Brexit threats continue – Stock rally under threat

Brexit and Boris Johnson

On the Brexit front, Boris Johnson, the British Prime Minister told the German Chancellor that the UK is ready to leave the EU without a deal if the EU isn’t ready to compromise. Basically, the warning from the British Prime Minister is more of a strong arm move, and the chances are that it is likely to backfire because the EU doesn’t respond well to such threats.

The OECD warned yesterday that the unemployment rate in the UK can rise up to 15% if the second wave hits the country. The reality is that the emergence of the second coronavirus wave is unavoidable in the UK given how the government has dealt with the coronavirus situation. So, the UK needs to choose its battles very carefully, especially with the EU if it wants the path of recovery to be smoother.

Market Breadth: DJIA Index And SP500 Index

The stock market’s breadth shows some losses for the bulls. 37% of the Dow Jones stocks traded above their 200-day simple moving average SMA, a decline of 3% from a day earlier.

The S&P 500 index also echo the same message, 40% of the index stocks traded above their 200-day SMA, a drop of 3% here as well from a day before.

Dow Jones And SP 500 Futures Today

The Dow futures are trading modestly lower today as traders do need a new catalyst for this coronavirus stock market rally to resume again.

The Dow Jones futures have lost the battle with the 200-day SMA on a daily time frame as the Dow price has moved below this average. This is a sign of weakness, but this doesn’t mean that the bulls are losing control of the price. This is because the DJIA futures are still trading above the 50 and 100-day SMA, and as long as they continue to trade above them, we have a chance for this bull rally to continue its upward rally.  

The SP 500 futures do not show that the bulls have anything to worry about. The price is still trading above all the important moving averages: 50, 100, and 200-day SMA on a daily and weekly time frame.

Stock Market Rally 

The SP 500 index has broken its longest winning streak for this year as speculators believe that the tail wind that was helping the index to continue its upward journey may have lost its momentum.

The SP 500 stocks declined yesterday, and the index finished the day in negative territory by declaring a loss of 1.08%. Apart from consumer staples, all the 11 sectors of the SP 500 index closed with losses. Investors sold the Energy and financial stocks the most.

The Dow Jones industrial average also lost its mojo and closed lower with a loss of 1.51%. Almost all the DJIA stocks fell, 2 stocks posted gains. Boeing contributed the most of the decline and fell 4.81%. Walmart provided a safe haven and advanced 6.78%.  

The NASDAQ composite, the tech-heavy index, eased off from its record highs and dropped the least among the other two indices. The index fell 0.75%.