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European Markets Trade Higher As US Futures Trade Lower Ahead Of Initial Jobless Claims Data

European markets and US futures are at odds once again and this shows that traders are not sure about the direction of the current trend. European markets are taking comfort in German trade balance data which was better than expected and also trying to build on the momentum from the Asian trading session.

The Dow Jones futures continue to fluctuate between gains and losses for investors are not entirely sure if their faith in the current economic recovery will last for long. The economic recovery in the US is still very much fragile because coronavirus cases are still rising. The US reported a record single day increase of over 60,000 Covid-19 cases on Tuesday. This has increased the risk that many states that have reopened their economies may have to reverse their action.

In addition to this, we have Trump who is missing no chance to continue to blame China for current virus by calling it “China Virus”. Tensions continue to simmer between Washington and Beijing. This has made investors reluctant to buy stocks hence we are not experiencing a wider recovery in the US stock market.

The stock market rally in the US is led by handful number of stocks and it is stocks like Apple, Microsoft, Tesla and Amazon that have contributed the most towards stock market gains. There is no other reason for the NASDAQ composite index to continue to record string of all-time highs apart from the fact that it is stocks like Apple that have blown things out of proportion for the index.

With US earnings seasons about to kick start, one of the biggest question that traders are asking themselves under the coronavirus environment is if the US stocks need more fiscal stimulus? Trump wants another $2 trillion stimulus package to fight the adverse influence of coronavirus. Congress is working on the next phase of stimulus, but again, one needs to ask this basic question: do we really need this massive stimulus package when the US stock market is hitting record high?

The global stock market had a positive session today. Chinese stock market shopping spree by traders led the gains for the Asian trading session. Shanghai index was the winner and recorded the gains of 1.33%. The HSI index soared 0.43%. The KOSPI and Nikkei indices jumped 0.82% and 0.68% respectively.

US Weekly Jobless Claims

The Dow futures, along with the S&P 500 futures, are also paying attention to the upcoming US weekly initial and continuing jobless claims data. The expectations are that they have fallen to 1.38 million from 1.43 million. Continuing claims is likely to gain more attention and the forecast is that we may see another drop here as well. The forecast is for 18.75 million.

If we see a drop in the initial and continuing claims data today, we are likely to see the US equity market to find strength. Perhaps, this could be the catalyst that push the S&P 500, and the Dow Jones, to close the week in positive territory.

Here is more on this.

Gold Price Crossed 1,800

The precious metal, gold, finally crossed the biggest hurdle and ripped the 1,800 price level yesterday. The move in the gold price is backed by gold inflow in gold ETFs as I mentioned yesterday. The current momentum in the precious metal price shows that traders are likely to support the gold price. The door is wide open for the gold price to target the all time high.

Market Breadth: DJIA Index And S&P500 Index

The stock market’s breadth shows no major shift in bull and bear among day traders. 37% of the Dow Jones stocks traded above their 200-day simple moving average SMA—the same number as the day earlier.

The S&P 500 index also confirmed no chance in sentiment. 40% of the index stocks traded above their 200-day SMA.

Dow Jones And S&P 500 Futures Today

The Dow futures are trading slightly lower today as traders are hesitating to put bigger bets ahead of the US initial jobless claims data.

The Dow futures are still trying to move above the 200-day SMA on a daily time frame. The Dow price has tested this average again today but failed so far which confirms weakness. However, the DJIA futures are still trading above the 50 and 100-day SMA, and as long as they continue to trade above them, the odds are stack in favor of bull rally.

The S&P 500 futures, which are better representation of the overall US stock market, show traders do not have much to worry about the bull run. The S&P 500 index price is trading above all the critical moving averages: 50, 100 and 200-day SMA on a daily and weekly time frame.

Stock Market Rally

The US stock market experienced a late recovery led by the tech stocks yesterday. The optimism was fueled by the comments of Atlanta’s Fed President, Raphael Bostic who believes that things have started to level off in the US. The US economy may possibly need more stimulus.

The S&P 500 stocks closed positive and recorded gain of 0.78%. Information technology stocks led the gains for the index. 8 sectors out of 12 jumped higher yesterday.

The DJIA index recovered its earlier and advanced 0.68%. 21 shares of the Dow Jones Industrial moving average closed in positive territory yesterday. Apple contributed the most gains while Walmart was the biggest drag.

The NASDAQ, the tech savvy index, recorded another all-time high yesterday, and recorded gains of 1.36%.

Coronavirus

Global coronavirus cases have surpassed the 12 million mark and new cases are flaring up in countries that had more reasonable control of the disease as their economies have began to open up again. US coronavirus cases soared by 2% outpacing the 7-day average and the death toll has started to rise as well.

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