Stock markets have been mixed overnight and into this morning. The Hang Seng rose 0.9% and US index futures are up 0.25%, but the FTSE, Dax and Nikkei are all flat. Crude oil has rebounded 0.9% on indications Saudi Arabia and Kuwait support extending production cuts, which has taken some of the pressure off energy stocks.
Earnings continue to have a big impact on trading in stocks. So far this earnings season, traders have been reluctant to reward positive results and have been taking profits against earnings news, indicating that the big post-election rally already priced in high expectations. Last night, Qualcomm, American Express, plus railroads CSX and Canadian Pacific all beat the street while Nestlé and Unilever posted positive sales on price increases in Europe this morning. Insurer Travellers posted mixed results this morning with a miss on earnings offset by higher premiums written and a dividend increase. Celestica beat the street by a penny.
Canadian banks and real estate companies may also be active today with the Ontario government expected to announce measures for dealing with the hot Toronto housing and rental markets. Measures are expected to include a tax on foreign speculators and expanded rent controls.
USD continues to weaken as expectations for an aggressively hawkish Fed fade. Expectations measures from President Trump could be inflationary have eased between difficulties getting reforms passed through Congress and overseas distractions like Syria and North Korea.
The split between strong soft data (PMI, consumer confidence) and weakening hard data (retail sales, manufacturing production) could come into focus again today. The most positive hard data lately has been employment which is a lagging indicator. Today we get the US leading indicator which may indicate where the US economy is heading as we move past President Trump’s first hundred days in office. There were no big surprises in yesterday’s Beige Book report on regional economies, but today’s Philadelphia Fed report could attract attention if it confirms Monday’s soft Empire Manufacturing report.
Chart Signals: CAD weakens, WTI tests $50.00 while markets digest recent moves
WTI crude oil has held $50.00 round number support in an initial test while the Germany 30 continues to test the 12,000 round number. For the most part, markets have been in consolidation mode, digesting big moves made earlier in the week like GBP’s big rally. CAD, continues to retreat with USDCAD bumping up against 1.3500.
North American and European Indices
US 30 remains under distribution drifting down into the 20,420 to 20,450 area trading within a falling channel still well below its 50-day average. RSI holding under 50 confirms downward momentum. Next potential support near 20,270 a 23% retracement of the previous uptrend.
US SPX 500 has paused for a rest near 2,340 near the middle of a 2,325 to 2,360 trading range. Lower highs in the index indicate continuing distribution as a bearish descending triangle continues to form.
US NDAQ 100 continues to attract support above 5,400. The index has bounced up toward 5,418 while RSI bouncing off 50 signals momentum turning back upward. This could be the right shoulder of a head and shoulders top forming. The index would need to clear 5,440 to reject that notion.
UK 100 has stabilized near 7,100 trading between 7,090 and 7,120 while working off an oversold RSI. It remains in a downtrend having completed a head and shoulders top earlier this week with next potential support near the 7,000 round number.
Germany 30 is still hanging around the 12,000 round number and its 50-day average. The index is trading between 11,935 and 12,045 in what looks like a rest stop within an emerging downtrend. Next downside support possible near 11,900 then 11,815 a 23% retracement level with next resistance near 12,100.
Crude Oil WTI successfully tested $50.00 support and has bounced a bit but it doesn’t appear to be out of the woods yet. Resistance has fallen toward $51.00 and the price has dropped back toward $50.60 while RSI remaining below 50 indicates downward pressure increasing. Next support on a breakdown possible near $49.50.
US Dollar Index has stabilized in the 99.30 to 99.60 area but it remains in a downswing with the index stuck below 100.00 and the RSI still trending downward. Next potential support appears near 99.00 then 98.65.
USDJPY is holding above 108.00 while working off an oversold RSI. So far, its trading bounce appears to be contained by a Fibonacci cluster in the 109.00 to 109.25 area.
EURUSD was unable to overcome resistance near $1.0775 and has drifted back toward $1.0740. So far, however, it has held above support in the $1.0700 to $1.0720 area near a round number and Fibonacci level. RSI above 50 and rising indicates underlying upward momentum is still increasing.
GBPUSD continues to consolidate its massive breakout rally in the $1.2770 to $1.2860 range, recently trading near $1.2810. It’s trading well above its $1.2700 breakout point while facing resistance near $1.2900 then $1.3000.
USDCAD is bumping up against $1.3500 as it continues to rally with support rising toward $1.3460. Next potential resistance at the December high closer to $1.3600. Rising RSI confirms increasing upward momentum.
CADUSD remains under pressure, falling to test $0.7410, with next potential support near $0.78380 both Fibonacci levels. RSI under 50 and falling indicates increasing downward momentum. Initial resistance falls toward $0.7430 from $0.7465.