Opening Bell: Futures, Global Stocks Ignore Wall Street Dip; Gold Rebounds

  • US Congressional delays on coronavirus relief package spur sharp selloff during NY session
  • The dollar became more valuable, pressuring gold

Key Events

US futures for the , , and pushed higher on Wednesday, and European shares rose, lifted by hopes of additional UK stimulus after poor , showing Britain’s economy had entered a recession, and data that was, nonetheless, better than anticipated.

Treasuries extended a selloff and gold found its footing.

Global Financial Affairs

Though Asian indices struggled to break free of the gloom that remained after yesterday’s Wall Street rout, triggered by fading hopes for additional US stimulus, ES contracts climbed this morning, breaking free of a range since yesterday’s close of the benchmark.

ES 60 Minute Chart

While both the MACD and RSI bottomed out, contracts on the S&P 500 found resistance by the bottom of a rising channel, in place since Aug. 3, that yesterday failed to keep the price within its boundaries.

The recovered from an initial dip fueled by technology and healthcare shares. However, a jump in telecoms stocks boosted the pan-European index after Switzerland’s Sunrise Communications (SIX:) received a $1 billion takeover offer from UK-based Liberty Global (NASDAQ:).  Shares of the Swiss company jumped more than 26%.

Trade in Asia was mixed this morning. Hong Kong’s outperformed, (+1.4%), as Chinese funds made record purchases to stabilize the city’s economy after months of civil unrest; a string of high-profile listings of giant tech companies added to the exuberance. China’s underperformed for a second session, (-0.6%), as slower growth in bank lending offset a recovery in car sales, as US-Sino diplomatic headwinds continue looming large.

Tuesday, during the New York session, US stocks suddenly dropped in the final two hours of trade as investors locked in profits on some of the Wall Street rally’s biggest winners after Republican Senate Majority Leader Mitch McConnel said a stimulus deal could take weeks to pass.

In the aftermath, the SPX up-ended what could have been an eight-day rally, its longest upswing since the spring of 2019, which took the benchmark to less than 0.4% from its Feb. 19 all-time high.

SPX Daily

The late-session selloff completed a double-bearish pattern: a Bearish Engulfing pattern that also confirmed Monday’s hanging man. The RSI curved down from its 70 oversold level. The momentum-based indicator failed to climb above its June high, forming a double negative divergence, including slowing momentum from January 2018. This contrasts with —along the pattern of its long-term broadening pattern. 

Yields, including for the US Treasury benchmark, climbed for a fourth straight day. 

UST 10Y Daily

Rates broke free of a downtrend line since June 16, and closed above the 100 DMA, after bouncing off the 50 DMA.

The gave up gains, even after news of the delayed stimulus boosted greenback demand.

DXY Daily

DXY Daily

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Yesterday’s late rebound for the global reserve currency formed a hanging man on the chart. If today’s trading takes the Dollar Index below 93.62, and it closes at that point, it will have completed a shooting star, confirming the bearish intent of yesterday’s hanging man. This would also reaffirm the bearish engulfing pattern over a shooting star which occurred early in the month.

On the other hand, should the dollar break through the 94 resistance, it will have completed a small double bottom. The larger technical forces are the conflict between the falling channel since April and the rising channel since 2009.

Delayed stimulus provoked traders to quickly take advantage of a sudden, newfound arbitrage opportunity, increasing demand for the now-more-valuable dollar, at the expense of .

Gold Daily

Gold Daily

The precious metal fell for the third day out of four, after it tumbled the most in seven years on Tuesday. It’s now bounced off the bottom of its rising channel, paring almost all of today’s losses, posting a possible, imperfect hammer, with an upper shadow.

wiped out yesterday’s losses.

Oil Daily

Oil Daily

As WTI climbed, it continued to churn in a counter-intuitive rising wedge, following a rally rather than a descent. Today is the sixth day in a row that the price took on the 200 DMA but failed to surpass it. The RSI and MACD remained in a bearish posture.

Up Ahead

  • This week’s remaining earnings releases include those from (NASDAQ:) and Applied Materials (NASDAQ:).
  • US weekly are scheduled for Thursday. A slight downtick, to 1,120K is forecast.
  • On Friday, China releases a slew of data for July including and figures.

Market Moves

Stocks

  • Futures on the S&P 500 Index rose 0.7%.
  • The Stoxx Europe 600 Index climbed 0.1%.
  • The increased 0.2%.
  • The declined 0.2%.

Currencies

  • The Dollar Index decreased 0.1% to 93.60.
  • The fell 0.1% to $1.1731.
  • The decreased 0.1% to $1.3041.
  • The weakened 0.1% to 6.951 per dollar.
  • The weakened 0.3% to 106.79 per dollar.

Bonds

  • The yield on 10-year Treasuries rose three basis points to 0.68%.
  • The yield on Treasuries climbed less than one basis point to 0.15%.
  • Germany’s yield rose two basis points to -0.46%.
  • Britain’s yield gained two basis points to 0.219%.
  • Japan’s yield increased one basis point to 0.046%.

Commodities

  • West Texas Intermediate crude gained 0.9% to $41.99 a barrel.
  • gained 1% to $44.93 a barrel.
  • Gold strengthened 0.3% to $1,917.81 an ounce.
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