Australia: S&P/ASX 200 (.AXJO) set to open higher after tech giants boost Wall Street

Australia: S&P/ASX 200 (.AXJO) set to open higher after tech giants boost Wall Street

Australia: S&P/ASX 200 (.AXJO) set to open higher after tech giants boost Wall Street

The Australian sharemarket is set for an upbeat morning after Wall Street hit new highs overnight, buoyed by gains in US technology stocks and optimism that a US-China trade deal is on track to be signed this week.

The SPI200 futures contract was up 22 points, or 0.32 per cent, at 6863 points at 7am on Tuesday after Apple, Facebook, Netflix, Microsoft and Amazon, which have powered the longest bull run in US equities, led the US market to new records again.

The gains come as a US-China trade agreement, expected to be signed in Washington on Wednesday, has encouraged riskier bets. President Donald Trump’s administration is set to stop calling China a currency manipulator, removing a major obstacle to the two nations’ trade deal, reports said.

1. US stocks challenge fresh records: Wall Street stocks shrugged off a mixed lead from their Asian and European counterparts overnight to once again challenge fresh all-time highs. It was a high activity day in US markets, especially for a Monday, with investors clearly keen to go for growth. Tech shares were strong performers. The Nasdaq traded just shy of 0.9 per cent higher, aided by a rally in Tesla shares, which touched the $US500 mark for the first time in the carmaker’s history.

2. US earnings season kicks off: Market attention swings to US corporate fundamentals now. Earnings season gets kicked off in earnest, with some of the US’s financial giants like Goldman Sachs, JP Morgan, and Citigroup topping the billing. It’s forecast to be another lacklustre results season overall on Wall Street. Earnings growth is expected to contract by around 2 per cent. As always, traders will be focusing on companies’ outlooks for signs of a turnaround in profit growth in the year ahead.

3. ASX set for positive open: Wall Street’s lead is setting up the ASX200 for a positive start this morning. SPI Futures are suggesting the benchmark index ought to open roughly 22 points higher this morning. It comes on the heels of a negative day for local stocks yesterday, which might well be chalked up to some profit taking after Friday’s rally. Crucially, the market closed last night above the psychological level of 6900, pointing to still very bullish sentiment amongst traders.

4. British economy disappoints: The data docket overnight was highlighted by UK economic numbers. GDP data showed on a month-on-month basis that the UK economy contracted by 0.3 per cent. The data applied to November, and could reflect a hit to economic activity leading into last month’s general election. Irrespective of the cause, the pound fell into the 1.29 US dollar handle last night, as traders price in a nearly 50 per cent chance of a Bank of England rate cut this month.

5. US removes ‘currency manipulator’ tag from China: The other headline-worthy story last night was the expected US move to no longer label China as a “currency manipulator”. It’s being seen as an act of goodwill ahead of this week’s signing of a “phase one” trade deal between the US and China. The news will likely give more tailwind to the Chinese yuan, which has climbed lately on the back of lower trade tensions.

6. Oil prices continue to track lower: Oil prices remain a major macro mover. WTI Crude dropped another 1.5 per cent yesterday, while brent crude gave up 1.1 per cent. As traders’ nerves were easing regarding US Iran tensions, geopolitics in another oil producing region in the world lowered prices. A tentative ceasefire was announced between belligerent forces in oil-rich Libya’s civil war overnight, removing another marginal risk to global oil production and supply chains.

7. Risk events in the day ahead: There’s a handful of events to watch out for over the next 24 hours. Locally, the calendar is light. But the US earnings season begins its run today, kicking off a month-long confession period. US inflation figures will be published tonight, and are expected to show reasonably strong month-on-month price growth of 0.2 per cent. And traders will continue to focus on what’s to come from Wednesday’s “phase-one” trade-deal with China, speculating about what the details of the deal.

Technical Indicators

Overall, the bias in prices is: Upwards.

By the way, prices are vulnerable to a correction towards 6,716.84.

The projected upper bound is: 7,062.51.

The projected lower bound is: 6,753.45.

The projected closing price is: 6,907.98.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 92.8012. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 60.78. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 132 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 151.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -25.300 at 6,903.700. Volume was 40% below average (neutral) and Bollinger Bands were 5% wider than normal.

Open     High      Low     Close     Volume___
6,929.0006,929.0006,880.7006,903.700 358,104,480
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 6,799.97 6,763.07 6,595.35
Volatility: 16 15 14
Volume: 414,311,616 558,288,256 613,017,984

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 4.7% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 2 periods.

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