ASX to fall as Delta variant fears hit Wall Street

July 20, 2021 - 4 days ago
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Fears over the increased spread of the Delta variant of COVID-19 has spooked investors on Wall Street as the main indexes tumble as much as -2% on Monday, with the Dow posting its worst day in nine months.

The ASX futures ended down -68 points or -0.9%, at 7,129, while our local currency, the Australian dollar, tumbles further and reaches a new 2021 low of US$0.7323 and is currently buying US$0.7340 (as of writing).

U.S. stocks fell sharply on Monday, suffering their steepest single-day declines of the year, as the recent rise in COVID-19 infections stoked fears of an economic slowdown.

At the finishing bell, on the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial fell -725.81 points, or -2.09%, to 33,962.04, logging its steepest decline since October.

During the New York session, the Dow was down -946 points before recovering some ground into the close.

The broad-based Standard & Poor’s 500 Index finished the session -68.53 points lower, or -1.58%, to end at 4,258.63.

Energy, Financials, and Industrials were the worst-performing sectors.

The technology-focused Nasdaq Composite Index tumbled -152.30 points, or -1.06%, to 14,275.0, posting its fifth-straight day of losses and worst losing streak since October.

The 10-year Treasury yield reached a five-month low of 1.17%, exacerbating fears about the slowing economy.

COVID cases have rebounded in the U.S. this month, with the delta variant spreading among the unvaccinated.

According to CDC data, the U.S. is averaging nearly 26,000 new cases a day in the last seven days through Sunday, up from a seven-day average of around 11,000 cases a day a month ago.

Oil prices fell on fears of slowing growth and as OPEC+ agreed to begin phasing out production cuts.

Later this morning, the Reserve Bank of Australia will on Tuesday release the minutes from its July 6 meeting.

At the meeting, the bank decided to leave its cash rate unchanged at a record low of 0.10 per cent, as widely expected.

It also scaled back its quantitative easing program citing stronger-than-expected economic recovery and suggested that interest rates will remain at the current level until 2024.

Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator has plummeted through the 50-midway point, therefore, supporting a negative signal.

Meanwhile, the Moving Average Convergence Divergence (MACD) holds a negative signal.

The Average Directional Movement Index (ADX) trend indicator decline suggests the presence of a trading market and the absence of a trend.

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

RSI oscillates between zero and 100.

According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.

Signals can also be generated by looking for divergences, failure swings and centreline 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 strengthens or weakens.

With a weaker opening expected, views a move to the near-term base located at 7,210-35, with 7,150 viewed beneath.

The resistance is considered from 7,305 (minor), with 7,360-65 located above.

Daily outlook on the benchmark S&P/ASX 200

The Australian share market kick starts the week in negative territory; after a choppy session on Monday, the index finished below the waterline amid rising COVID-19 cases and worries about the economic damage from prolonged lockdowns in NSW and Victoria.

At the closing bell, the benchmark S&P/ASX 200 index fell -62.1 points, or -0.85%, to 7,286.0, while the All Ordinaries dropped -71.0 points, or -0.93%, to 7,559.7.

Most of the losses in the local market were focused on the Materials, Energy, Telecommunication, Industrials and Financials sectors.

Besides other beaten sectors, Materials dragged the ASX 200 lower after falling -2.44%, with BHP Group leading the titans lower after plummeting -2.64%, to $50.50, while Rio Tinto dropped -2.12% to $127.83, and Fortescue Metals Group lost -1.4% to $25.42.

Woodside dropped -1.89%, to $22.33, Oil Search plummeted -5.17%, to $3.67, Origin Energy lost -1.1%, to $4.49, AGL Energy fell -0.49%, to $8.06, Santos declined -2.71%, to $6.83 and Worley lost -2.62%, to $11.15.

Gold miners also struggled with Newcrest Mining falling -1.97%, to $26.37, Northern Star Resources fall -4.1%, to $10.29, and Evolution Mining Ltd dropped -8.74%, to $4.28.

The Financial sector deeper into negative territory with National Australia Bank leading the “Fab Four” (banks) lower by -1.19%, to $25.65, with Australia and New Zealand Banking Group falling -1.02%, to $27.15, Commonwealth Bank decreased -0.52%, to $97.68, Westpac Banking Corp lost -0.88%, to $24.69, and Macquarie Group fell -1.14% and settled to $153.71.

Technology stocks were mixed with ‘Buy-now-pay-later’ giant Afterpay rose +1.64%, to $114.90, while accounting software provider Xero added +1.05%, to $138.64, Altium lost -3.78%, to $35.17, EML ended flat at $3.83, and Nearmap ended -0.92%, lower to $2.16.

Biotechnology giant CSL gained +1.81%, to $282.74, while ResMed added +2.43%, to $34.52, Fisher & Paykel Healthcare rose +1.92%, to $29.27, while Cochlear added +0.85%, to $241.32 and Mesoblast lost -1.05%, to $1.885.

Travel stocks were weaker with Sydney Airport ending flat at $7.91, Flight Centre falling -2.42%, to $14.50, Webjet dropped -3.26%, and $4.75, Qantas shares lost -1.48%, to $4.65, and Regional Express slid -2.03%, to $1.205.

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