5 Things To Watch Next Week + ChartBook

US-Chinese Talks Resume as Chinese Markets Re-Open

Shanghai Composite Index CFD, 4-Hour Chart Analysis

After one week of holidays Chinese markets will reopen on Monday, and there will be plenty of catalysts to digest after the hiatus. Last week, we saw some trendline breaks in some of the key risk assets following the post-Christmas surge, which was led by US stocks, but another downswing is not yet confirmed.

Chinese stocks have been relatively weak for a long time now, especially from a long-term perspective, with the slowing economic growth and the trade worries weighing on them, and although the PBOC is doing everything in its power to reignite growth, that didn’t help equities out of their bear market.

We will have a very busy week for Chinese assets, with the crucial Trade Balance and both the CPI and PPI indices coming out, while the trade talks with the US will also resume in Beijing. While this week, President Trump and White House adviser Larry Kudlow both made negative comments about the negotiations, causing some turmoil in financial markets, we expect some progress during this round, with the March 1 trade deadline, but in any case, the pressure on Chinese assets is unlikely to ease unless, the central banks stimulus attempts succeed.

Litecoin Leads Crypto Rally

LTC/USD, 4-Hour Chart Analysis

The cryptocurrency segment has experienced yet another rally attempt this week, and as it was the case last time around With Ripple, one coin, LTC triggered a broader spike higher in the market. Litecoin hit its highest level since November, topping the $44.50 level in the process, and thanks to the technical progress our trend model improved in the case of most of the majors, at least from a short-term perspective.

Once again, the fate of the rally attempt will be decided by the strength of the follow-through move in the segment, and although we saw new short-term highs on Sunday, but due to the relative weakness of Bitcoin and Ripple, we remain suspicious of the pop higher, especially in the light of the still hostile long-term technical setup.

That said, the coming week could see some fireworks in the market, and a short-term trend change and a more sustained rally could be ahead, but traders should still consider it a bear market rally, and only enter short-term positions with strict risk management rules even in the relatively stronger coins.

Dollar Continues Winning Streak?

Dollar Index, 4-Hour Chart Analysis

While the USD had been under pressure in the second half of January, mostly because of the broad risk rally and the Fed’s dovish shift, following the recent Fed meeting, the Greenback scored a 7-day winning streak, which is still intact after Friday’s session. With almost all global central banks now joining the cautious bandwagon, this week it was the RBA, the BOE, and the Reserve Bank of India, the relatively strong US economy and the relatively high interest rates continue to squeeze the reserve currency higher.

The Dollar Index (DXY) still faces stiff technical resistance just above the 97 level, coinciding with the support in the EUR/USD pair, but the long-term trend remains bullish, and we expect that trend to continue in the coming months. Investors should pay special attention to this week’s inflation-related US economic releases, since a higher-than-expected CPI reading could be the trigger for a break-out in light of the still stable US growth and the sharp global slowdown. A bearish shift in investor sentiment would also likely support the Dollar, even though the Yen could be back in focus, should volatility in stocks spike higher again.

Short-Term Top or Orderly Pullback in US Stocks?

S&P 500 Futures, 4-Hour Chart Analysis

While the German DAX, which has been leading the way for global stocks in recent months, seems to already have rolled over in earnest this week, the major US indices are still relatively strong following the historic short squeeze of January. That said, the benchmarks broke their rising short-term trendlines, and from a fundamental standpoint, it’s hard to point out the positive catalysts that could propel stocks even higher.

The data-dependant dovish shift by the Fed is unlikely to be enough in light of the bearish global trends, and the two-faced quarterly earnings season showed that profits could be headed south in the first quarter of 2019, even as the previous quarter still saw dynamic earnings growth in the face of the weakening global outlook.

All in all, short-term technicals are not terrible, but given the long-term pressures, a crucial short-term top might form, and the major indices could already be headed back towards the December lows. Should the key Chinese and European indices start to show strength, the immediate outlook could change but for now, bulls are facing very strong headwinds.

US Data Dump with Another Government Shutdown Looming

We will have a very busy week regarding economic releases, and besides the already mentioned US and Chinese indicators, the Great British Pound will likely be in focus. On Monday the British GDP, Manufacturing Production will likely steal the show, on Tuesday, the speeches by fed Chair Jerome Powell and BOE Governor Carney could move markets ahead of the real data dump.

Wednesday will see the release of the British CPI and PPI indices, together with the crucial US CPI report, while on Thursday, we will have the Japanese prelim GDP print, the Chinese Trade Balance, the prelim German GDP, the flash Eurozone GDP, and the US Retail Sales and PPI reports. The week will end with the Chinese CPI, British Retail Sales, and the prelim US UOM Consumer Sentiment Index, so the second half of the week could be very active across asset classes.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.

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