Russell 2000 stock performance is expected to show a strong recovery in the earnings line

highlights

• The political drama in Washington dominated the financial markets agenda, last trading week

• The optimism, after Biden’s approval of the presidency and the Democrats’ 2 seats in the Senate, led to a positive trend in the stock markets and declines in the government bond market

• The US Stock Exchange deletes 3 Chinese companies from trading

The technical arena – recommendations for the coming week

Stormy year opener

U.S. political drama dominated the first week of the year. Confirmed Biden’s Election to the Presidency All major North American stock indices climbed to highs.

The positive sentiment led to a sharp rise in yields, among long-term government bonds. The yield to maturity in the 10-year US government bond has crossed the 1% threshold for the first time since last March. The weakening US dollar provided support for commodity prices, including oil and copper. The WTI has soared for the first time since February over $ 50 a barrel, aided by a surprising report that Saudi Arabia has led to a new manufacturing agreement with Russia and other members of the Organization of the Petroleum Exporting Countries (OPEC).

Within the stock markets, the “small” stocks and growth companies have led the past week. The performance of Russell 2000 shares, which are expected to show a strong recovery in the earnings line, was particularly strong and the index jumped by 5.7%. The S&P 500 rose by 1.8%.

The number of jobs (not agriculture) recorded in the US decreased in December
The number of cases of coronary heart disease is on the rise in the world and in the United States. Thus, in December the number of jobs (excluding agriculture) decreased by 140,000. Economists predicted an additional 50,000 jobs. Nearly half a million leisure and hospitality workers were displaced in the month in question. One bright spot was a significant upward update of November and October data. The decline in December is temporary, because with the increase in the availability of vaccines and the economic assistance that has already been launched, they will increase the pace of economic growth later in the year and accordingly improve the employment situation in the economy.

Trump admits defeat, promises a calm passage after the Capitol is occupied
On Thursday, a day after a crowd of supporters stormed Capitol Hill in the U.S., crowds entered the building and violently disrupted the vote to approve the electorate, which would officially make former Vice President Joe Biden president. Finally, President Donald Trump acknowledged the results. Elections and a calm transition of power.According to the tragic events, a number of Cabinet representatives and senior officials in the Trump administration resigned.Some, blamed the president for inciting White House rallies shortly before the riot that left five dead.

A double victory in Georgia gives Democrats control of the U.S. Senate
Stock markets this week benefited from the expectation of additional support measures from the administration, following the news of the election results for the two seats in the Georgia State Senate. Investors have received more optimism from these moves than from the storm that has erupted from Washington. The Biden administration appears to be promoting $ 1,400 worth of checks, as well as a seemingly high-priority infrastructure investment package set to launch later this year.

Chinese telecom companies are being wiped out of trade and in the US and removed from the indices

After a rocking week in which the New York Stock Exchange reversed twice regarding the listing status of three Chinese telecom companies – China Mobile, China Telecom and China Unicom – will be wiped out in the US. Their shares have already been removed from MSCI indices on Friday. Remove the shares in the coming days.The move comes as a result of a presidential executive order that prevents U.S. investors from holding shares in companies that the Pentagon says support China’s military and intelligence mechanisms.

US from the time of imposing caps on French luxury goods

The U.S. on Thursday suspended its plans to impose 25% tariffs on imports of French luxury goods ($ 1.3 billion) in response to a French tax on major technology companies such as Facebook and Amazon. The U.S. Trade Representative said it was willing to coordinate its response. All similar conflicts occurring in 10 other countries (including Italy, the United Kingdom and India).

The U.S. Trade Representative threatened to impose tariffs last year, in retaliation for France’s 3% levy (imposed in mid-2019) on certain revenues from large technology companies, which the U.S. says were unfairly targeted at American businesses.

Now, the decision leaves President-elect Joe Biden and his government to address the growing demands of many countries that global technology companies pay more taxes where their customers are, when at the basic level they do not contribute to public coffers (do not pay corporation tax in the destination country).

The technical arena

S&P 500 , (SPY $ 381.26)
The S & P500 index contains the 500 largest stocks on the Wall Street Stock Exchange. Major U.S. stock indices, as well as the S&P 500, rose on the last day of the trading week, despite investors’ disappointment with the December weak job report.
During Friday, the S&P 500 traded at an all-time high of 3,824.4. Also the Dow Jones and the Nasdaq.

The monthly data released by the U.S. Bureau of Labor Statistics showed on Friday that the number of jobs in the U.S. economy (excluding agriculture) fell in December by 140,000, compared with analysts’ rise. Apparently, market players are pricing the new chances for further stimulation, despite this dismal call.

Technically, the index is in a buying position for the coming week. The momentum indicator is negative. The support line is at the $ 268.61 level and the resistance line is at the $ 428.81 level.

Gold (Gold, $ 1847.80)
In the first part of the week the gold was in a positive and good trend which reversed starting on Wednesday and deteriorating on Friday. On Friday gold fell 4%, the strongest daily fall since November.
Gold has been around for several years, with the exception of March – precisely at a time when market risk is rising. This occurrence coincided with the US Federal Reserve raising interest rates.

It is possible that the growing popularity of Bitcoin has contributed its share to the move. Moreover, it has been seen recently that gold does not show a negative correlation to markets, i.e. it is not a reliable risk diversification instrument.
Technically, gold is in a buying position for the coming week. The momentum indicator is positive. The support line is at the level of $ 1541.16. The resistance line is at the $ 2164.89 level.

USD / CAD (USDCAD,1.2685 Canadian dollar)

The USD / CAD presented a limited response to a larger-than-expected decline reported from the Canadian employment market. Major market trends may continue to affect the exchange rate as the US dollar still reflects an inverse relationship with investor confidence.
It remains to be seen whether the published current data in Canada will affect Canadian central bank forecasts as the employment report shows a contraction of 62.6 thousand Canadian jobs in December, compared to projections of 27.5 thousand, but the BoC may continue to support by providing future guidelines and presenting an “ionic” approach . The Canadian governor said this week that the bank “remains committed to providing the monetary policy needed to support the recovery and achieve the inflation target”.

Until the bank chooses to do something, market developments will continue to affect the USD / CAD as the BoC recognizes that a “broad drop in the US exchange rate has contributed to a further rise in the Canadian dollar, which is adversely affecting overall sentiment.

Technically, the USD / CAD is on sale for the coming week. The momentum indicator is negative. The support line is at C $ 1.20542. The resistance line is at C $ 1.40339.