Equities report: Equity traders remain uncertain about the future

US stock markets managed to maintain the support they gained last week, with prices remaining relatively stable. It could appear that market panic surrounding the banking system has eased.  In this report we aim to present the recent fundamental and economic news releases that impacted the US stock markets, look ahead at the upcoming events that could affect their performance and conclude with a technical analysis.

US stock markets gain whilst Europe is in turmoil

Equity traders appear to have regained confidence in the US stock market following last weeks volatile price movements, with price remaining between last week’s open and close range thus potentially indicating that equity traders have stopped the bleeding following the market turmoil with SVB, Silvergate and First Republic. As such following statements from Fed officials provided hope to equity traders that the Fed may have reached its peak terminal rate.

More specifically, Minneapolis Fed President Kashkari’s tone could be perceived as dovish following this statement “It’s too soon to make any forecast about the next interest rate meeting”, indicating potential unwillingness to hike rates further. Pausing or even cutting interest rates could have massive impact for equity traders as a weaker dollar would allow for American firms to conduct business at lower prices with overseas partners at lower costs, therefore potentially increasing demand for goods and services, thus translating into a stronger US equity market. However, we should note that Treasury Secretary Yellen’s unscheduled Financial Stability Oversight Council meeting, may have some equity traders concerned that the crisis may not be over.

European Banks struggle to get up following relentless market beating

Deutsche bank on Friday narrowly avoided a bank run following fears of a contagion spread by the merger of UBS and Credit Suisse, which facilitated inflows into the US equity market, as equity traders potentially saw the US as better prepared to combat future situations in comparison to their European counterparts.

A substantial development was the fact that French prosecutors on Tuesday, searched the Paris offices of 5 banks according to Reuters “including Société Generalé (SocGeneral), BNP Paribas (BNPParibas) and HSBC (#HSBA), on suspicion of fiscal fraud, part of a broad European probe into the dodging of dividend tax payments”. Although not something ‘new’ per say following French prosecutors previously charged these banks for the same indictments, equity traders could perceive this as a signal that, the risks are ultimately still there and some caution could be required in the following days, in order to fully assess the long-term impact on the market.

China KO’s Alibaba

Alibaba this week announced that it would be breaking up into six different entities, Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.

As a result of the restructuring, these individual units will be able to raise capital and seek stock market listings as independent entities from Alibaba thus potentially being less likely to be subject to antitrust violations thus could potentially appreciate rapidly in value. Alibaba rose in value as a result of these news following reports that the company would operate as holding company management model. Thus, share prices could increase exponentially as these new entities could exceed current valuations.

技术分析

#BABA Daily Chart

Support: 92.00 (S1), 85.00 (S2), 79.00 (S3)

Resistance: 100.00 (R1), 106.00 (R2), 113.00 (R3)

Looking at #BABA Daily chart we observe investors react favorably to the Chinese giant’s breakup announcement and flooding the market with bids, which pushed the stock’s price significantly higher in today’s session and in essence, reversed its two-months-long descend. We hold a bullish outlook bias for Alibaba, given the break above the descending channel and today’s upshot move. Supporting our case is the RSI indicator below our daily chart which currently registers a value of 67 and highlights the strong bullish sentiment that currently surrounds the stock. Furthermore, the break above the upper bound of the Bollinger band alongside the break of both the 100- and 200-day Moving Averages, signal that the bulls are eager and are actively trying to push prices higher ground. Should the bulls extend their reign, we may see the break above the 100.00 (R1) resistance level and the move towards the 106.00 (R2) resistance barrier. Should traders ride the bullish momentum and capitalize on the higher volatility we may thus see the break above the 113.00 (R3) resistance barrier. Should on the other hand the bears take over, we may see the break below the 92.00 (S1) support level and the return of the price action closer to the 85.00 (S2) support base.

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