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Opening Bell: Stocks, Futures Rise On Lingering Stimulus Hopes; Gold Drops

By Investing.com (Pinchas Cohen)Market OverviewAug 11, 2020 06:49AM ET
www.investing.com/analysis/opening-bell-stocks-futures-rise-on-lingering-stimulus-hopes-gold-drops-200533659
Opening Bell: Stocks, Futures Rise On Lingering Stimulus Hopes; Gold Drops
By Investing.com (Pinchas Cohen)   |  Aug 11, 2020 06:49AM ET
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  • S&P 500 just 0.75% from record
  • Nasdaq’s first back-to-back selloff in 3 months
  • Gold falls the most since March bottom

Key Events

US futures for the Dow Jones, S&P 500, NASDAQ and Russell 2000 all jumped on Tuesday, along with European and Asian shares.  The optimism was spurred by lingering hopes of a resolution to the Congressional stalemate regarding additional US fiscal stimulus and by what appear to be easing tensions on the Sino-US diplomatic front.  

Yields reached their highest level since late July, the dollar's rally fizzled and gold was sold off.

Global Financial Affairs

Contracts on the four main US benchmarks were at least 0.5% higher this morning, with small caps and the mega cap YM outperforming at time of writing.

The Stoxx Europe 600 Index Index jumped at the open, hoisted by automobile manufacturers such as BMW (DE:BMWG) and Renault (PA:RENA) as well as travel and leisure stocks including International Airlines Group (LON:ICAG), cruise operator Carnival (LON:CCL) and InterContinental Hotels Group (LON:IHG), even after the latter posted a loss and halted its dividend.

STOXX 600 Daily
STOXX 600 Daily

Though the pan-European benchmark completed a H&S bottom on the hourly chart—on a rising gap, confirming the rising channel bottom support—volume faded and a slew of indicators faced resistance.

Earlier Tuesday, Asian indices were mostly green as foreign investors increased regional holdings of emerging markets assets for the second straight month. However, China’s Shanghai Composite was uncharacteristically depressed, (-1.15%), as the US-China relationship was back in focus ahead of a meeting between top trade officials to review the first six months of the Phase 1 trade deal.

On Monday, during the Wall Street session, stock performance was uneven as investors sold off some big gainers that had pushed equities to near-record highs. The S&P 500 Index closed a mere 0.76% from its Feb. 19 record.

At the opposite end of the spectrum, the NASDAQ fell 0.4% for the second consecutive day, for a total decline of 1.25%. This marks the tech-heavy benchmark’s first back-to-back selloff since May 13.

Yields, including for the 10-year Treasury note, reached their highest level since July 27.

UST 10Y Daily
UST 10Y Daily

Rates are struggling against the top of a falling channel.

The dollar's three-day rally ran out of steam, erasing Monday’s gains.

DXY Weekly
DXY Weekly

Technically, the greenback’s churning for over a week underscores the importance of this technical vortex—where the downtrend from the March high meets with the uptrend since the 2008 bottom. The USD reached the bottom of a rising channel since 2009, visible in the chart above.

Gold lost over 2%. It was the second, sharp selloff for the yellow metal within three days, for a total decline of 3.4% and the worst slump since the March bottom.

Gold Daily
Gold Daily

Both the ROC and RSI momentum-based indicators topped out, while the price-based, lagging MACD appears about to be triggering a bearish cross—suggesting a sharper pullback toward the uptrend line, currently at $1,900.

Oil climbed for a second day, crossing midway to $43 a barrel, its highest level since March 5.

Oil Daily
Oil Daily

WTI still seems to be trapped by the market dynamics following perhaps the worst falling gap in its history on March 9, which erased about a quarter of its value.

Up Ahead

Up Ahead

Stocks

  • The Stoxx Europe 600 Index increased 1.5%.
  • Futures on the S&P 500 Index advanced 0.4%.
  • Germany’s DAX gained 1.9%.
  • The MSCI Asia Pacific Index moved up 1%.

