Nasdaq has again moved to new all-time highs while S&P 500 approaches similar levels. While better than expected results from Walt Disney Company (+8.8%) together with big movers like Square Inc. (+7.10%) and Boeing (+5.58%) have supported the move higher in the US equities, in general, it is technology sector that attracts the most investment dollars. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we don’t provide investment advice.
Sector level analysis reveals how investment dollars have flowed away from almost every other market sector into technology. Over the last 10 days, technology has gained 4% relative to the S&P 500 while e.g. energy has lost 3.6% and utilities 3.9%. In this calculation, the S&P 500 is constant and sector performance is calculated as change from this base. This shows how investors believe it’s the US technology companies that will emerge as winners from the crisis created by Covid-19. This same bullishness can be seen in indicators that measure how widely supported the recent index moves are. At the time of writing this, 78% Nasdaq 100 stocks are trading above their 200-day moving averages while only 58% of S&P 100 stocks are above the same moving averages. It seems likely that as long as the Fed keeps on borrowing at the current rate and market participants have a reason to believe that there will be more stimulus, the prices of stocks will keep on trending higher. This, however, isn’t a promise, only speculation and prices never move higher in a straight line. Therefore please remember that there will be retracements and volatility that can cause losses to careless traders. Especially to those that lack the discipline to keep their bet sizes small and/or a good trading strategy.
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Nasdaq has been trading higher in a rising channel and is now trying to move above the most recent short terms trading range. Blue horizontal line points to the lower end of this range while the red line shows the upper end of the range. Bulls are now trying to push the market higher from this “box” but at the moment it’s unclear whether there will be enough demand to move the index higher immediately or whether a re-test of supports is needed first. As per Stochastics oscillator, the market is overbought and losing momentum. This is confirmed by the narrow range candle formed yesterday. Key daily timeframe support levels can be found at 10300 and 10502 (e-mini Nasdaq futures prices). We warmly welcome you to join our webinars to learn more about market analysis, risk management and trading strategies. You can register and deposit to your account here.
Recent macroeconomic data
Chinese Manufacturing PMI: 51.1 (50.8 expected)
US Manufacturing PMI: 54.2 (53.6 expected)
Canadian GDP 4.5% (3.5% expected)
NZD unemployment rate 4.0% (5.6% expected)
US ISM Services PMI 58.1 (55 expected)
US Markit Final Services PMI 50.0 (49.6 expected)
Macroeconomic releases today and tomorrow
Bank Of England rate decision Unchanged at 0.10%
BOE Governor Bailey speaks
Canadian unemployment rate 11.1% expected
US Non-Farm Payrolls 1550K expected
US Average Hourly Earnings -0.5% expected
US Unemployment rate 10.5% expected
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