A lower reactionary in the Apple stock at a resistance level signals weakness in the stock and quite likely in the main indices too. The stock has the heaviest weight in both S&P 500 and Nasdaq 100. In this report, we will provide you with our view on AAPL and Nasdaq that should both provide good intraday volatility today and tomorrow as traders and fund managers position themselves for this week’s big event: The speech by the Fed Chair Powell on Friday. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
The strongest USD rival since the London session open yesterday has been EUR (+0.27) while the JPY (-0.29%) has been the weakest.
The rally in US stock indices slowed down yesterday with S&P 500 (+0.15%), the Dow Jones Industrial Average (+0.09%) and the NASDAQ Composite (+0.52%). The financials (+1.18%) and energy (+0.76%) sectors attracted the most inflows while the healthcare (-0.27%) and consumer staples (-0.17%) sectors were the weakest. Seven out of 11 S&P 500 sectors closed in the green yesterday.
The best performers among our stocks were WDC (+7.80%), ULTA (+4.29%), AXP (+3.09%), DVN (+2.49%) and DE (+2.28%). The biggest losers included BB (-3.24%), BIIB (-1.90%), TMUS (-1.85%), PFE (-1.80%) and BMY (-1.34%). HPQ will report earnings today. Look for increased volatility in HPQ.
Precious metals traded lower yesterday. Gold (-0.97%), silver (-0.50%), platinum (-1.64%) futures closed down Tuesday while Crude oil managed some gains (+1.21%) but started losing momentum and the stochastic oscillator entered into the overbought zone. The benchmark US 10-year Treasury yield continued to climb higher and finished the day at 1.3470% (previous 1.2900%). Today’s key risk events are the US Prelim GDP release and the start of the Jackson Hole Symposium. For details on other important macroeconomic releases, see the TIOmarkets economic calendar here.
Since our reporting on AAPL (here) in June, the Apple stock has rallied over 13%. On July 27th the company reported a massive earnings surprise (28.6% better than the consensus number). The stock has moved higher but the move has been a bit sluggish. All in all, the stock is still in an uptrend but yesterday’s lower high and a bearish shooting star candle suggests the red team is in the driver’s seat.
This increases the risk that the next support level gets violated. The nearest key support level is at 144.75 where the rising trendline coincides with it. If the stock doesn’t recover but sells off quickly this level is a risk of getting penetrated. The next important support area is at 142.40 – 143.55 where we have the SMA(50) and 23.6% retracement level.
AAPL weakness shows in Nasdaq too as the index has created a small range candle indicating momentum loss. Note how Stochastics are also showing this and are about to give a sell signal. The key support and resistance levels in Nasdaq are 14710.35, 15182.09 and 15397.14. The market is trending higher but the likelihood for a corrective move within the trend has now increased. To learn the strategies you can combine with our analysis join our free monthly webinars at TIOmarkets.com/webinars.
Here we pointed out that the EURUSD was trying to push above a resistance. Since then the market rallied strongly is now approaching our first confluence zone at 1.1777 – 1.1804. The other important price zones and levels are 1.1829 – 1.1856, 1.1888 – 1.1915, 1.1600 and 1.19760. To learn the strategies you can combine with our analysis join our free monthly webinars at TIOmarkets.com/webinars.
Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
|The FED||The more hawkish Fed bankers have been voicing their views on the need for the tapering and the rate hikes to take place earlier rather than later. The July FOMC Meeting Minutes indicated that taper might start as soon as in 2021.|
|Stimulus||The US lawmakers have authorised approximately five trillion dollars of economic stimulus since the beginning of the pandemic. Now, US lawmakers have agreed to a $1.2 trillion infrastructure spending plan. The Fed officials consider ending the asset purchases in the middle of 2022.|
|Yields||After trending higher since the beginning of August 2020, the Treasury yields have been moving lower or sideways. All in all, the yields and interest rates are extremely low on both nominal and real basis.|
|Employment||The last two employment reports have been very positive (+938K and +943K) indicating that the hawks in the Fed will have fundamental backing for their views on early tapering and rate hikes.|
|Inflation||The month on month Core CPI (excluding food and energy) for July came in at 0.3% (0.4% expected) which indicated a big drop in the rate of inflation from the month before (0.9%). The Fed has earlier taken a view that inflation is transitory and will be therefore likely to fade away. Even though one data point doesn’t make a trend it seems that the Fed has been correct in their inflation projections. The lumber futures for instance are once again trading at October 2020 levels and down over 70% from their May highs.|
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Market News & Facts
- US durable goods orders for July -0.1% (-0.3% expected)
- EU might again impose travel restrictions on Americans
- Nakamura (BOJ): Economy in a severe state but improving
- Semiconductor chip shortage continues
- US services PMI 55.2 (59.5 expected)
- Pfizer covid vaccine received full acceptance from FDA
- Paypal accepts bitcoin from this week
- RBNZ Chief Economist: No pressure to act on monetary policy
- Fed’s Kaplan softens his views on taper
- Germany PPI for July +1.9% (0.8% expected)
- New Zealand lockdown extended to 24th of August
- Yellen proposes extending Jobless claims in some states
- US Jobless Claims 348K (362K expected)
- FOMC Minutes indicated tapering could start this year
- Canada CPI for July 3.7% versus 3.1% last month
Quick Links to Recent Analysis
The Next Main Risk Events
- USD – Preliminary GDP q/q
- USD – Unemployment claims
- USD – Jackson Hole Symposium
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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