Key Talking Points:
- Europe sees stricter lockdown measures as virus cases rise again
- IBEX 35 sees caution creep in
- CAC 40 trades sideways trapped between two key areas
COVID CONCERNS VS BREXIT AND US STIMULUS HOPES
European equity markets are mixed this morning as growing Covid-19 concerns keep investors cautious as Christmas holiday plans may be in jeopardy. London will enter into a tier 3 lockdown this evening, following Germany, France, and the Netherlands in tightening their restrictions.
This is met with improved sentiment surrounding Brexit negotiations, given comments yesterday that talks will continue as long as there is a commitment to work out a trade agreement. Speculation about the possibility of talks stretching past the new year is growing, as many believe this could be done by avoiding a hard Brexit rhetoric if both parties commit to continue their attempt at finding a suitable compromise.
US stimulus deal hopes have also increased, as a bipartisan group of US senators has presented a new fiscal stimulus worth $748bn in a final attempt to approve the economic relief package in the next few days. This new proposal is a compromise from the previous $908bn proposed, but legislators are hopeful that by removing two provisions – liability protection for businesses and assistance for state and local governments – they are close to getting the package approved, which could possibly lead to a much anticipated Santa Rally as we near the Christmas holidays.
Stock Market Holiday Calendar 2020/21
IBEX 35 FORECAST
These lingering doubts keep the Spanish stock market under pressure, as yesterday’s morning gains were halved by the end of the session. The IBEX 35 has turned lower this morning after stalling at the 20-day simple moving average at 8,175, where a push below yesterday’s low at 8,095 may increase selling pressure. Short-term resistance remains between 8,000 and the 50% Fibonacci at 7,945.
A break below this area would possibly increase bearish pressure, with the next point of reference as support being the low from November 12th at 7,640, before retreating back to the 38.2% Fibonacci at 7,442. On the topside, a break above the 81.8% Fibonacci remains as the main objective, but increased selling pressure can be expected around the 9-month high at 8,340.
IBEX 35 Daily chart
CAC 40 FORECAST
The CAC 40 has been unable to push above horizontal resistance at 5,625, leaving the index facing sideward consolidation as support remains at the 76.4% Fibonacci at 5,495. The argument for a break in either direction is pretty week at the moment, so we should expect to see subdued rice action until there is a clear catalyst.
To the downside, this would mean a fall towards the 61.8% Fibonacci at 5,115, as there are not many points of reference before this area, although the 5,315 area could offer some short-term support. If we see a break on the upper side, 5,705 is the next point of reference before the 6,000 level comes into play.
CAC 40Daily chart
| Change in | Longs | Shorts | OI |
| Daily | 18% | 11% | 15% |
| Weekly | -4% | -1% | -3% |
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
