Asian Open: Fears of contagion weighs on market sentiment

Asian Futures:

  • Australia's ASX 200 futures are up -20 points (0.44%), the cash market is currently estimated to open at 6,779.50
  • Japan's Nikkei 225 futures are up 250 points (0.86%), the cash market is currently estimated to open at 29,634.52
  • Hong Kong's Hang Seng futures are up 82 points (0.29%), the cash market is currently estimated to open at 28,420.30

UK and Europe:

  • The UK's FTSE 100 futures are up 29.5 points (0.44%)
  • Euro STOXX 50 futures are up 32 points (0.84%)
  • Germany's DAX futures are up 126 points (0.85%)

Monday US Close:

  • The Dow Jones Industrial rose 98.49 points (0.3%) to close at 33,171.37
  • The S&P 500 index fell -3.45 points (-0.09%) to close at 3,971.09
  • The Nasdaq 100 index fell -13.374 points (-0.1%) to close at 12,965.74

Indices: Wall Street wobbles at their highs

Banks could be facing losses of up to billions of dollars after Archegos Capital Management were forced to liquidate positions on Friday. Japan’s largest investment Bank, Nomura said it could be facing up to $2 billion in losses and Credit Suisse fell over -14% when they said that a fund had failed to cover its margin calls.

Whilst this could turn out to be a contained event, it does leave some worried that there could be others out there. As Warren Buffet once famously said “only when the tide goes out do you discover who's been swimming naked”, and some are weighing up the odds that the tide has turned (and that perhaps they themselves are naked). Still, Nikkei 225 futures (Nomura is listed on the Nikkei) are taking it within stride and currently 0.9% higher ahead of today’s open.

The Russell 2,000 produced a bearish outside candle after finding resistance at its 10 and 20-day eMA’s. With a potential swing high in place on the daily charts, the lows around 2066 – 2085 could appeal to bearish swing traders.

The S&P 500 printed a minor intraday record high but ultimately closed the session with an indecision candle (Rikshaw man Doji). Yet market internals were skewed to the downside with more sectors and stocks declining than advancing. Utilities (+1.07%) and consumer non-cyclical sectors were the strongest of the session, energy (-1.37%) and financials (-1.3%) were the weakest. 206 stocks in the index advanced whilst 299 stocks declined.

ASX200 stalls at 6850 (again….)

Australia’s ASX 200 has effectively been range bound between 6660 – 6850 since the end of February. Over this time there have been four failed attempts to break above 6850, and each time it produced a high wick then closed beneath that level to print a swing high. We therefore find yesterday’s bearish candle and ‘seller’s tail’ at resistance of interest.

  • A break beneath 6790 could be taken as a sign that mean reversion is underway.
  • The bias remains bearish beneath 6860.60.
  • We have a loose downside target between 6660 – 6709. Notice that spikes have appeared near the lower target whilst closing prices have appeared around the upper target.

Forex: Dollar remains firm

The US dollar caught a bid overnight as investors weighed up the knock-on effect from Archegos Capital’s margin call. The US dollar index produced a bullish engulfing candle and remains above its 200-day eMA.

  • Conversely, EUR/USD is probing Thursday’s low and continues to look weak beneath its 200-day eMA and 1.1800 handle, with next major support sitting around the 1.1744 low.
  • AUD/USD is holding above its 100-day eMA and touched a 3-day high overnight yet is another market which produced an indecision candle. With no domestic news scheduled today it could be another quiet session.
  • AUD/JPY is holding above its Marabuzo line (outlined in yesterday’s Asian open report). If prices continue to hold above 83.30 then the bias remains bullish over the near-term.
  • AUD/NZD is struggling to break above 1.0936 resistance (September high), having now produced three upper wicks, two of which are bearish pinbars. We currently favour its chances of a retracement from its highs although 1.0843 is a likely support level to keep in mind.
  • NZD/JPY is one to watch as it is potentially carving out a swing high below 76.98 resistance. Given its strong bearish leg from 18th to the 24th of March we see the past three days of gains a corrective, so we are now seeking its potential to move lower. Keep in mind Japan release retail sales and employment data this morning.  

Commodities: Palladium leads metals lower

The stronger dollar and general de-risking overnight saw metals under pressure. But it was palladium which bore the brunt of any sell-off by falling over -5%.

We had high hopes for palladium yesterday as it appeared to be breaking higher on Friday. Yet those hopes were quickly dashed amid its most bearish session in 3.5 months. Having produced a large bearish engulfing candle which crashed back to 2514 support in a matter of hours we will step aside from this. Although a break back inside the 2220 – 2514 range could itself become a strategy for metal bears.

Gold finally broke out its small 4-day range to the downside, sliding over -1.5% near the session low but now trades around 1711 at -1.2%. Silver also touched a 2-day low and closed beneath $25, although remains above its 200-day eMA and has several potential support levels above $24.

Oil prices are holding up quite well, considering ‘that boat’ everyone is talking about is no longer grounded. We outlined the case for prices to try and carve out a low and for brent to break above $65 if we do not see any large bearish candles o the daily timeframe in yesterday’s video. And for now, that view remains intact.

Up Next (Times in AEDT)

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