0.49%) in positive territory. Communication Services (4.3%) was again the clear leader on Alphabet’s and ’s superior earnings, overshadowing Amazon (NASDAQ:)’s stock plunge after an end to its record
S&P 500 Daily
From a technical perspective, while the index closed above an evening star reversal two weeks ago, it closed below a broadening pattern since January 2018. Both the MACD and the RSI provide negative divergences, with the momentum-indicator set for a H&S top.
U.S. yields resumed a consolidation with the dollar advancing for the sixth straight day to within the highest since May 2017. The euro dropped to the lowest in the same period. It is taken for granted by many traders that the ECB, along with Germany, will restart stimulus measures due to the worst industrial slump in years.
The pound slumped as a Boris Johnson win is tantamount to a no deal Brexit. Also, uncertainty increases as chances for a new general election rise. The Conservative majority is slim and likely to be whittled down to just one on August 1 when the byelection takes place.
XAU/USD Weekly Chart
softened for the week on a strengthening dollar, but it had already completed the massive bottom going back more than 5-years. The bottom pattern’s dramatic implied coming rally fits the scenario of a weakening dollar whose legs are about to be cut out from under it by the Fed. On the other hand, both the dollar and gold rallied in the aftermath of Trump’s 2016 U.S. election victory.
All times listed are EDT
Tentative: Japan – ,
Tentative: Japan –
10:00: U.S. – expected to jump to 125.0 from 121.5
10:00: U.S. – seen to plunge to 0.5% from 1.1%
21:00: China – likely to edge up to 49.6 from 49.4, still in contracting territory.
21:30: Australia – probably surged to 0.5% from 0.0%
3:55: Germany – seen to have jumped in July to 3K from -1K
5:00: Eurozone – expected to have lowered to 1.1% in July from 1.3% in the previous July.
8:15: U.S. – expected to jump for the second month to 150K from 102K
8:30: CAD – forecast to drop to 0.1% in May from 0.3% monthly.
10:30: U.S. – seen to surge to -4.01M from -10.835M
14:00: U.S. – expected to be cut to 2.25% from 2.50%.
14:30: U.S. –
21:45: China – seen to edge up to 49.6 from 49.4 MoM, still within contraction territory
4:30: U.K. – probably edged down to 47.7 from 48.0 MoM
7:00: U.K. – expected to remain at 0.75%
7:30: U.K. –
10:00: U.S. – probably advanced to 52.0 from 5.17 from a month earlier.
21:30: Australia – seen to have climbed to 0.3% from 0.1% MoM
4:30: U.K. – seen to rise to 46.0 from 43.1 MoM
8:30: U.S. – expected to fall to 160K from 191K – It is noteworthy that expectations are downward while that of the ADP Nonfarm Employment Change are upward, as the market attempts to rebalance after investors overshot expectations. Will they get it right this time?
8:30: U.S. – expected to remain steady at 3.7 %, slightly up from the earlier 3.6%, the lowest since 1969.