- Crude trims most of yesterday’s losses but has already completed a peak-trough downtrend
- Gold also rebounds after extending a downtrend since the August record peak
Key Events
US futures for the Dow Jones, S&P, NASDAQ and Russell 2000 were flat on Tuesday, even as European shares extended a record-setting rally. Investors remain focused on economic and pandemic worries as the fast spreading Delta variant continues its contagious course even as markets await additional clues from central banks on the timeline for tightening the most accommodative policy in history.
Both gold and oil reversed recent slumps.
Global Financial Affairs
Though contracts on all four major US indices were little changed, travel and technology stocks—opposing sides of the Reflation Trade in a post-pandemic economy—led the STOXX Europe 600 Index higher, to notch its seventh record in a row.
Asian benchmarks were mixed earlier today. Even those that finished in the green, such as Hong Kong's Hang Seng, which rose 1.23% and Japan's Nikkei 225, which gained 0.24%, might have performed better had traders not kept a wary eye on COVID related developments, the key spoiler holding the world back from a powerful economic recovery.
Ironically, China, even with 94 new cases bringing the Asian nation to a six-month high in the worst outbreak since the Wuhan peak, outperformed, notwithstanding increased social restrictions. The Shanghai Composite, was up a full percent.
Technically, however, the upward bias in the crowded trade recently seen on the Chinese benchmark may be a bearish flag. It could be the prelude to a massive H&S top, 13 months in the making.
Some regional benchmarks sagged: South Korea’s KOSPI fell 0.5% as traders cashed out on virus fears.
Treasuries, including the US 10-year benchmark note, found their footing, after a four-day selloff. Investors increased their bets in anticipation of higher future payouts after stimulus reduction.
Rates paused after their four-day rally, precisely on the neckline of a small double-bottom. While the MACD is still within a bullish cross, the RSI is finding resistance at its previous highs. Above the neckline await the 50 and 200 DMAs, just after a Death Cross.
The dollar edged higher, extending an advance.
Today’s price movement is forming a doji, a candle demonstrating indecision, as the greenback hovers at its highest level since Apr. 2. Still, it must contend with the resistance of the July highs. If the price registers a level higher than the Mar. 31 peak, it will have completed a massive double bottom. The recent Golden Cross may increase long bets, helping the price bottom out.
Gold trimmed some of yesterday’s losses, the second day in a selloff that followed Friday's much better than anticipated US jobs report which was followed by Fedspeak calling for removal of stimulus and the beginning of a new, higher interest rate cycle, if there's more such positive employment data.
The yellow metal bounced off the March lows, demonstrating support. However, yesterday’s $1,677.90 low was lower than the Mar. 8, $1715.70 trough. Strictly speaking, that extends the downtrend since the August record peak. The recent Death Cross raises the odds for an ongoing descent.
Even though theatre chain AMC Entertainment (NYSE:AMC) announced it will allow consumers to pay for movie tickets and snacks using Bitcoin, the cryptocurrency seems to have slowed at the top of what could prove to be a rising channel.
It appears that the digital token's momentum is peaking, as can be seen by the RSI, even after taking on the 200 DMA, since flopping below it on May 21.
Oil rebounded, nearing $68 a barrel, nearly wiping out yesterday’s extended selloff.
While the price of crude climbed back above the 100 DMA, yesterday’s low registered a second trough, completing a downtrend. Therefore, we’re betting on a continued downtrend, as China increases its restrictions amid its zero-tolerance policy toward COVID.
Up Ahead
- Cleveland Fed President Loretta Mester; Kansas City Fed President Esther George among Fed speakers during the week.
- The U.S. consumer price index print for July is released on Wednesday; it's forecast to show prices increased again.
- OPEC's Monthly Oil Market Report is due on Thursday.
Market Moves
Stocks
- The FTSE 100 fell 0.1%
- The Stoxx Europe 600 rose 0.2%
- Futures on the S&P 500 were little changed
- Futures on the NASDAQ 100 were up 0.14%
- Futures on the Dow Jones Industrial Average were marginally lower, -0.07%
- The MSCI Asia Pacific Index rose 0.3%
- The MSCI Emerging Markets Index rose 0.5%
Currencies
- The British pound held steady at $1.3849
- The Dollar Index climbed less than 0.1% and is fluctuating
- The euro was unchanged at $1.1737
- The Japanese yen dipped 0.1% to 110.41 per dollar
- The offshore yuan was little changed at 6.4823 per dollar
Bonds
- Britain’s 10-year yield was little changed at 0.58%
- The yield on 10-year Treasuries declined one basis point to 1.31%
- Germany’s 10-year yield was little changed at -0.47%
Commodities
- Brent crude rose 1.2% to $69.89 a barrel
- Spot gold rose 0.4% to $1,736.39 an ounce