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Stock Futures Trade Lower


27 December 2021 Written by Naeem Aslam  AvaTrade Chief Market Analyst Naeem Aslam

US stock futures are trading flat as traders book some profits after a strong three-day rally that took place before Christmas. The focus among investors and traders continues to remain on three important factors. Firstly, the economic data—traders would like to see more strength in the economic numbers, then you have the ongoing Omicron Covid infection ratio—this is increasing for the last number of weeks, and finally the hawkish monetary policy stance among central bankers. The biggest fear is that ahead of the new year, a time when large parties take place, governments could announce some strict measures–to prevent the further spread of the Covid variant– which can lead to total lockdown. Even if they don’t take those measures, it is pretty much a given that we are likely to see the Covid infection rate soaring after the New Year as people will be careless about Omicron.

The fact is that no one wants to see another total lockdown as they have an adverse influence on the economy. The world is still suffering from supply bottleneck shortages due to Covid restrictions introduced last year.

In terms of the economic docket, this particular week isn’t really heavy; however, next week [KL1] is full with some really important economic events such as OPEC meeting, Fed minutes, and US non-farm payroll data. Regarding trading volume, it is likely to remain on the low side as many traders are taking time off to celebrate Christmas and the New Year holiday period.

Forex 

The USD sank after the Federal Reserve anticipated three rate rises next year, while the EUR surged after the European Central Bank suggested a rate hike in 2022 is quite improbable. Many of our readers may find the price activity in forex over the previous 48 hours bewildering. The Philadelphia Fed index fell to 15.4 from 39, while unemployment claims increased to 206K from 200K in the United States. Building permits and housing starts remained strong.

The Sterling continues to gain more strength against the dollar and the Euro as traders know that there is still a lot more room to the upside as the BOE is finally on the hawkish monetary policy stance and it is likely that the bank will waste no time in handling the soaring inflation after the New Year. The Bank of England has already increased the interest rate this year, and we are likely to see more interest rate hikes next year.

Asian Markets 

The Asian stock market traded mostly mixed as most remain closed for Christmas holiday and others close early. The Nikkei index plunged 0.26%. The Shanghai index increased by 0.15%, while the HSI index increased by 0.13%. The ASX index increased  by 0.44%.

The Dow Jones’ market breadth gained a bit more momentum during the last session. 76% of the Dow Jones stocks traded above their 200-day moving average. The S&P 500 stock breadth also confirmed strong momentum. 73% of the shares traded above their 200-day moving average. 

The Dow Jones futures are trading lower today. In terms of economic data, investors will be looking at US Richmond Manufacturing Index data which will be coming out at 15:00 GMT tomorrow. Between now and then, this is only important economic event that matters. The forecast is for 11 which is the same as the previous reading. A higher number than the forecast is likely to boost optimism among investors and traders.

The Dow Jones futures are trading lower and it appears that the price has formed a double top once again. Double top is a bearish pattern which usually means that the price may head lower. Overall, there is a lot of optimism among investors and traders as the price is trading above the 50, 100 and 200-day SMA on the daily time frame which means that the bulls are in control of the price. In addition to this, the 50-day SMA is trading above the 100-day and the 100-day SMA is trading above the 200-day SMA which echoes the above narrative.

As for the RSI, it isn’t really indicating that the prices are oversold on the daily time frame. Currently, the RSI is trading at 56. The near term support is at 35232, while the resistance is at 36,178.    

Stock Market Rally

The S&P 500 stock index closed higher on the last trading day; the index increased by 0.62%. The consumer discretionary sector led the index lower, and 7 sectors advanced, while 3 sectors closed lower. The Dow index also moved higher on Friday; the Dow stocks moved the index higher by 0.55%. 17 shares advanced, while 13 shares closed lower. The NASDAQ composite, the tech-heavy index, closed higher by 0.85%.

Newmont Corp stock contributed the biggest gain, soaring 8.79%. Adobe stock was the largest drag; it fell by 10.19%. The S&P 500 stock index is up 22% so far this year.

Verizon provided the biggest help for the Dow Jones; it advanced by 1.391%, while Apple inc. was the largest decliner, it fell by 3.92%. 

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