Pre-Market Analysis And Chartbook: Stocks Extend Gains as Sentiment Improves

Wednesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,722 1.21%
DAX 30 11,477 1.68%
WTI Crude Oil 65.97 -0.56%
GOLD 1,214 -0.85%
Bitcoin 6,253 -0.26%
EUR/USD 1.1318 -0.23%

The relative calm within the most oversold assets continues in financial markets, and stock markets are broadly higher today, as yesterday’s late-day risk-on shift remained dominant so far today. The markets that have been leading the way lower, such as the Shanghai Composite, the German DAX, and the US small-cap Russell 2000 are all trading in corrective patterns as the selling got exhausted, at least from a short-term perspective.

 DAX 30 Index CFD, 4-Hour Chart Analysis

The DAX got back to the 11,500 level today, and although the benchmark field to clear the resistance zone, so far, the positive momentum divergence could lead to a rally up to 11,800 or even the long-term breakdown level at 12,000. The other major European indexes are also meaningfully higher today, despite a string of weak economic releases from the Old Continent.

 German Retail Sales, and the Italian Unemployment Rate and CPI all missed the consensus estimates, and even though the Eurozone CPI was in line with expectations, the Euro got under pressure especially after the US ADP Employment Report.

Nasdaq 100 Futures, 4-Hour Chart Analysis

Non-farm payrolls rose much more than expected according to the private firm, with US economy adding 227,000 new jobs, compared to the 188,000 expected. Wall Street opened clearly in the green thanks to the quiet Asian and European sessions, with the Nasdaq leading the way higher, boosted by the more than 5% post-earnings surge of Facebook (FB).

The Dow and the S&P 500 are also sporting nice gains, together with small-caps, but the broader technicals continue to be bearish, even as further short-term gains are likely, given the oversold momentum readings across the board.

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

On a negative note, emerging market equities continue to struggle, as capital flight is still apparent in the segment even as the most vulnerable currencies are still strong, despite the broad rally in the USD. The grueling downtrend in the segment will likely continue on the coming weeks, especially as funding conditions just got worse since the August panic.

Forex Markets Shrug Off Bank of Japan Meeting as All Eyes Still on the VIX

The BOJ didn’t surprise the market, striking a much more dovish tone in the light of the recent turmoil in financial markets, as we expected. The Yen remained weak after the central bank’s announcement as safe-haven flows also reversed somewhat, confirmed also by the weakness in gold.

The Dollar index is now trading at its highest level since late 2016, and despite the recent volatility, the broader trends in the forex market are intact.

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

The Volatility Index (VIX) opened near the 22 level today after forming a lower high below the initial top at 30 this week. The regime change that we have been tracking is clearly intact, and although a dip below the line-in-the-sand 20 level is likely during the current bounce, we don’t expect the fear-gauge to get back to its pre-correction levels below 15. The US midterms next Tuesday offers a possible correction-top, depending on the outcome, but until then a choppy consolidation period could be head.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 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

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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