5 Things To Watch Next Week + ChartBook

Crucial Brexit Vote On Tuesday

GBP/USD, 4-Hour Chart Analysis

The all-important vote in the British Parliament got even more likely to fail this week, since Theresa May lost several battles already, and the math just doesn’t work for the Prime Minister, for now. Risk assets sold off sharply towards the end of the week, in part of the Brexit related fears and the Great British Pound is hovering near key technical levels ahead of the decision.

While the GBP avoided a major breakdown against the US Dollar so far, holding on near the 1.27 level, the currency remains relatively weak, and should the uncertain situation persist, the pair will likely move below the 1.25 level soon. The broader downtrend is clearly intact in the GBP/USD, and technicals support a bearish move too, following the more than three-month-long consolidation.

Stock Markets Breaking Down?

Dow 30 Futures, 4-Hour Chart Analysis

We had another crazy week on Wall to a lesser extent the global stock markets, as the swift changes in the US-Chinese relations caused wild swings in equities across the globe. While the real reasons behind the broad bearish shift in risk assets are the quantitative tightening by the key central banks and the global economic slowdown, trade headlines continue to dominate trading, together with the large moves in yields.

Even as yields fell sharply last week, that wasn’t enough to stabilize equities, and several key benchmarks hit new bear market or deep correction lows. The major US indices are trading very close to their October lows, and on a negative note the Russell 2000, the main small cap index already closed on its lowest level since February. While seasonality still favors a bounce in stocks, we still view all rallies as selling opportunities, and we expect the bearish shift to be persistent in risk assets.

Gold Finally Turning Bullish?

Gold Futures, 4-Hour Chart Analysis

We have been favoring gold as a key long-term investment for a long time now, and we continue to think that it should be a key component of a long-term portfolio, and last week, finally technicals seemed to be shifting in the precious metal’s market as well. Should gold hold above the $1250 level, a short-term trend change would be confirmed and that could open up the way to the yearly highs just above $1350.

The bearish shift in risk assets, the collapsing yields, and the Dollar’s sideways drift all helped gold in the recent period, but it’s important to note, that compared to the other major currencies, the metal already acted in a bullish fashion ever since August, and we expect that trend to continue in the coming months.

Dead Cat Bounce in Crude Oil?


WTI Crude Oil, 4-Hour Chart Analysis

The OPEC countries and Russia agreed on a larger than expected 1.2 million barrel/day production cut this week, and following a tectonic shift in the market of crude oil in the past two months, we only saw a weak intraday bounce in the crucial commodity.

The WTI contract is still only slightly above the $50 per barrel price level, and with the US turning into a net exporter for the first time in 75 years last week, thanks to the record production levels, fundamentals remain weak, even as the commodity is still severely oversold. The slowing global growth and the re-escalation in the US-Chinese relations also weigh heavily on the price of oil, and given the broad bearish technical shift the long-term trend will likely remain negative.

Inflation Worries Likely Taking a Back Seat

As for economic releases, the British and the US indicators will likely steal the show next week. The British GDP and Manufacturing Production will be coming out on Monday, while the British Employment Report is scheduled for Tuesday, together with the German ZEW Sentiment and the US Producer Price Index (PPI).

Wednesday will be highlighted by the US Consumer Price Index (CPI) and given the current consensus of no rate hikes in 2019, barring a huge surprise, the measure will likely have a smaller-than-usual impact on markets. The ECB’ s monetary meeting will be held on Thursday, and following the recent turmoil in financial markets, together with the clear economic slowdown, it’s hard to imagine a hawkish shift in the central bank’s stance.

The week will end with the US Retail Sales Report and the European flash PMIs, and it will be interesting to see how Europe faired in November following three months of disappointing releases.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 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

Shanghai Composite Index CFD, 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

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

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.