Key Talking Points:
- It’s a positive start to the last week of the month for global equities
- Dow Jones just shy of all-time high
- IBEX 35 tries to push above 8,000
POSITIVE START TO THE LAST WEEK OF THE MONTH
Both European and US futures look slightly firmer at the European open, undoing some of the profit-taking seen at the end of last week as vaccine euphoria seemed to subside. US stocks closed in the red on Friday whilst European stocks enjoyed a steady positive session, bringing attention to key resistance levels in major indices like the DAX and IBEX.
It seems for now that the worst has been avoided by the rapid discovery of coronavirus vaccines with outstanding efficiency, but further turmoil should not be discounted for the six weeks of the year that lie ahead. With a shortened week this week due to the Thanksgiving holiday in the US, we are likely going to see a positive finish to the month of November, possibly keeping risk sentiment high.
But ongoing economic concerns, as well as a recent spat between the Fed and the Treasury department could be the cause of renewed weakness as we head into the Christmas period. It is important to note that not many times before has there been so much cooperation between monetary and fiscal authorities, which is likely why markets were able to recover so quickly back in March, so it is going to be a big concern for markets if this cooperation ends towards the end of the year, given that the health situation is at its worst again.
2021 looks set to be somewhat of a year of social dilemmas, as we try to balance public health, the economy and our personal freedom. Whatever happens in the next 6 weeks is possibly going to shape the year ahead, as most economies are likely unable to withstand another summer season with social and travel restrictions. That said, and as the latest round of PMI figures suggest, firms have been able to adapt to their operations to the new conditions, which means that economic slowdown is expected to be much slower this time around. Vaccine news is likely to remain at the forefront of a bull market run, but corrections cannot be discarded.
DOW JONES JUST SHY OF ALL-TIME HIGH
The Dow remains just a few percentage points below its all-time high, an encouraging factor likely to attract interest to the index to try and push above 30,000 once again. That said, it is likely to be a tough job getting a consolidation above said level unless there is another catalyst, likely positive momentum generated around more positive vaccine news. In the lead up to this area, the Dow will need to overcome the March highs reached before the coronavirus meltdown, standing at around 29566, where selling pressure may increase. Any further losses may be seen as a good sign to generate positive momentum heading higher as long as the price stays above the 28,000 mark, where simple moving averages are converging.
Dow Jones Daily Chart
IBEX 35 TRIES TO PUSH ABOVE 8,000
Focusing on Europe, positive momentum is likely to remain throughout the remainder of the week as new coronavirus infections seem to be heading lower in some key areas. The Spanish stock index, IBEX 35, continues to be the most lagged of the major Europeans despite it enjoying the biggest push from the vaccine news. The index is now battling a key area of resistance just above the 8,000 mark, an area which is located below the coronavirus gap but has been pivotal in stopping any attempt to push higher in its recovery from the March lows.
There is still a lot of upside potential in the IBEX, but the index needs to be able to move away from the 50% Fibonacci level close and the coronavirus gap in order to garner further bullish momentum. Short-term resistance can be found at last week’s high around 8110, whilst the next objective will be the 61.8% Fibonacci level at 8450.
IBEX 35 Daily Chart
--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
