A record reading in ISM Services PMI (63.7% vs. 58.3% expected, 55.3 previous) bolstered equity investors yesterday.  This was the highest reading since September 2005. Nasdaq together with DJIA and S&P rallied strongly yesterday. The indices were up by 1.67%, 1.13% and 1.44% respectively. The consumer discretionary sector was leading the gains with a sizeable gap higher and a 2.27% rise while the energy sector was the only loser with a draw of -2.39%. Tesla and other big technology names certainly helped Nasdaq in yesterday’s rally (TSLA +4.43%, GOOG, +4.19%, FB +3.43%, MSFT 2.77%, AAPL 2.36%).   By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

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In December the price of oil kept on rallying higher even though OPEC increased production. This time, however, it might be different. OPEC+ agreed last week to hike the supply of oil perhaps hoping to repeat the recent success but the price plummeted 5% in yesterday’s trading. What the cartel probably counts on is the economic recovery in the US and the hope that global demand will pick up once the vaccination programs advance. This time though, the market reaction doesn’t indicate the traders would be willing to back up their plans. For more analysis on USOIL see our Weekly Market Commentary here.

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The RBA rate decision offered no surprises. The cash rate was kept at 0.10% as expected. The board of directors estimation is that their targets for employment and inflation won’t be realised before 2024 (at the earliest). They reiterated their stance that the cash rate stays low until their real inflation target of 2 – 3% is reached. For more details on macroeconomic releases see our economic calendar.

Yesterday gold was trading for a full day outside the bullish wedge formation we identified in the Weekly Market Commentary. Now the price is rallying higher with the bulls aiming to challenge the 1752.80 resistance level. The ETFs tracking the treasury yields gapped slightly higher in the open yesterday retraced lower intraday leaving the gain for the day at 0.98%. We still hold to our view that the yields have risen too much too fast and could now correct lower. This view seems to be shared with the gold bulls that have been willing to bid the price higher today. For more analysis and for the key price levels in gold see the Weekly Market Commentary (here).

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The adverse reaction to the OPEC supply increase news took the price below our rising trendline support (red line) but the 5% drop and the 61.8% Fibonacci retracement level attracted bargain hunters who had bid the price higher by 3% or so and right back to the rising trendline. Now it remains to be seen if the bargain hunters can push the price high enough to challenge the key resistance again. If not, the probability for further downside move increases. For more analysis and for the key price levels see the Weekly Market Commentary (here).

Recent macroeconomic data releases

  • US Average Hourly Earnings -0.1%, 0.1% expected
  • US Non-Farm Employment Change 916K, 652K expected
  • US Unemployment Rate 6.0%, 6.0% expected
  • US ISM Services PMI 63.7, 58.3 expected

Important macroeconomic data releases today

  • RBA Rate Statement
  • RBA Cash Rate 0.10%, 0.10% expected

You may access the times and dates in the economic calendar here.

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Janne Muta
Chief Market Analyst
TIOmarkets.com

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