Dow holds 20,000 as stocks consolidate gains

This article was last updated on April 16, 2022

Canada: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…

Market Insights

Dow holds 20,000 as stocks consolidate gains

Yesterday’s big rally that saw the Dow clear 20,00 and the S&P500 reach a new alI-time high continued through Asia Pacific trading that saw the Nikkei soar 1.8% and the Hang Seng gain 1.4% heading into the Lunar New Year holiday.  As we lap around to European and North American trading markets have flattened out to digest this week’s action and await the next round of news. The FTSE is flat while the Dax is up 0.5% and US index futures are up 0.2%.

It’s looking to be another big day for earnings reports with Caterpillar headlining the morning round while Google, Microsoft and Intel all report after the close.  In Canada, Methanex posted a huge earnings beat overnight while this morning Potash has disappointed on both earnings and guidance.

In the US, Speaker of the House Paul Ryan outlined the Republicans agenda for Congress with plans to focus on repealing and replacing parts of Obamacare first, then tax reform by August. Ryan would reportedly prefer to address immigration in the fall but President Trump has been trying to get that addressed sooner. The timing could be important for markets because the longer it takes Congress to approve infrastructure spending the longer it will take to reach corporate earnings. With infrastructure stocks soaring right now, there is a growing risk that some stocks may be getting caught up in the hype and ahead of their short to medium term prospects.  

Brexit remains in focus as well with legislation published today, a white paper due shortly and UK PM May scheduled to meet President Trump tomorrow. UK GDP exceeded expectations with US GDP due Friday.

Currency trading has seen the US Dollar rebound a bit causing other currencies to give back some of their gains. After defying gravity for a day, JPY has been knocked back more than others with defensive plays still under pressure and gold trading below $1,200 again. Commodities have been relatively steady overnight with Australia closed for a holiday. Natural Gas, a more North American commodity has been most active rallying 2.5% ahead of today’s storage report.

Chart Signals

Chart Signals: Mixed technical signals as indices digest recent breakouts and USD stabilizes

The Dow continues to hold above 20,000 but momentum indicators suggest recent rallies in the Dax, SPX and NDAQ may be nearing exhaustion and corrections possible. The USD is showing signs of bottoming out with GBP and EUR rolling over. Defensive currencies remain under pressure with gold and JPY breaking down today.

North American and European Indices

US 30 rallied up toward 20,130 before running into resistance and has since drifted back toward 20,090 in normal backing and filling. The index remains above its 20,000 breakout point which could be retested. Next measured tests near 20,150 then 20,300.

US SPX 500 is testing 2,300 trading between 2,296 and 2,304 with next resistance near a measured 2,312. The recent 2,282 breakout point has become support confirming the breakout but RSI overbought and possibly forming a H&S right shoulder suggests momentum may be near a top.

US NDAQ 100 popped up toward 5,170 and has since dropped back under 5,160 to where it started the day setting up a potential shooting star candle. With RSI getting really overbought the recent rally may be getting overextended for now and a correction possible, perhaps back to retest the recent 5,100 breakout point or 5,070. 

UK 100 remains stuck below 7,200 but the RSI holding 50 and a small ascending triangle base forming suggests the recent correction may be over for now. Initial resistance on a rebound possible near 7,262 with next downside support near 7,120 then 7,100

Germany 30 continues to climb, confirming its breakout over 10,700 with a rally up into the 11,850 to 11,890 area. Next measured resistance possible near 11,955 followed by the 12,000 round number. RSI getting overbought again and a negative divergence suggests upward momentum could be peaking. 

Commodities

Gold is breaking down again today, the price has plunged toward $1,187 after retesting $1,200 as new lower resistance. RSI falling toward 50 indicates a bearish trend change pending. Next potential support between $1,172 a Fibonacci level and $1,178 the 50-day average. 

Crude Oil WTI continues to consolidate in a sideways trend between $50.40 and $54.20 with a symmetrical triangle forming and RSI trending sideways between 40 and 60. Recent trading between $52.20 and $52.50 with next resistance near $52.90 and next support near $51.75.

FX

US Dollar Index has popped up from 99.90 toward 100.50 in what looks like a bullish engulfing day so far. RSI holding 40 and starting to turn up suggests the recent slide may be ending and the underlying uptrend resuming. Initial resistance possible near 100.75 then 101.20 with next support possible near 99.70.

USDJPY continues to rebound within its 112.35 to 115.50 trading range, retaking 114.05 a Fibonacci level and advancing on 114.50 with next potential resistance at the 115.00 round number. RSI breaking a downtrend and testing 50 indicates an upturn in momentum pending.

EURUSD is starting to break down with both the pair and the RSI rolling over. The pair has dropped from near $1.0750 down through $1.0720 a Fibonacci level and on toward $1.0690 with next potential support near $1.0640.

EURGBP is holding 0.8460 Fibonacci support. Successfully retesting a recent low with RSI bottoming near 40 suggests its underlying uptrend remains intact The pair has regained 0.8500 with next rebound resistance possible in the 0.8600 to 0.8660 area.

GBPUSD is in retrenching mode after resistance held at $1.2686 a 23% retracement of its previous downtrend. The pair has dropped back toward $1.2570 with next support possible near the $1.2500 round number. RSI peaking near 60 suggests broader downtrend could be reasserting itself, but this could also be a correction within an emerging uptrend.

USDCAD has bounced up from $1.3080 toward $1.3130 in what looks like a normal upward correction of recent big declines. RSI finding support at a higher low near 40 suggests the bigger sideways trend may still be intact with next rebound resistance possible near $1.3155 then $1.3190.

CADUSD continues to struggle with $0.7675 resistance. The pair has tumbled back toward $0.7620 and a test of its 200-day average with next support possible near $0.7550 a Fibonacci level.

USDMXN found initial support at its 50-day average near 20.75 and has stabilised between there and 21.15. RSI under 50 indicates downward pressure still growing so this could be a pause within a bigger downtrend with next potential support near 20.55 then 20.00.