Stock indices are screaming. But why?: S&P 500, EUR/USD, AUD/USD, Copper

Either stocks should begin to move lower or EUR/USD, AUD/USD and Copper should begin to move higher.

Uptrend 2

Stock markets are skyrocketing again today.  The S&P 500 is approaching all-time highs as up over 175 handles off Sunday night Globex open.  The index held the 200 Day Moving Average and long-term support from January 2018, and quickly began moving higher.  S&Ps are  currently back at trendline resistance from the prior ascending wedge and the 161.8% Fibonacci extension from the September 1st highs to the September 24th lows, near 3836.75.  There are also recent highs from Jan 20-27th which could not push past that zone.  Three trendlines converge above near 3875, which would be an all time high .  The DJIT is also up 2% and the NDQ 100 is up 1.5%. The part that is concerning about the move is that some of the traditional correlations,  such as with currencies and copper, are not holding. What’s going on?  

Source: Tradingview, CME, City Index

EUR/USD

Yesterday we wrote about 1.2050 was a key level to watch in EUR/USD.  With stocks moving higher, one may have expected that level to hold.  However, the 240-minute chart shows that once that level was broken, the move lower continued.  1.2011 is the next support level, just in front of 1.2000.  Resistance is now at the 1.2050 level!  With EUR/USD moving lower, why are stocks higher?

Source: Tradingview, City Index

AUD/USD

The RBA earlier was dovish, and they said they expect to continue to increase their buying program of 100 million AUD per month past the current expiration date in March.  It makes sense that the AUD/USD would be moving lower. Yesterday, the pair broke lower below the downward sloping channel on the 240-minute timeframe, and today, the continued to move lower through the 61.8% Fibonacci retracement of the December 21st, 2020 lows to the January 6th highs, near 0.7600.  Horizontal support is at 0.7557.  With a lower Aussie, one may expect stocks to be lower as well.

Source: Tradingview, City Index

Copper

China reported worse than expected Manufacturing and Non-Manufacturing data over the weekend.  Traders may have concern on demand for copper, and therefore, one would expect a lower price.  After reached 3.7328 on January 6th, which an extremely divergent RSI, one may expect prices to pull back a bit.  The price of copper pulled back to the 200 Day Moving average near 3.5482.  However, today copper is threatening to close below the key moving average, as well as, take out support at 3.4873.  Copper is down 0.5% today.  Yet why would stocks be higher?

Source: Tradingview, City Index

How sustainable is this move in stock indices?  Could this just be a move back to levels prior to the short squeeze scare?  (GME and SLV are getting crushed today) Or is this possibly just a move to buy stocks ahead of “potential” good earnings from AMZN and GOOG?  Maybe!  (Remember TSLA was a huge miss last week.)  Is it because of the $1,9 trillion stimulus Joe Biden offered weeks ago?  Or is it just continued “money that needs to be put to work at the beginning of the month”.  It could be any or all these reasons.  However, one could expect that something has to give.  Either stocks should begin to move lower or EUR/USD, AUD/USD and Copper should begin to move higher.

Learn more about forex trading opportunities.

Learn more about index trading opportunities.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.