European Open: Asia Trades Lower, Reversal Patterns Cloud European Indices
Matt Simpson April 27, 2021 6:15 AM
It wasn’t exactly a bear feast, but Asian equities were mostly lower overnight, yet volatility was capped. But do take note of the bearish reversal candles on European indices as it suggests all is now well at these highs.
- Australia's ASX 200 index fell by -24.7 points (-0.35%) and currently trades at 7,020.90
- Japan's Nikkei 225 index has fallen by -0.07 points (-0.16%) and currently trades at 29,081.84
- Hong Kong's Hang Seng index has fallen by -42.33 points (-0.15%) and currently trades at 28,910.50
UK and Europe:
- UK's FTSE 100 futures are currently down -8 points (-0.12%), the cash market is currently estimated to open at 6,955.12
- Euro STOXX 50 futures are currently down -6 points (-0.15%), the cash market is currently estimated to open at 4,014.83
- Germany's DAX futures are currently down -21 points (-0.14%), the cash market is currently estimated to open at 15,275.34
Monday US Close:
- The Dow Jones Industrial fell -61.93 points (-0.18%) to close at 33,981.57
- The S&P 500 index rose 7.45 points (0.18%) to close at 4,187.62
- The Nasdaq 100 index fell -134.24 points (-0.96%) to close at 14,026.16
Bearish Candles Appear on European Indices
Indices are trading cautiously ahead of this week’s Fed meeting, yet they are sending conflicting signals. On one hand European bourses remain in strong, bullish trends, yet bearish reversal patterns on the weekly charts are of a slight concern. The CAC and STOXX 50 produced bearish hammers whilst the DAX produced a bearish outside week. The FTSE produced the two-bar reversal pattern, a Dark Cloud cover. And whilst it will taker more than one weekly candle to spoil a trend, the fact that bullish momentum has failed to re-establish itself should be taken note of.
US futures have opened slightly higher but, ultimately, flat. Euro STOXX 50 and DAX futures are -0.15% lower, the FTSE 100 futures are down -0.11%.
FTSE 100: Market Internals
The FTSE 100 closed to a four-day high yesterday and continues to move cautiously higher after falling 2% last Tuesday, although it is yet to recover that day’s losses. Still, it trades above its 10 and 20-day eMA’s and remains in a steady uptrend despite last week’s hiccup. If it can break back above 7,000, its game on for a break to new highs, whilst a break below 6850 spells trouble.
FTSE 350: 6963.12 (0.35%) 26 April 2021
- 249 (70.94%) stocks advanced and 95 (27.07%) declined
- 41 stocks rose to a new 52-week high, 5 fell to new lows
- 86.89% of stocks closed above their 200-day average
- 23.36% of stocks closed above their 20-day average
- + 11.1% - IMI PLC (IMI.L)
- + 6.66% - Tui AG (TUIT.L)
- + 5.96% - Rolls-Royce Holdings PLC (RR.L)
- -2.73% - Petropavlovsk PLC (POG.L)
- -2.66% - Drax Group PLC (DRX.L)
- -2.64% - SSP Group PLC (SSPG.L)
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Forex: BOJ stand pat
The Bank of Japan (BOJ) have trimmed their inflation forecasts. Not for the first time, and probably not the last. They also kept their interest rate at -0.1% and their 10-year bond yield target at ‘around’ 0%.
- The USD is the strongest currency in overnight trade, whilst CHF, NZD and JPY are the weakest. USD/JPY is -0.19 lower.
- EUR/GBP produced a 2-bar bearish reversal (Dark Cloud cover) just below 0.8731, suggesting there could be further downside.
- Several euro crosses printed bearish engulfing candles yesterday. Of interest is EUR/NZD as it failed to rally as high as some other euro crosses, and a break below 1.6665 assumes bearish continuation.
- EUR/USD reached our 1.2100 target on Friday and produced a Spinning Top doji, warning of a potential retracement. Whilst it traded lower overnight, the bias remains bullish overall whilst it holds above the 1.1991 low.
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Commodities: Copper thinks it’s worth its weight on gold
Gold is holding above its bullish trendline, projected from the April low. Its double bottom at 1676 projects a target around 1835, and the 50-bar eMA is providing dynamic support. However, 1800 is the next milestone to conquer, but we like that fact prices have already tried to break above it before retracing (it is very rare to see such milestones broken on a first attempt). From here, our bias remains bullish above 1760 and for a break above 1800, en route towards the 1835 double bottom target.
Copper prices are bursting higher, rising to their highest level since August 2011 and trading around 4.459 during Asian trade. It took longer than we anticipated, but momentum has finally realigned itself with the dominant trend. We expect 4.54 resistance will initially hold as traders boo profits, but the trend remains bullish above 3.9435, although we wouldn’t like to see prices dip below 4.16 if this trend is to be believed.
Palladium is another metal on a surge and has traded beyond out inverted head and shoulders (H&S) pattern of 2895. Whilst our core view remains bullish, we would prefer to wait for a period of consolidation of a retracement before seeking additional longs.
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