ASX 200 to rally, S&P 500 marks best day since April + Charts of the Week

ASX 200 futures are trading 85 points higher, up 1.23% as of 8:20 am AEST.

S&P 500 SESSION CHART

MARKETS

• S&P 500 higher, closed at best levels, marks best day since April
• S&P 500 up 4.9% in the last four sessions, reclaimed key 200-day moving average
• US 10-year yield down 27 bps since Fed decision on Thursday
• Oil prices bounce 2%, breaking a three-day losing streak
• Risk sentiment has ramped up in recent days thanks to factors including peak Fed, dampened volatility in both stocks and bonds, favourable seasonality (November and December are two strong periods for stocks) and oversold conditions
• Markets hone in on Powell's view that hikes may be done (Bloomberg)
• Powell downplays concerns over scarce bank reserves, signals more QT (Bloomberg)

STOCKS

• Qualcomm revenue tops forecasts, indicates end of inventory glut (Bloomberg)
• PayPal raises guidance, volume growth supported by strong consumer (Bloomberg)
• Disney confirms plan to acquire remaining Hulu share from Comcast (Reuters)
• Amazon to launch new BNPL checkout for small businesses (CNBC)
• Ford's October US vehicles sales fall, including highly popular F-series truck (Renters)

KEY EARNINGS

• "Customer demand for us remains strong. We're not really seeing any change in the sentiment in our customer base at this time.” – Starbucks CEO Laxman Narasimhan

CENTRAL BANKS

• Fed on hold, Powell says policymakers mixed on end of rate hikes (Bloomberg)
• Bank of England keeps rates at 15-year high (Reuters)
• BOJ likely timing of an exit around spring next year (Reuters)
• Norway's central bank holds rates at 4.25%, signals possible year-end hike (Reuters)

ECONOMY

• US weekly jobless claims rise marginally, productivity accelerates (Reuters)
• Japan PM Kishida announces US$87bn extra budget to boost growth (Bloomberg)
• China's property sector loans fall for first time on record (Bloomberg)
• Eurozone manufacturing slump intensifies in October, new orders fall (Reuters)
• German unemployment rose more than forecast in October (Reuters)
• South Korean inflation unexpectedly accelerates (Bloomberg)
• US 2023 holiday sales expected to rise at slowest pace in five years (Reuters)
  
  

The State of Play

It took a while but we finally got there – The oversold bounce. Things got pretty dark for a moment with the S&P 500 and Nasdaq entering correction territory (down more than 10% from recent peaks) and the ASX 200 falling to a 12-month low (with around 50% of its constituents marking a 52-week low).

Most of the ASX 200's rallies this year have come from oversold conditions. In recent months, the rallies have fizzled rather fast and despite reclaiming key price points or moving averages (e.g. green 50-day moving average).

That said, risk sentiment has picked up considerably over the past couple of days. There's a myriad of excuses to drive a strong bounce including:

• Downward pressure on yields: 10-year at 4.66% from recent peak of 5.02%
• Dampened volatility: S&P 500 VIX down to 15 from ~20 a week ago
• Contrarian positioning: NAAIM Exposure Index was at the lowest level in a year last week, BofA Bull & Bear Indicator was the lowest since last November, UBS flagged CTAs increased shorts in equities by 50% since last update
• Seasonality: The ASX 200 has rallied an average of 3.3% in November in the past five years, 1.6% in the past 10 years and 0.8% in the past 30 years. You can read more about seasonality here.

If the above factors can be sustained, then that's more ammo for a rally. But the question is, is this a V-shaped rally that'll soon fizzle out or can it find a calm pullback and kick on?

Charts of the Week

This segment of the Morning Wrap brings you weekly technical commentary by Chris Conway on the ASX 200 and some of the more interesting charts in the market. These are not meant as recommendations and illustrative purposes only. Any discussion of past performance is for educational purposes only. Always do your own research.

ASX 200 – Retest at 6900

The index has rallied over the past couple of session, setting up a retest of the 6900 level. It’s an important time for market. If the bulls can punch back above this level with some conviction, the threat of a collapse into 6400 dissipated – somewhat. If the bulls fail at this level and the index rolls over, the probability of a steeper decline increases significantly. Failure at key levels often represent the last attempt to halt a broader course of action (in this case, declines). It’s the last stand. The last whimper. Let’s hope the bulls have a bit of fight left in them.

Wildcat Resources (ASX: WC8) – So wild, you don’t know what it’s going to do!