Morning Wrap: ASX 200 to extend gains, commodity prices soar + Charts of the Week

The S&P 500 continued to climb overnight despite weakness from the Magnificent Seven stocks, the Dow scores its second consecutive record close, the US 10-year yield dips below 4.0% for the first time since August, commodities experience a broad-based rally on weaker US dollar and Charts of the Week!

Let's dive in.

S&P 500 SESSION CHART

S&P 500 slightly higher amid choppy trade (Source: TradingView)

MARKETS

• S&P 500 finished around the midpoint of its intraday range, between session highs of 0.67% and lows of -0.27%

• 48% of S&P 500 stocks have an RSI of more than 70, the most overbought in at least a decade

• Dow logged another all-time high – Prior to that – It’s been approximately 700 days since its last all-time high

• Bulls now outnumber bears by 32% in the AAII Sentiment poll, the largest positive spread since April 2021

• Magnificent 7 stocks continued to weaken, led by Microsoft (-2.4%)

• US bond yields extend selloff, 10-year falls below 4.0% for the first time since August

• Bond yield and US dollar weakness driving broad-based strength across commodities

• Markets price in ~140 bp of rate cuts next year (Bloomberg)

• Oil volatility likely next year amid concerns about oversupply, slowing growth, Middle East tensions (Reuters)

STOCKS

• Adobe shares tumble as revenue outlook underwhelms expectations (Bloomberg)

• OpenAI to offer news in ChatGPT after striking deal with Axel Springer (CNBC)

• GM's Cruise will lay off 24% of workforce or 900 employees amid turmoil in robotaxi startup (CNBC)

• Intel debuts new AI chip created to compete with AMD and Nvidia (CNBC)

• Berkshire Hathaway buys another 10.5 million or almost $600 million worth of Occidental Petroleum shares (CNBC)

CENTRAL BANKS

• Dovish Fed signals rate hikes over, forecasts 75 bp of easing in 2024 (FT)

• Goldman Sachs revamp Fed outlook, see cuts starting from March (Bloomberg)

• ECB has tough job to fight rate cut bets as inflation falls (Bloomberg)

• BoE to hold rates with warning of a 'way to go' on inflation (Bloomberg)

• Norway delivers hawkish surprise by hiking rates 25 bps to 4.5% (Bloomberg)

• Switzerland keeps rates on hold at 1.75% as expected (Bloomberg)

• ECB President Lagarde says policymakers shouldn't lower guard as inflation tumbles (Bloomberg)

• BoE holds, Bailey says there is still some way to go (FT)

• Mexican central bank keeps rates steady for sixth time at 11.25% (Bloomberg)

GEOPOLITICS

• Israel keeps up attacks on southern Gaza despite intensifying international calls to reduce civilian casualties (Reuters)

• Top US and Chinese defense officials met for first time since February (FT)

• Venezuela doubles its 2024 budget to $20.5bn as it expects higher defense spending amid tensions with Guyana (Bloomberg)

• Putin says goals in Ukraine have not changed; seeks to demilitarize Ukraine and ensure neutrality (CNBC)

CHINA

• China's central bank set to boost liquidity injection (Reuters)

• Fitch says China's outlook is neutral but flags growing debt risks (Bloomberg)

• China activity data on Friday expected to confirm growth remained muted in November (Bloomberg)

• China's bank loans rise by less than expected (Bloomberg)

ECONOMY

• US retail sales rebounded in November, up 0.3% compared to consensus expectations of a 0.2% contraction(Reuters)

• Australian jobs growth tops expectations but unemployment rises by more than forecast (Bloomberg)

• New Zealand economy unexpectedly shrinks (Bloomberg)

Charts of the Week

Chris is out this morning so I'll be taking care of Friday's Charts of the Week. As always, they are for illustrative and educational purposes. Always do your own research.

Setting setting the scene: The market is in a state of euphoria as dovish Fed takeaways, growing soft landing expectations and disinflation momentum reverberate. The market rally on Wall Street is starting to broaden away from defensives and the Magnificent Seven towards unloved laggards and various other sectors, which supports further upside into the seasonally favourable part of December. However, stocks have run up in a rather V-shaped fashion in the past six or so weeks. The sentiment and indicator signals we like to track (e.g. AAII investor survey, BofA data, CNN Fear & Greed Index etc.) are starting to enter cautious territory. In the event of a pullback, can the market consolidate on recent gains? Or has it priced-in far too many rate cuts for 2024 (and gotten too complacent).

Breakouts galore: Before we dive into some charts, it's worth noting that a lot of things have moved out. Sectors like iron ore, building and construction, retail and financials have rallied rather aggressively in the past few weeks. It's pretty hard to find a chart that isn't overextended. And if it hasn't moved out ... then that in itself might be a red flag.

Service Stream has been incredibly choppy in the past few months. It's finally started to break out of the 92-93 cent level.

Service Stream daily chart (Source: TradingView)

Champion Iron has been on a tear (like most iron ore stocks). It's starting to settle around the $7.80 level. Can it set a constructive base and take off again?

Champion Iron daily chart (Source: TradingView)

Mount Gibson is another iron ore name that's taking a bit of a breather after breaking out in late November.

Mount Gibson Iron daily chart (Source: TradingView)

Spartan Resources has been a massive trender since May. It's a ~$400m market cap gold explorer.

Spartan Resources daily chart (Source: TradingView)

Boral has been a little volatile after its massive run in August, which was followed by one of its major shareholders offloading some shares (where the massive gap down takes place). It's setting up around the $5.00 level.

Boral daily chart (Source: TradingView)

ASX corporate actions occurring today:

• Trading ex-div: None

• Dividends paid: Technology One (TNE) – $0.11, Waterco (WAT) – $0.05, National Australia Bank (NAB) – $0.84, Nufarm (NUF) – $0.05, Ava Risk Group (AVA) – $0.001, Liberty Financial Group (LFG) – $0.12

• Listing: None

Economic calendar (AEDT):

• 9:00 am: Australia Manufacturing and Services PMI (Dec)

• 1:00 pm: China Industrial Production, Retail Sales, Fixed Asset Investment (Nov)

• 1:00 pm: China Unemployment Rate (Nov)

• 1:45 am: US Manufacturing and Services PMI (Dec)