Technical Analyst, Saxo Bank
Summary: ASX200 in downtrend testing key support.
Hang Seng rejected at 20K. Trend reversal could unfold
China A50 in uptrend but could be caught in side ways range
S&P ASX 200 is currently testing the 0.382 retracement and 200 daily SMA around 7K. The Index is in a confirmed short-term downtrend. RSI showing negative sentiment indicates lower levels are likely. Next strong support at around 6,785 which is also around the 0.618 retracement of the September to December uptrend.
If ASX 200 closes above 7,167 it could indicate a trend reversal that could take the Index back to December highs possibly higher.
Hang Seng Index has now twice failed to close above 20K not even testing the resistance at 20,185. Divergence on RSI indicates exhaustion of the uptrend, and a correction or trend reversal could be seen.
A close back below the 200 SMA and below the lower rising trend line will indicate a correction is in the making, a close below 18,885 will confirm that scenario. A correction that could take Hang Seng down to the 0.382 retracement at around 18K where the 100 and 55 SMA will provide support.
If Hang Seng can manage to close above 20,185 the uptrend is likely to be extended.
FTSE China A50 future seems to be trading in a wide rising channel but struggling to close above the 200 daily SMA. The China A 50 future could be caught in a range be between 12,700 and 13,415 for some time and need a close below or above for direction. RSI showing positive sentiment indicates that the breakout direction will be to the upside. If RSI closes back above 60 that could be a good indicator for the bullish scenario to play out.
A close below 12,696 is likely to fuel a sell-off down to around 11,831. Support at around 12,500.
RSI divergence explained: When the price of an instrument is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and a weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.