Asian Open: Bearish Reversal Candle at ATH on SPX, AU CPI Up Next

Whilst one candle cannot break such a strong trend, the bearish hammer on the S&P 500 at its record high is a near-term sign of exhaustion, at the very least.

Australia

The S&P 500 and Dow Jones hit marginal new highs overnight, yet printed bearish reversal candles

Asian Futures:

  • Australia's ASX 200 futures are up 4 points (0.05%), the cash market is currently estimated to open at 7,447.40
  • Japan's Nikkei 225 futures are down -150 points (-0.51%), the cash market is currently estimated to open at 28,956.01
  • Hong Kong's Hang Seng futures are down -227 points (-0.87%), the cash market is currently estimated to open at 25,811.27
  • China's A50 Index futures are down -67 points (-0.42%), the cash market is currently estimated to open at 16,012.35

 

UK and Europe:

  • UK's FTSE 100 index rose 54.8 points (0.76%) to close at 7,277.62
  • Europe'sEuro STOXX 50 index rose 35.66 points (0.85%) to close at 4,223.97
  • Germany's DAX index rose 157.83 points (1.01%) to close at 15,757.06
  • France's CAC 40 index rose 53.64 points (0.8%) to close at 6,766.51

 

Tuesday US Close:

  • The Dow Jones Industrial rose 15.73 points (0.04%) to close at 35,756.88
  • The S&P 500 index rose 8.31 points (0.19%) to close at 4,574.79
  • The Nasdaq 100 index rose 45.293 points (0.29%) to close at 15,559.49

 

Indices: US to jab children between 5-11

US regulators voted in favour of vaccinating children between the ages of 5-11 using the Pfizer/BioNTech COVID-19 risks, on the basis that the benefits outweighed the risks.

Wall Street earnings continued to deliver the goods with Alphabet beating sales estimates and Microsoft beating quarterly revenue estimates. The S&P 500 and Dow Jones hit fresh record highs, despite the setback from Facebooks earnings the day prior.

However, a bearish pinbar formed on the S&P 500 daily chart with (slightly) above average volume. It’s not what bulls want to see at a record high but, in context of the grand uptrend, it is just one candle that flies in the face of it. Still, should we see a break of yesterday’s low it could trigger a technical sell-off as it confirms the reversal candle.

The STOXX 50 and DAX broke higher in line with our bullish bias yesterday, and now hoping to see prices remain above their recent consolidation ranges (essentially yesterday’s lows).

The ASX 200 is an interesting one as it produced a bearish pinbar below 7487.6 resistance and matched Monday’s high to form a double top on the daily chart. So those technical signs, alongside a stronger CPI report could knock the ASX from its highs.

 

ASX 200 Market Internals:

IT and consumer discretionary sectors have outperformed the ASX 200 over the past 30 trading days

ASX 200: 7443.4 (0.03%), 26 October 2021

  • Information Technology (1.34%) was the strongest sector and Utilities (-1.34%) was the weakest
  • 5 out of the 11 sectors closed higher
  • 6 out of the 11 sectors closed lower
  • 86 (43.00%) stocks advanced, 103 (51.50%) stocks declined
  • 71% of stocks closed above their 200-day average
  • 55.5% of stocks closed above their 50-day average
  • 66% of stocks closed above their 20-day average

 

Outperformers:

  • + 9.35%-Nanosonics Ltd(NAN.AX)
  • + 8.7%-Crown Resorts Ltd(CWN.AX)
  • + 8.13%-Pilbara Minerals Ltd(PLS.AX)

 

Underperformers:

  • ·-7.04%-Mineral Resources Ltd(MIN.AX)
  • ·-6.14%-Regis Resources Ltd(RRL.AX)
  • ·-4.23%-Whitehaven Coal Ltd(WHC.AX)

 

 

Forex: AUD/USD hold trend support ahead of CPI

AUD has been the strongest major currency over the past two trading days

Australia’s CPI report at 11:30 AEST is today’s main economic event in Asia. That is, if CPI actually inflates at a reasonable rate. Trimmed mean is the RBA’s preferred gauge and currently sits at 1.6%, and has remained below its target range of 2-3% since Q4 2015. However, Westpac expect that to rise to 1.9% today which, if true, could light a match under the Australian dollar.

AUD/USD is crawling along trend support ahead of today's CPI report

 

AUD/USD has been gently rising along with trend support and has carved out a narrow bullish channel over the past 3 trading days, despite a stronger US dollar. With RBA remaining as dovish as ever, a weak CPI print may not be enough to send it notably lower. And besides, we would want to see a break of 0.7487 support to confirm a near-term change in trend. That means the more volatile reaction could be to the upside if Westpac’s higher CPI forecast is correct, as it piles further pressure on RBA to ‘get with the program’ and acknowledge they are behind the curve. Initial target would be around 0.7520/25 then the 0.7540/46 zone.

New Zealand also have the NBNZ business outlook report, which is closely watched by their central bank. Sentiment has been pessimistic (below 0) for four consecutive months but may have formed a trough in August. This means that any reading above September’s -7.2 print is a net-positive, especially if it reverts to optimism. This could reinforce views that RBNZ will raise rates by 50 bps at their November meeting.

The US dollar index (DXY) touched a 6-day high after breaking above Monday’s bullish outside candle. Then the bounce is on, although momentum is yet to sweep us off our feet. For that, we may need to see a stubbornly dovish ECB meeting on Thursday despite inflation sitting at 13-year highs. And we suspect we will get just that.

 

Commodities:

Gold did not stay above 1800 or its 200-day for very ‘long’, instead retracing towards its lower trend channel. Small pinbar on the four-hour chart shows it may try and recover losses, but 1800 remain key going forward.

Silver touched a 3-day low, although we had been prepared for this potential given its bearish hammer near its 200-day eMA and $25 resistance zone. Like gold it printed a small bullish hammer on the four-hour chart and closed back above $24

 

Up Next (Times in AEDT)

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