Risk Sentiment Stabilises Following Monday's Sell-Off
Benchmark global equities indices are seeing better buying on Tuesday amidst a mild recovery in risk appetite. There is still a great deal of caution around the omicron news flow. However, for now it seems that sentiment has improved since the heavy selling we saw across the European open yesterday. In the UK, the PM avoided adding fresh COVID restrictions ahead of Christmas, which has allowed for better trading in UK assets. While further restrictions have not been ruled out following the holiday, there is at least a sense of relief at having avoided restrictions ahead of the festive period.
Still despite, the sight rebound seen so far today, equities remain down from recent highs and the near-term outlook remains vulnerable to fresh downside shocks. In Europe, the situation remains precarious with increasing numbers of countries adding fresh restrictions and, in some cases, lockdowns. New Zealand announced this week that it will delay its planned border reopening in the New Year while it assesses the risk from Omicron. In the US, plans to return workers to the office have been postponed in many regions as a result of omicron, once again underscoring the uncertainty around the new variant.
Looking ahead this week, traders will be keen to receive the latest US core PCE figure on Thursday. A strong reading will no doubt give the Dollar a boost, weighing on equities as a result of bolstered Fed tightening expectations. However, given the holiday In the US and Europe on Friday, trading is expected to remain light.
Technical Views
DAX
The DAX remains below the broken rising trend line for now, following the rebound off the 15078.83 level. Between there and 14791.27 is a major support region for the DAX. While price holds above here, the longer-term focus is on a continuation higher. Below there marks a bearish shift and will turn focus towards the 14170.79 level next.
S&P 500
The S&P has turned lower from the latest test of the 4692.75 level. For now, price is being supported by the rising channel low, just ahead of the 4475.25 level. While above here, the focus is on an eventual break higher with 4937.50 the next big upside marker to note. To the downside, a break of 4475.25 turns the focus to 4295.75 next.
FTSE
The correction lower from 7362.6 saw the FTSE breaking below the 7241 level and testing below 7137 also, where buyers stepped back in. Price has since been driven sharply back above the 724 level and, with both MACD and RSI turned higher, the focus is now once again on further upside with a break of 7362.6 targeting 7444.3 next.
NIKKEI
For now, the NIKKEI continues to trade around the midpoint of the large contracting triangle pattern, still straddling the 28356.6 level. With indicators mostly flat here and the market having lost momentum, further range action looks likely. The key levels to watch for an upside or downside break, respectively, are 29464.9 and 27422.9.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.