Are Equities on The Turn?
It’s been much more bearish start to the week for global equities benchmarks with each of the four indices tracked here, firmly in the red as of writing. US inflation expectations are on the rise ahead of tomorrow’s release. Despite a weaker than expected April jobs report last Friday, sharply higher producer input prices and higher commodity prices (including oil) are raising expectations of a jump in the data. Indeed, looking at last month’s labour market data, the surprise jump in average hourly pay is another factor driving this view.
While the Fed has reiterated its view that any spike in inflation will likely be temporary, not warranting policy action, it seems the market is reverting to the themes which drove action across Q1 with yields turning higher again here, weighing on equities. Despite the uptick in inflation expectations, USD remains at depressed levels currently suggesting that if the data tomorrow fails to show any significant lift-off in inflation, there is room for equities to reclaim upside momentum. Similarly, any upside surprise will likely see strong USD buying, extending the current equities rout.
Technical Views
DAX
The DAX has fallen back into the bullish channel this week, breaking back under the channel resistance and the 15311.01 level. Given the bearish divergence over recent weeks, a correction lower was a clear risk. However, while price holds above the 14783.12 level, the focus is still on further upside. Below there, however, the channel low and 14411.90 levels come into view.
S&P500
The S&P found selling pressure on the latest test of the upper trend line of the rising wedge formation. Price has since broken back below the 4180.50 level but is still sitting above interim support at the 4115.75 level. A break below there, however, will open the way for a much deeper correction towards the rising wedge low and the 3964.25 levels.
FTSE
The rally above the 7025.8 level ran into heavy selling pressure ahead of the 7235.9 level with price since reversing back under the former level and the April highs. While below here, there is room for a continued correction back towards the 6803.1 level next.
NIKKEI
The sell-off in the Nikkei this week has seen price breaking down below the 29005.6 level and the rising channel low running from last year’s lows. The big test now will be the 28372.5 level. This has been big support for the index and a break below here could pave the way for a much bigger correction lower.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.