Dow wobbles, Nasdaq holds its own, ASX futures today with break of 8200

Wall Street indices displayed their first signs of doubt following Trump’s election victory last week. Bullish momentum had all but died but Monday after a 5-day rally, which then saw Dow Jones futures drop -0.8% and erase all of Monday’s gains, while the S&P 500 fell a more modest -0.3% and close above 6,000 after an intraday drop beneath it. The Nasdaq was more defiant with a -0.17% decline and remains within a tight range, just off its record high.

None of this looks like a major cause of concern for the bullish trend. But a pullback had to be expected at some point, given the blind assumption that Trump’s victory would extrapolate gains indefinitely.

S&P 500 and Dow Jones futures appear extended from their 10-day EMAs
Dow Jones futures formed a bearish engulfing day making it preferred for shorts during risk-off
Nasdaq 100 futures remain in a tight range near record high, holding above 21k and not as extended from tis 10-day EMA – making it the preferred long of the three

Bitcoin remains on a rampage, but there’s even early signs of fatigue here too. Tuesday’s 2% gain paled in comparison to its 13.5% gain on Monday which included a 5% gap higher at the open. Prices reached 90k for the firt time on record, a level it now meanders around. I’ll steer clear of calling a top today, but these are not levels I would personally be looking to enter long.

The US dollar continued to surge on Tuesday and reached a 2-year high, as it tracked yields amid the ongoing Trump trade. GBP/USD was the weakest major after soft wage rekindled hopes of another BOE cut, although the central bank finds themselves in a tight spot following the inflationary UK budget and prospects of an inflationary Trump presidency. AUD/USD retested the US-election low but is now trying to hold above the 0.6500 – 0.6513 support zone noted in yesterday’s report.

Related analysis: AU consumer, business sentiment improves ahead of key jobs report

Australia’s business and consumer sentiment perked up notably according to NAB and Westpac. And if this is accompanied with higher wages data today and employment tomorrow, the RBA could be closer to a hike than a cut.

Events in focus (AEDT):

China’s loan and fiscal data warrants a look to see if there has been a pickup in the economy since stimulus was announced. China’s markets are entering another slump after expectations of fresh stimulus were not met this week, so we could find the downside moves accelerate if today’s data comes in soft.

Australia’s wage price index is released, with a market consensus for it to rise to 0.9% q/q but slow to 3.6% y/y. The bigger risks is an upside surprise which increases the odds of an RBA hike over a cut next year.

US inflation data is the standout event, but even then it is debatable as to how much it happens with all the attention on Trump, his cabinet picks and generally any headlines surrounding him. Core CPI is expected to remain flat on the month at 33% y/y and 0.3% m/m, and CPI is expected to remain at 0.2% m/m but rise to 2.6% y/y.

08:45 – NZ migration and visitors
09:00 – FOMC member Harker speaks
10:50 - JP PPI
11:30 - AU wage price index
17:00 - JP Machine tool orders
19:00 - CN new loans, outstanding loan growth, fiscal financing
20:45 - BOE member Mann speaks
00:30 - US CPI, FOMC member Kashkari speaks
01:30 – FOMC member Williams speaks
01:35 – Fed Logan speaks

ASX 200 futures (SPI 200) technical analysis:

The ASX has remained the underperformer on Wall Street, failing to retest old highs but selling off more aggressively during pullbacks. Weak sentiment in China is a big factor behind the underperformance. ASX traders should therefore keep a close eye on Hang Seng and China A50 markets alongside today’s loan data from China to assess the downside potential for the ASX this week.

The ASX fell for a third day, and Tuesday was the most bearish of the three. However, given Tuesday’s selloff was on very low volumes and the daily RSI (2) is nearing oversold, I am seeking evidence of a swing low. Perhaps positive data from China (or stimulus that traders really want) could help form it.

The ASX holds above 8200 and the 50-day EMA for now, but an initial downside break seems plausible.
A break of yesterday’s low also breaks the weekly Si pivot (8181) and brings the lows around 8120 into focus.
Upside targets include the weekly and monthly pivots around 8245/62.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.