ASX set for a muted start

January 11, 2021 - 2 weeks ago
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ASX looks set for a muted start on Monday after a choppy session on Wall Street on Friday ended higher as investors weighed the prospects of new fiscal aid as well as disappointing U.S. jobs data.

Global stock markets have displayed a solid week to start 2021 as investors looked past a violent siege on Capitol Hill and focused on the prospect for additional fiscal stimulus after a Democratic sweep of Congress.

The benchmark S&P/ASX 200 index has climbed +2.30% in two consecutive days.

The S&P 500 climbed for four days straight to a record with a +1.8% gain last week.

The Dow and the rich-tech Nasdaq Composite gained +1.6% and +2.4% in the prior week, respectively, also reaching all-time highs.

At the finishing bell, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average ended the day up +56.84 points, or +0.18%, at 31,097.97.

The Standard & Poor’s 500 Index was trading +20.89 points, or +0.55%, reaching 3,824.68, while, the rich-tech Nasdaq Composite climbed +134.50 points, or +1.03%, to 13,201.98.

The ASX futures rose +7 points, or +0.1%, to 6,704, while our local currency, the Australian dollar is currently buying US$0.7754 (as of writing).

President-elect Joe Biden pledged on Friday a substantial economic stimulus rollout, which he said will be “in the trillions of dollars.”

More details will follow in a formal announcement on Thursday, six days before he is scheduled to take office.

The Non-Farm Payrolls (NFP) in the U.S. fell by -140,000 in December, the data published by the U.S. Bureau of Labor Statistics showed on Friday.

This reading followed November’s increase of 336,000 (revised from 245,000) and missed the market expectation of +71,000 by a wide margin.

Further details of the publication revealed that the Unemployment Rate stayed unchanged at 6.7% and the Average Hourly Earnings rose by 0.8% on a monthly basis, compared to the 0.2% forecast.

Viewing the technical standpoint, the Relative Strength Index (RSI) 3-day ‘lookback’ indicator is currently holding above the 50-midway point, which in terms supports a positive signal, while the Moving Average Convergence Divergence (MACD) is balanced on the 0.00 axis, which now needs to be monitored in the event of a break higher, which would then support a positive signal.

The Average Directional Movement Index (ADX) trend indicator is ranging.

Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures the speed and change of price movements.

RSI oscillates between zero and 100.

According to Wilder, (depending on the period setting), the RSI is considered overbought when above 90 and oversold when below 10.

Signals can also be generated by looking for divergences, failure swings and centerline crossovers.

RSI can also be used to identify the general trend.

Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.

The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.

(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price is strengthening or weakening.

Since last week’s rebound, the bulls are expected to hold the helm and navigate towards the topside of the 7-week range, with the resistance viewed at 6,755-65, which is expected to draw a bearish response.

The minor support is located from 6,690, with a potential base forged from 6,580-90.

Daily outlook on the benchmark S&P/ASX 200

On Friday, the Australian share market booked another round of gains, following Wall Street led after the Dow rallied, the S&P 500 breaks into 3,800 territory, and the rich-tech Nasdaq Composite clears the 13,000 hurdle.

At the closing bell, the benchmark S&P/ASX 200 index rallied +45.90 points or +0.68%, to 6,757.90, while the All Ordinaries advanced +43.70 points, or +0.63% to settle at 7,024.20.

The bullish sentiment strengthened after Congress confirmed Joe Biden as the winner of the presidential election and Jon Ossoff was declared the winner of a Georgia runoff election, tipping control of the Senate to Democrats.

Shortly after Congress certified his loss, President Trump issued a statement saying there will be an “orderly transition on January 20th.”

Trump still claims falsely that he won, having appeared to excuse the violent occupation of the Capitol by his supporters.

U.S. House Speaker Nancy Pelosi urged Trump’s immediate removal from office through the 25th Amendment.

President-elect Joe Biden accused Trump of fomenting violence and said Wednesday was one of the darkest days in U.S. history.

Investors anticipate the Biden administration, and a Democrat-controlled Congress will deliver more stimulus spending to help the US economy overcome a steep pandemic-induced downturn.

Although the minors were weaker on Friday, they displayed a stellar performance on the week, as the iron ore price rose through $US170 a tonne.

BHP Group led the titans higher after climbing +10%, to $46.67, Rio Tinto advanced +8.9%, to $124.01 and Fortescue Metals Group rose firmly by +8.2%, to $25.34.

All three minors hit record highs during the week.

Lynas Rare Earths surged +15.6%, to $4.60, IGO added +13.6%, to $7.25, OZ Minerals climbed +11.3%, to $21.02 and Mineral Resources gained +8.1%, to $40.48.

The Financial sector lifted the Index once again with Westpac Banking Corp leading the “Fab Four” (banks) higher by +1.45%, to $20.28, National Australia Bank rose +1.35%, to $23.35, Commonwealth Bank climbed +1.24%, to $85.63, Australia and New Zealand Banking Group added +0.85%, to $23.84, and Macquarie Group rallied +1.81% and settled to $140.95.

As for our oil and gas producers, Woodside Petroleum advanced +1.89%, to $24.81, Santos firmed +0.43% to $6.98, Oil Search added +2.64%, to $4.27, Origin Energy climbed +1.19%, to $5.12 and Beach Energy rose +1.06%, to $1.92.

Buy now, pay later Afterpay rallied +6.57%, to $116.00, WiseTech fell -0.42%, to $28.47, Computershare lost -1.62%, to $13.97, and Xero rose +1.48%, to $142.61.

Biotechnology giant CSL added +1.91% to $280.25, while ResMed rose +1.56% to $27.42, Fisher & Paykel Healthcare advanced +0.96%, to $30.58, while Cochlear climbed +1.5% to $182.24 and Mesoblast ended down -0.88%, to $2.24.

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