Vaccine & Stimulus Hopes Keeping Equities Supported

Global benchmark equities indices remain broadly positive over the early European session on Tuesday. Sentiment is being held up by ongoing optimism around the COVID vaccinations which have now begun as well as renewed focus on a US stimulus package. The UK, US and Canada have now each started to administer the Pfizer/BioNTech COVID vaccine. With vaccination programmed now underway, market optimism Is increasing though current COVID conditions are exerting an offsetting effect as infection rates and deaths continue to soar. In the UK, London is on the brink of returning to the highest level of social restrictions (equal to the lockdowns seen in Q1) while in Europe, Germany has recently extended its lockdown to run across the Christmas period.

In the US, the focus has shifted back to the prospects of a further fiscal stimulus package. This week, a bi-partisan group has proposed a $908 billion COVID-relief package that it its hopes will strike a compromise between the Republicans and the Democrats. The bill is to be split into two sections. The first will comprise a $748 billion relief plan focusing on $300-per week enhanced unemployment benefits along with $300 billion for small businesses and an allotment for vaccine distribution. The second part will be a $160 billion package aimed at addressing broader measures outlined by both parties. Beyond that, the focus this week will then be on the FOMC meeting (Wednesday) where the Fed is expected to keep rates on hold along with offering clearer guidance on any forthcoming measures.

Technical Views

DAX

The DAX continues to test the 1322.69 level resistance. The level has held as firm resistance for several months now and remains the key upside marker for bulls to break. While price holds above the 12916.11 support, the focus is on an eventual break higher here. Below that level, bulls will be looking to defend a retest of the broken bearish channel.

SP500

The S&P continues to stagnate in a holding pattern below the 3711.75 all-time highs. Momentum studies flagged bearish divergence on the move into highs. However, while price holds above the 3586 level support, the near term bias remains bullish. Should price slip back below that level, the focus will be on a test of the rising trend line support next, ahead of the 3391.75 level next.

FTSE

The FTSE is now retesting the 6518.2 level, having broken above the level last week. While 6518.2 holds as support, the near term bias remains skewed towards further upside. However, with momentum studies reflecting a loss of momentum on the rise above the level, there are risk of a deeper correction here which would turn attention to the 6123.3 level support next.

NIKKEI

The Nikkei continues to hold in a tight consolidation pattern between the 26213.4 level support and the 26949.5 level resistance. With momentum studies flagging strong bearish divergence, there are risks of a correction lower which, if seen, will turn attention to support at the 24562.3 level next.

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