Currencies

  • The Dollar Index fell 0.2% to 93.46.
  • Sterling was little changed at 0.8981 per euro.
  • The Japanese yen weakened 0.2% to 106.20 per dollar.
  • The Turkish lira was flat at 7.2864 per dollar.

Bonds

  • The yield on 10-year Treasuries climbed less than one basis point to 0.58%.
  • The yield on two-year Treasuries was unchanged at 0.13%.
  • Britain’s 10-year yield gained one basis point to 0.14%.
  • Germany’s 10-year yield increased less than one basis point to -0.52%.

Commodities

  • West Texas Intermediate crude climbed 0.7% to $42.25 a barrel.
  • Gold weakened 1.1% to $2,004.78 an ounce.
  • Silver weakened 3.1% to $28.23 per ounce.
  • LME zinc sank 0.3% to $2,389 per metric ton.
Opening Bell: Stocks, Futures Rise On Lingering Stimulus Hopes; Gold Drops
 

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Opening Bell: Stocks, Futures Rise On Lingering Stimulus Hopes; Gold Drops

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Comments (10)
Evan Ault
Evan Ault Aug 13, 2020 8:40AM ET
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Mr. Cohen. would love a "Chart of the day" on $MSFT. would like to see your take on the last four weeks or so. pretty much sideways, maybe a bit of a gain, but not sure how much higher it could justifiably go.
Jake Dixon
Jake Dixon Aug 12, 2020 12:01AM ET
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This guy is a bad analyst
Pinchas Cohen
Pinchas Cohen Aug 12, 2020 12:01AM ET
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Thanks for your comment Jake. Would you kindly elaborate?
Evan Ault
Evan Ault Aug 12, 2020 12:01AM ET
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you're nuts Jake. This guy gives you facts, not loaded up with narrative. I don't even know what side of the political aisle Mr. Cohen is on, and that is the way it should be. More than you can say for most authors featured daily on this site.
Piyush Samani
Piyush Samani Aug 11, 2020 12:05PM ET
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what are the views on gold and silver?
Piyush Samani
Piyush Samani Aug 11, 2020 11:55AM ET
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what are the views on gold and silver?
khalifa saliou
khalifa saliou Aug 11, 2020 11:25AM ET
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very nice
Pinchas Cohen
Pinchas Cohen Aug 11, 2020 11:25AM ET
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Thanks, Khalifa!
Alex Malmstrom
BrassTacks1 Aug 11, 2020 10:03AM ET
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I completely overlooked the fact that commercials have been going long since June this year on DXY. Also, the commercials and large specs in gold futures are closing in on each other so I would not at all be surprised to see gold correcting even lower for longer now that every piece of stimulus is probably already priced in.  Finally, if investors decide to take delivery of physical gold and not roll-over their contracts, then bullion banks will have to drive down the price of gold if they don't they will be forced to buy more bullion which they do not yet have. According to Longview Economics, bullion banks had an estimated short position worth $39 billion towards the end of July this year.
Pinchas Cohen
Pinchas Cohen Aug 11, 2020 10:03AM ET
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Good stuff, BrassTacks!
Mohammad Usefi
Mohammad Usefi Aug 11, 2020 9:54AM ET
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zinc 4500.
Pietro Rosato
Pietro Rosato Aug 11, 2020 8:11AM ET
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There is always a pull back to settle at a new plateau, the a bounce upward again.
Patrick Philippe
PaTT_Philippe Aug 11, 2020 8:07AM ET
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So even more stimulus (hopes) but Gold drops? Clear opportunity to buy Gold if they choose to water down international currencies even more.
Edward Chong
Edward Chong Aug 11, 2020 8:07AM ET
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stimulus or no. the mkt will goes up. when the party ends no one will know. its all a bet whether u want to join them.
Brady Murray
Brady Murray Aug 11, 2020 8:00AM ET
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Gonna add some gold here today for sure. You cant print money like drunken sailors and not reap some nasty repercussions on down the old road. Not just the US but the world. Gold is going up. Way up.
ADAM FANNING
ADAM FANNING Aug 11, 2020 8:00AM ET
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Wheeeen! Days or weeks of gains gone overnighy.
 
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