5 Things To Watch Next Week + ChartBook

Third Time is the Charm for the Dollar?

Dollar Index, 4-Hour Chart Analysis

The Greenback had a nervous week, as the midterms and the Fed meeting were both high-risk events for the reserve currency. The outcome of the elections was in line with expectations, and although the political gridlock is slightly negative for the Dollar, given the recent economic trends and the widening rate differential with its most important peers, the USD’s long-term rising trend still seems safe.

From a technical perspective, the Dollar index looks ready to test its recent highs just above 97, and while a break-out is not guaranteed, Dollar shorts are being squeezed and another leg higher would cause a lot of pain in the investment community.

A move above 97 could set up a rally up to 100, with a possible test of the 2016 highs. A trade deal with China followed by a strong risk rally is the biggest risk here for Dollar bulls, but barring an agreement, the rising trend could continue in the coming months.

Oil Ready to Bounce?

 WTI Crude Oil, 4-Hour Chart Analysis

Oil completed the drop below the $60 per barrel level in the WTI contract that we have been expecting, despite the two-week rally in equities. The Dollar strength towards the end of the week gave another boost to the selloff, and the crucial commodity reached a deeply oversold stance with regards to momentum.

Oil entered a bear market recently, but given the stretched technicals, a short-covering rally will likely start soon, burning the late shorts and resetting investor sentiment. Obvious targets for the likely move are the $63 and $65 resistance levels, while the next major support zone is found around the $54 per barrel price level.

The Perfect Short or a Post-Election Santa Claus Rally?

Nasdaq 100 Futures, 4-Hour Chart Analysis

Should the US market follow China and most of the emerging markets into a bear market the current setup is what technical analysts call the perfect short, or in other words the first complex correction in the developing downtrend. There are still contradicting technical signs on Wall Street, but most of the trends point to at least a lengthy healing process even if the longest bear market in history will resurrect once more.

Besides the bearish worldwide trends, peaking earnings, the persistent weakness in small-caps, the horrible market internals, and the Nasdaq’s lackluster performance are the most important negatives here, while the still robust economic growth, the baseline election outcome, and the possibility of a Chinese trade deal could be considered bullish.

Also, the Dow and the S&P 500 got relatively close to their all-time highs during the recent rally, but Friday’s decline could already morph into something bigger next week.

A Chinese Deal Could Define the Coming Months

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Despite a brief period of relative strength and the trade deal hope the Chinese stock market is still nothing short of disastrous from a technical standpoint, and the Shanghai Composite is in a clear long-term downtrend. The bounce that started almost a month ago failed to carry the index back above the key resistance levels, and there is no technical evidence of a looming trend change.

The Chinese Yuan also gave back its initial gains, and now, the weak macro trends and the bearish technicals are back in charge. That said, an agreement between the two countries could cause a major short-covering rally, even if it will likely not be enough to stop the bear market which is likely primarily caused by the end of the historic credit cycle in the country.

Employment Reports, Retail Sales, and CPIs Highlight Economic Calendar

We will have a busy week with regards to economic releases, with especially the Great British Pound, the Dollar, and the Australian Dollar being in focus. The US CPI (Wednesday) and Retail Sales (Thursday) reports will be closely watched globally, and after the slightly hawkish Fed statement, risk assets could be in pressure should the CPI beat the estimates similarly to the PPI.

Analysts expect a price increase of 0.3%, with the core measure of 0.2% while Retails Sales are forecast to surge by 0.6% and 0.5% respectively. In Europe, the British Employment Report and the German ZEW index will come out on Tuesday, while the British CPI and the flash Eurozone GDP are scheduled for Wednesday, with the British Retail Sales coming out on Thursday.

ChartBook

Major Stock Indices

S&P 500 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

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.