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Risk Assets Rebound Ahead Of Weekend Break

Following a rough Thursday session, risk-assets are back in style to close the week. At the midpoint of the U.S. trading day, the DJIA DOW (+275), S&P 500 SPX (+30), and NASDAQ (+65) are all trending higher. As of now, optimism rules despite an uptick in COVID-19, fresh election uncertainty, and a lagging Michigan Consumer Sentiment Index (Nov.).

During the U.S. pre-market hours, several inflation metrics were released to the public. Here’s a look at the data:

Event                                                          Actual             Projected          Previous

Producer Price Index (MoM, Oct.)            0.3%                  0.2%                  0.4%

Core PPI (MoM, Oct.)                                  0.1%                  0.2%                  0.4%

Like yesterday’s CPI figures, PPI reports from October suggest that commodity prices are falling. While stagnant inflation is certain to worry the Fed, the numbers don’t come as much of a surprise. However, the slumping Michigan Consumer Sentiment Index (Nov.) may be. This metric came in at 77.0, well beneath expectations (82.0) and October’s level (81.8). It looks like business owners aren’t too excited about the incoming Biden administration.

Despite today’s numbers, risk-assets are gaining ground. The DJIA is positive and looking to extend gains ahead of the bell.

Risk-Assets Rally On Friday

The markets are up, and that’s good news for equities bulls. For the December E-mini DOW, prices are within striking distance of all-time highs at 30,000.

December E-mini DOW Futures (YM), Daily Chart

Here are two levels to watch in this market as we move into next week:

  • Resistance(1): All-Time High, 30,000
  • Support(1): 38% Current Wave, 28,454

Bottom Line: The coming weekend news cycle is likely to be very active. U.S. election recounts are already underway, specifically in Georgia. Any surprises from the proceedings are likely to shake the pricing of risk-assets. Also, COVID-19 cases are on the rise, setting records in the United States. While the markets appear tired of coronavirus headlines, lockdown announcements can quickly drive sellers to the market.

If we see a Monday pullback, I’ll be going long the December E-mini DOW. With buy orders in the queue at 28,479, this trend-following trade produces 100 ticks with an initial stop loss at 28,429 and 1:2 risk vs reward ratio.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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