Exhausted stocks slide as traders go defensive

This article was last updated on April 16, 2022

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Stock markets around the world continue their move into April in ‎a slump. US index futures are down 0.2% while the Nikkei fell 0.9%. The Dax is flat while the FTSE is the only major market in the green, rising 0.3%. Yesterday’s mixed manufacturing PMI and soft sales for traditional automakers have been dragging on sentiment to start the month.

Energy and metal prices are on the rebound today with WTI crude oil up 0.35% and holding $50, copper up 0.25%, gold up 0.5% and Silver up 1.0%. Despite this tailwind, resource currencies are struggling with USDCAD back above $1.3400 and NZDUSD back under $0.7000. 

Considering the resource countries like Canada and Norway were among the league leaders in manufacturing PMI, resource country weakness seems odd. With the Japanese Yen up today as well, it seems to me that we’re seeing profit-taking in risk markets between major developments and some of that money is wandering back in to defensive havens.

Today the spotlight for news is on trade and manufacturing. Trade balances for the US and Canada are at 830 am EDT which could attract more attention than usual in the current political climate with President Trump looking to renegotiate NAFTA. Australia’s trade surplus jumped to $3.5B in February from $1.5B a month earlier which could bode well for Canada also a big resource exporter. 

US factory orders and a durables update may also attract attention. Tomorrow brings service PMI reports and ADP Payrolls. The health care sector could be active if reports of a new Obamacare reform proposal come to fruition.

Chart Signals: Gold breaks out as indices break down

There’s a lot of technical action on a day of limited fundamental news. Gold and the Yen are breaking out to the upside, while CAD and GDP are breaking down as capital moves back into defensive havens. Major indices are showing more signs of rolling over with the Germany 30 having completed a significant technical top and the US 30 testing its 50-day average. 

North American and European Indices

US 30 is testing its 50-day average near 20,575. It has been trading above this average since the election results in November and a failure would suggest that the Trump trade is over and a correction starting. Next potential support near 20,300 a 23% retracement of the post-election rally. RSI under 50 and falling indicates downward pressure increasing. 

US SPX 500 continues to decline, falling from 2,362 toward 2,350. Lower highs in both the index and its RSI plus the RSI falling back under 50 indicate increasing distribution. Next potential support a the 50-day average near 2,342 then 2,313 a 23% Fibonacci retracement of the previous uptrend.

US NDAQ 100 is starting to roll over, falling from 5,450 toward 5,410. A break under 5,400 would signal a downturn that could test the 50-day average near 5,300 or a 23% retracement near 5,250. A negative divergence and falling RSI signals upward momentum weakening and a downturn pending.

UK 100 is testing 7,300 and its 50-day average near 7,290 as it continues to form a head and shoulders top falling away from right shoulder resistance and confirming it has broken an uptrend line. Neckline support in place near 7,260. RSI under 50 confirms momentum turning downward.

Germany 30 appears to have peaked following yesterday’s bearish key reversal day with further declines. Resistance drops toward 12,280 from 12,375 with the index falling toward 12,230 and next potential support near 12,165 its recent breakout point.

Commodities

Gold is accelerating upward again, breaking through $1,255 and testing its recent intraday high near $1.262 with next potential resistance near $1,278 a Fibonacci level. RSI above 50 and rising indicates upward momentum increasing. Support moves up toward $1.255 from $1,250.

Crude Oil WTI is levelling off near the $50.00 level trading between $49.50 and $50.40. RSI sitting on 50 confirms a sideways range emerging.

FX

US Dollar Index continues to work its way back upward, building on its recent breakout over 100.00. The index has regained 100.50 with net potential resistance near 101.00 then 101.60 and 102.00. RSI holding 50 and rising indicates renewed accumulation. 

USDJPY has resumed its primary downtrend, dropping from near 111.40 toward 110.40 with next potential support near the 110.00 round number then a Fibonacci cluster near 109.20. Falling RSI confirms accelerating downward momentum.

EURUSD has stabilized in the $1.0640 to $1.0680 range near its 50-day average digesting its recent tumble down from $1.0900. RSI stuck under 50 suggests this could be a pause within a bigger downtrend with next potential support near $1.0585 a Fibonacci level them $1.0500.

EURGBP continues to bounce up off of 0.8500 support to trade near 0.8560 but so far, gains have been contained by its moving averages (which recently completed a Death Cross) near 0.8590. RSI still under 50 suggests this may be a dead cat bounce within a broader retreat.

GBPUSD has dropped back under $1.2500 falling form $1.2530 toward $1.2430, but it still remains well above $1.2355 support. RSI testing 50 which may confirm the uptrend or signal a downturn.

USDCAD is turning back upward, breaking out over $1.3400 and advancing on $1.3445 with next potential resistance near $1.3500 then $1.3600. RSI rallying up off 50 confirms upward momentum accelerating again.

CADUSD is under pressure today with resistance falling form $0.7500 toward $0.7470 and the pair falling toward $0.7440 with next potential tests near $0.7410 then $0.7380 both Fibonacci levels. RSI turning down from 50 signals downward pressure increasing again.