New highs for indices, oil plunges, nonfarm payrolls preview

It’s days like today that ‎show the power of markets to cut through the noise of world events. Every day people in the markets vote with their wallets not their mouths.

With al of the fire and brimstone coming from politicians, pundits and activists, one would think President Trump exiting the Paris Climate deal was the end of the world. Traders clearly think otherwise, however. The S&P 500 broke out to a new all-time high before the speech, The Dow broke out to a new all-time high during the speech, and after the speech the Nikkei and Dax staged breakouts as well.  Clearly traders see the news as either good for business or at least as the removal of a potential headwind from the economy.

Overnight, the Nikkei picked up on positive US momentum

Gaining 1.6% and breaking through the 20,000 barrier. This morning, the Dax is up 1.4% trading above12,800. The Dax may also be benefiting from a German election poll showing ‎Merkel’s conservative coalition with a big 39% to 25% lead over the Social Democrats.

The FTSE is up 0.3% with recent UK election polls showing a close race. Today Ipsos Mori showed the Conservatives at ‎45% down from 49% and Labour at 40% up from 34%. GBP is down slightly on the news with Cable still steady between $1.2800 and $1.2900.

Crude oil is getting hammered again. Despite another big drawdown in US inventories yesterday, WTI has plunged 2.5% overnight. It appears traders are concerned the Trump announcement could encourage increased fossil fuel production, depressing prices. In the long term, market forces may have a bigger impact (ie if the price drops too much exploration could slow again).

Today the focus turns back to employment with nonfarm payrolls coming out. USD is steady ahead of the news which could impact Fed ‎speculation on an interest rate hike this month. Yesterday’s stellar ADP payroll growth of 253K added to the hawkish case. At this point it would take a really poor, likely a negative number to knock the Fed off course from a June rate increase. I think we’ll see an increase of 225K above the street which is near 180K.

Today also features the last two Fed speakers before the pre-meeting blackout starts next week. Regional Fed presidents Kaplan and Harker are expected to continue to point toward a potential rate increase this month, and perhaps one more by the end of the year. September remains unlikely with the potential for a big budget battle and government shutdown.

Chart Signals: Breakouts and New highs for major indices while Oil plunges again

The big story today is big breakouts for US 30, US SPX and US NDAQ. Plus, Germany 30 has broken a downtrend and is testing key resistance. Meanwhile WTI remains under pressure diving into a new downleg.

North American and European Indices

US 30 is breaking out to a new all-time high today, clearing 21,130 to complete an ascending triangle and signal the start of a new upleg. RSI breaking out of a downtrend confirms upward momentum accelerating. Next resistance possible near 21,230 then a measured 21,330.

US SPX 500 continues to climb to new highs, building on Thursday’s big breakout over 2,420. Rising RSI confirms  increasing upward momentum. Next potential resistance near a measured 2,465. Support rises toward 2,430.

US NDAQ 100 is hitting new highs again today, building on its recent breakout over 5,800 trading up toward 5,840 with next resistance possible near a measured 5,875 then the 6,000 round number. RSI overbought but confirming increasing upward momentum for now. 

UK 100 reached a new high near 7,600 but has dropped back a big toward 7,565 in what could potentially become a bearish key reversal day. A negative RSI divergence suggests upward momentum may have peaked already.

Germany 30 is breaking out of a downtrend today, blasting through 12,700 and rallying to test the top of a 12,475 to 12,900 trading range. RSI confirms the upswing in momentum. The test of 12,900 could end in a breakout with next resistance near 13,000 then a measured 13,325, or a double top.

Commodities

Gold continues to consolidate recent gains between $1,256 as breakout point, Fibonacci level and 50-day average, and $1,270 with additional resistance possible near $1,280. RSI near 50 indicates sideways momentum.

WTI continues to trend downward. Resistance drops from $49.00 toward $47.90 and the price has nosedived down toward $47.10 with next potential support near $46.55 then $45.85. RSI under 50 and falling confirms increasing downward momentum.

FX

US Dollar Index is still stabilizing in the 96.75 to 97.65 range. RSI rising toward 50 indicates downward pressure easing and base building underway.

USDJPY is in an upswing at the momentum within a 110.60 to 112.15 trading range, with the pair clearing its 50-day average near 111.20. RSI remains below 50 indicating that so far this continues to be a normal consolidation within an ongoing downtrend.

EURUSD is holding steady near $1.1200 having completed what could become a double top near $1.1260. RSI falling away from 70 indicates upward momentum fading and a correction possible. Next potential support near $1.1160 then $1.1095 a 23% retracement of the recent advance.

EURGBP is consolidating its recent breakout from a downtrend over 0.8655 support, with initial resistance in place near 0.8755 and 0.8800.

GBPUSD is struggling with resistance at a lower high near $1.2910 and has dropped back toward $1.2850. It continues to attract support above its 50-day average near $1.2760 with more support possible near $1.2710 a previous breakout point. RSI bouncing around 50 indicates sideways momentum emerging.

USDCAD is turning back upward with the pair breaking out over the $1.3500 round number and its 50day average. RSI testing 50 where a breakout would confirm the upturn in momentum. Next potential resistance near $1.3570 a Fibonacci level then $1.3635.

CADUSD is breaking down today, taking out $0.7400 and its 50-day average to confirm the start of a new downleg with next potential support near $0.7350 and $0.7310. RSI slipping back under 50 signals a downturn in momentum.

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