Equities Traders Shrug Off COVID Fears

Global equities benchmarks have continued the bullishness seen last week over early trading this week. Indices around the globe are trading higher, despite the presence of a firmer Dollar and rising COVID fears as investors focus on the potential passing of a $2.4 trillion US stimulus package. The new package, proposed by the democrats last week, is due to go to vote in the Chamber later this week and is currently drawing the most amount of investor attention.

Risk assets have also been boosted by recent Chinese data announced this week which shows that industrial profit in the world’s second largest economy rose by 19% last month, marking the fourth straight month of profits as the country continues to recover in the wake of the COVID pandemic.

The rally in equities markets this week appears somewhat at odds with the general backdrop of increased fears regarding the growing number of new COVID infections globally. However, this dynamic likely reflects the view that traders assign a very low probability to a return to national lockdowns and, moreover, the perspective that central banks will likely need to ease further in the coming months in any scenario.

Technical Views

DAX (Bullish above 12290.40)

From a technical viewpoint. The DAX continues to hold in a sideways range between support at the 12290.40 level support and resistance at the 13322.69 region. For now, the outlook remains bullish in line with the bullish move seen off 2020 lows, though bulls will need to see a break above 13322.69 soon to restore upside momentum

The S&P500 (Bullish above 3226.50)

From a technical viewpoint. The S&P500 has rallied firmly off the 3226.50 level and is now fast approaching a retest of the 3391.75 level and the broken bullish trend line. While the 3226.50 level holds, near term view remains bullish with the recent sell off seen as corrective.

FTSE 100 (Bearish below 5922.4)

From a technical viewpoint. The FTSE remains hemmed in against the 5922.4 level this week with the local bear channel top also providing resistance. While below here, the market is vulnerable to a further drop down towards the 5626 level.

NIKKEI (Bullish above 23273.6)

From a technical viewpoint. The NIKKEI continues to fight to hold above the 23273.6 this week with price once again advancing towards a retest of the underside of the broken bull channel low and the 24069.4 resistance level. View remains bullish above 23273.6 though momentum studies are worth monitoring given the bearish divergence.

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