Stock markets are off to a slow start to the week. US indices have been trading flat, European indices have started to retreat and Asia Pacific indices were mixed. Chinese economic data out over the weekend was disappointing and offset the positive surprises out of the US last week. This has taken some of the wind out of bulls’ sails and suggests that this could be a week of consolidation and retrenchment in many stock markets.
Commodity markets, however, remain active, particularly in the energy sector. The stronger US economy relative to China and Europe can be seen in the oil market today with UK crude breaking down and US crude holding steady, narrowing the spread. Trading also highlights the importance of political stability in the Middle East in pricing to the spread. Sabre rattling by North Korea (certainly not an oil exporter) appears to have had no impact on pricing at all compared to what would happen if an oil producing Gulf nation such as Iran made the same kind of threats.
Seasonal trends in energy markets also appear to be reasserting themselves. With last week’s big US storm having blown out to sea, natural gas traders have turned to face the upcoming end of home heating season. On the other hand, gasoline is rallying today as traders anticipate the approach of summer driving season. The continued rally up off of trend support suggests that the seasonal switchover imbalance that knocked gasoline back a couple of weeks ago has likely been all sopped up by now.
To no surprise really, copper remains weak underscoring its sensitivity to the weaker than expected Chinese economy.
Currency market action has been relatively subdued today as major pairs consolidate last week’s moves. There has been some interesting action in the UK today with Sterling getting pounded down to another new low on trend below $1.4900. Meanwhile, the FTSE is the only major European index posting a gain on the day. This suggests that some may be starting to speculate that the Bank of England may need to resume stimulus at some point. Perhaps meeting minutes due out on the 20th may shed more light on this.
Fitch Ratings downgraded Italy on Friday to BBB+ from A- with a negative outlook, blaming increased political uncertainty following last month’s election.
Significant economic announcements released over the weekend include:
China consumer prices 3.2% vs street 3.0% vs previous 2.0%
China producer prices (1.6%) vs street (1.5%) vs previous (1.6%)
China industrial production 9.9% vs street 10.6% vs previous 10.0%
China retail sales 12.3% vs street 15.2% no change expected.
China new yuan loans 620B vs street 700B vs previous 1,070B
China M1 money supply 9.5% vs street 12.3% vs previous 15.3%
Greece GDP (5.7%) vs street (6.0%)
Germany trade balance €13.7B vs street €14.4B vs previous €12.0B
France industrial production (3.5%) vs street (2.7%)
France manufacturing prodn (4.5%) vs street (3.4%)
Italy Q4 GDP update (2.8%) vs street (2.7%)
Japan machine orders (9.7%) vs street (1.7%)
India exports 4.2% vs previous 0.8%
India imports 2.6% vs previous 6.1%
There are no major announcements in the US or Canada today.
North American indices
US30 is starting to stall near 14,400. RSI near overbought and rolling over suggests it may be due for consolidation or a correction. Next support in a pullback appears near 14,310 then 14,250 and 14,100.
SPX500 is holding near 1,550, slightly below its all-time closing high of 1,565. It’s also sitting on the high end of a megaphone top while a negative RSI divergence continues to build. Support in a correction appears near 1,530-35 then 1,495-1,505.
NDAQ100is sitting on 2,800, maintaining support above its 2,780 breakout point. Next resistance appears near a measured 2,860 followed by a prior high near 2,880.
US SmallCap 2000 is holding above its 935 breakout point, indicating continued support. Initial resistance may appear near 940 followed by a measured 975 on trend.
Canada60 is still stuck in its 725 to 745 trading channel and may have completed a double top on Friday.
UK100 keeps creeping higher, currently testing 6,500 with next measured resistance on trend near 6,560 and initial support near 6,460.
Germany30 failed to hold above 8,000 on its first try and appears to be stalling. There remains a risk of a correction back toward 7,880 a breakout point but it remains in an uptrend with resistance near a measured 8,090 then 8,125 on trend.
France40 is consolidating Friday’s breakout, testing 3,800 as new support with upside measured resistance near the big 4,000.
Italy40 has bounced up off of 16,000 psychological support keeping its recovery trend intact. Upside resistance appears near 13,260 then 16,360.
Spain35 faltered near 8,650 and has dropped back in a normal correction to ease an overbought RSI. It remains in an uptrend with support moving up toward 8,480 and key resistance near 8,770.
Copper is breaking down today, completing a symmetrical consolidation triangle. Next downside support levels on trend appear near $3.40 then $3.25-$3.30 with initial resistance near $3.52 then $3.58.
US crude is sitting right on $91.50 trying to decide whether to break out or resume its downtrend. Next resistance near $93.00 and $94.00 with next support near $90.75 and $89.25.
UK crude is clinging to $110.00 but still appears vulnerable with next support near $109.50 then $107.00 and resistance near $112.00 then $113.50.
Gasoline is roaring back to life, keeping the momentum going after Friday’s retaking of $3.00. Next upside resistance on trend appears near $3.12, $3.20 and $3.40.
Natural Gas was unable to break shoulder resistance near $3.65 and has started to turn lower again. Next support appears near $3.40 then the $3.20 neckline of an emerging H&S top.
FX this morning
Gold is bouncing around between $1,550 and $1,580 and still would have a lot of work to do to call off its current downtrend. Next support appears near $1,525, the bottom of a massive descending triangle then $1,475.
Silver continues to bounce around between $28.25 and $29.50. With RSI stalling near 40, this increasingly appears more like a consolidation within a downtrend then the start of a base. Next support on a breakdown appears near $27.50.
USDCAD is holding under $1.0300 while RSI rolls back under 70 from overbought, suggesting that momentum has started to turn downward. Initial support may appear near $1.0240 then $1.0200 and $1.0160 with resistance near $1.3040.
EURUSD keeps hanging around $1.3000 as support strengthens near $1.2960. It still needs to break $1.3150 to call off its current downtrend.
GBPUSD remains under distribution, breaking $1.4900 today. $1.5000 increasingly appears to have become a new resistance hurdle with next key downside support near $1.4775 and $1.4525.