US Market Technicals Ahead (22 Mar – 26 Mar 2021)For this upcoming week, Investors will be watching the scheduled testimony by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on Tuesday and Wednesday before Congress, as 10-year bond yield reached its highest in 14 months. Personal consumption expenditures inflation data will also be released at the end of the week.
Before his joint testimony to Congress with Yellen, Jerome Powell is scheduled to speak Monday at the start of a four-day conference organized by the Bank for International Settlements on innovation in the digital age.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) traded the week to a all time high of 3,989, before returning all its gain with a weekly loss of -0.77% (-30.2 points) for the week. Optimism about the prospects for the economic recovery has accelerated a shift into bank and other value stocks, powering the $SPX to record levels during the week.
With $SPX remaining above its 20DMA & 50DMA and at a higher low trend formation, the immediate support to watch for $SPX is at 3,860 level, a break on the convergence of both major moving averages. Resistance to watch for $SPX is at 3,989 level, a continuation to break its all time high level.
Powell, Yellen testimony
Powell and Yellen testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday where they will discuss the health of the U.S. economy and the importance of fiscal and monetary stimulus in the recovery from the pandemic.
Financial markets have diverged from the Fed on the possible future outlook for monetary policy, sending yields on U.S. Treasuries to their highest in more than a year.
Investors are pricing in a first rate hike sooner than the Fed currently expects, amid fears that the economy could overheat as it recovers from the pandemic given President Joe Biden’s massive stimulus package combined with the Fed’s easy money policy.
U.S. economic data
On the data front, durable goods orders and the personal income and spending reports are set to be the highlights of the week, along with figures on new and existing home sales.
The housing data together with the personal income and spending figures, which includes the PCE deflator, the Fed’s preferred inflation measure, will probably show weakness, due to the impact of severe winter storms on economic activity in February. However, economists expect the slump to be short-lived.
The U.S. is also to publish the latest revision of fourth quarter 2020 GDP, which was last reported at an annualized 4.1%.
Spybull
US Market Technicals Ahead (1 Feb – 5 Feb 2021)A big week for earnings, including reports from Amazon ($AMZN), Alphabet ($GOOGL), Exxon Mobil ($XOM) and Pfizer ($PFE). Stimulus negotiations in Washington and the first jobs report of 2021 (January) will all be major events to watch in the coming week, but they are likely to be overshadowed by the standoff between retail investors and Wall Street hedge funds. Investors will be watching closely to see if the short squeezes driven by retail investors continue in what could be a bumpy week for stocks.
Here’s what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) ended the January flat, with a weekly loss of -3.47%. The correction have breached the multi-month long Trend Channel, along with 20SMA support convincingly, with the month’s highest transactional volume witnessed on 28th January. Additionally 50SMA was also breached on Friday session. This pullback affirms the technical Bearish Divergence between price rally and volume decline highlighted last week.
At the current junction, $SPX remains trading above 3,660 level, a classical support level established at the start of 2021. The breach of this support will see S&P500 trades at a cumulative loss for 2021.
1. The big squeeze
Last week saw retail investors using Robinhood and other apps drive a frenzied rally in shares of GameStop ($GME), AMC ($AMC) and other companies championed on social media platforms including Reddit’s WallStreetBets, that had been heavily shorted by hedge funds.
U.S. stock indexes suffered their biggest weekly fall since late October as the short squeezes saw hedge funds sell stocks to cover their losses, despite positive earnings results from market heavyweights like Apple ($AAPL) and Microsoft ($MSFT).
Some market watchers are concerned that the wild rally may be a fresh sign of overexuberance that could foreshadow volatility for the broader stock market, while others believe it is more of a sideshow.
2. Earnings
With quarterly earnings season in full swing, market participants are looking at whether companies can justify high valuations.
“By and large the surprises have been positive, even more so than typical and by and large companies are showing positive operating leverage where they are able to grow earnings a little bit faster than they are able to grow revenue,” said Ellen Hazen, portfolio manager at F.L.Putnam Investment Management in Wellesley, Massachusetts.
Tech giants Alphabet ($GOOGL) and Amazon ($AMZN) are both due to report after the market close on Tuesday, followed by Qualcomm ($QCOM), Snap ($SNAP) and Pinterest ($PINS) later in the week.
Some big names in the closely watched healthcare sector are also to report, including Pfizer ($PFE), GlaxoSmithKline ($GSK), AbbVie ($ABBV), Biogen ($BIIB), Gilead Sciences ($GILD), Merck ($MRK) and Bristol-Myers Squibb ($BMY).
3. January jobs report
The January nonfarm payrolls report will give markets the first look at the health of the labor market inherited by U.S. President Joe Biden.
The report is expected to show a slight uptick in hiring after the economy shed 140,000 jobs in December (mostly from restaurants and bars), but more substantial improvements are unlikely to come until there is a broader re-opening of the economy. The unemployment rate is expected to remain unchanged at 6.7% – almost twice the level that it was just prior to the pandemic.
Federal Reserve Chairman Jerome Powell last week said that the economic recovery hinges on the progress of the vaccination rollout. “There’s nothing more important to the economy than people getting vaccinated,” Powell said.
