Pre-Market: US Stocks Still Grinding Higher but Something is Fishy

The short covering and buy-the-dip rally that resumed after a few days of downward drift in US equities continued during the Asian session today, as Chinese markets continued to recover following last week’s emergency moves by the government.

Stocks are set to open notably higher, but the divergences with the main international indices just got even stronger, helped by the early dip in the USD that weighed on European equities. The risk-on assets that have been reliably leading markets since the volatility-surge three weeks ago are flashing red too, and we remain defensive here, despite the impressive recovery.

DAX Index, 4-Hour Chart Analysis

As the Dollar and Treasury yields remain in the center of attention, we expect a jump in trading activity after Mario Draghi’s speech before the opening bell, while the US New Home Sales data could also spark volatility later on.

DOW 30 Futures, 4-Hour Chart Analysis

The Dow is trading right at a key technical level, while the Nasdaq continues to lead the market higher, so a very interesting session could be ahead. The tech benchmark is very close to its prior all-time high, flirting with the 7000 level this morning.

Forex Markets and Commodities Mixed

USD/JPY, 4-Hour Chart Analysis

The strength in Gold and the Japanese Yen could be concerning for bulls here, with the precious metal continuing its consolidation below the recent rally high, while the primary safe-haven currency is still near its two-year high against the Greenback, despite the rally in stocks.

USD/CAD, 4-Hour Chart Analysis

Oil is drifting lower in pre-market trading after Friday’s advance, and that weighs on commodity-related currencies which are still under strong technical pressure as well. Traders should monitor the Aussie and the Canadian Dollar closely for further signs of weakness, while a drop below 1.2250 in the EUR/USD would also be a bearish sign.

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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.