Good morning,
US futures are pointing higher on Monday, tracking the gains made early in the European session, as stocks look to pare some of the losses made over the last couple of weeks.
There’s very little actually driving the markets at the start of the week and in fact, the entire week is looking a little quiet. Given the correction seen over the last couple of weeks, with the S&P falling almost 5% at one stage, this could provide a good opportunity for stocks to erase some of these losses with investors potentially seeing this as a good opportunity to buy the dip.
That is if people do view this as just a correction in the still ongoing uptrend, rather than a the start of the correction in the much longer term uptrend. The closer we get to the first rate hikes from the Fed, the higher the chances are that the start of the correction will happen. Ordinarily, a central bank the size of the ECB could offset this if they were easing at the same time but I’m not sure that they are willing to do the kind of stimulus that the markets would accept, by which I mean quantitative easing.
From a technical standpoint, the selling over the last couple of weeks looks like a temporary correction more so than anything else, but trading this week could confirm whether this is in fact the case. A break back above 2,000 would initially support this view, with a break beyond the 2,019 highs providing confirmation.
As already mentioned, the day ahead is looking very quiet. There is no economic data scheduled to be release or any announcements, leaving people looking forward to the two central bank announcements overnight, from the Bank of Japan and the Reserve Bank of Australia. No change is expected from either of these, although the former could provide further insight into the possibility of further stimulus next year, with many thinking it will inevitably happen.
Ahead of the US open, the S&P is seen 4 points higher, the Dow 41 points higher and the Nasdaq 9 points higher.
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