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.

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.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge