Asian Open: ASX 200 and CRB Commodity Index Eye New Highs

Sentiment has continued to improve which has provided a tailwind for commodities in general, and the CRB index and ASX 200 show the potential to break to new highs.

Uptrend 1

Asian Futures:

  • Australia's ASX 200 futures are up 2 points (0.03%), the cash market is currently estimated to open at 7,388.40
  • Japan's Nikkei 225 futures are up 350 points (1.27%), the cash market is currently estimated to open at 27,898.00
  • Hong Kong's Hang Seng futures are down -57 points (-0.21%), the cash market is currently estimated to open at 27,666.84

UK and Europe:

  • UK's FTSE 100 index fell -29.98 points (-0.43%) to close at 6,968.30
  • Europe's  Euro STOXX 50  index rose 32.37 points (0.8%) to close at 4,059.05
  • Germany's DAX  index rose 92.04 points (0.6%) to close at 15,514.54
  • France's CAC 40 index rose 17.11 points (0.27%) to close at 6,481.59

Thursday US Close:

  • The Dow Jones Industrial rose 25.35 points (0.07%) to close at 34,823.35
  • The S&P 500 index rose 8.79 points (0.21%) to close at 4,367.48
  • The Nasdaq 100 index rose 97.534 points (0.66%) to close at 14,940.17


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US Indices erase a wobbly start:

US indices gapped lower at the open yesterday as US jobless claims unexpectedly rose to a two-month high. However, whilst the rise to 419k from 368k previously made for a less desirable start to the session the 4-week average (trend) remains relatively flat, so perhaps this is just a bump in the road. US home sales also rose helping to soften the blow. US indices then regained their footing as earnings posted strong results to shake off earlier losses.

The Nasdaq 100 was the strongest index, rising 0.66% to a six-day high just -61 points from its record high during its third bullish session. Computer stocks were up 0.74% and FAANGS rose 0.46%.

The S&P 500 posted a 0.92% gain led by technology and consumer discretionary stocks. 6 of its 11 sectors rose, with healthcare and energy stocks falling around -1.1%.

Small caps bucked the trend with the Russell 2000 falling -1.55% after finding resistance at its 20-day eMA and forming a two-bar bearish reversal (Dark Cloud Cover). R2K value stocks underperformed with a -1.92% fall and the S&P 600 small cap index fell -2.1%.


The ASX 200 has been playing nicely without our analysis this week, rising to the top of its sideways range in line with yesterday’s bias. Given the strong rebound over the past two sessions (effectively covering the majority of its one-month range) momentum has clearly accelerated in line with the bullish trend since rising from trend support and the 50-day eMA.

A break above 7406.20 assumes bullish continuation, and a daily/weekly close above that level today only adds to the bullish case. Ideally, we’d like to see 7337 hold as support if prices move initially lower.


ASX 200 Market Internals:


ASX 200: 7386.4 (1.06%), 22 July 2021

  • Materials (2.19%) was the strongest sector and Healthcare (-0.28%) was the weakest
  • 10 out of the 11 sectors closed higher
  • 5 out of the 11 sectors outperformed the index
  • 151 (75.50%) stocks advanced, 39 (19.50%) stocks declined
  • 70% of stocks closed above their 200-day average
  • 59.5% of stocks closed above their 50-day average
  • 55% of stocks closed above their 20-day average

Outperformers:

  • + 10.1%   -  Pilbara Minerals Ltd  (PLS.AX) 
  • + 9.91%   -  Orocobre Ltd  (ORE.AX) 
  • + 9.01%   -  Lynas Rare Earths Ltd  (LYC.AX) 

Underperformers:

  • -7.78%   -  Zip Co Ltd  (Z1P.AX) 
  • -3.11%   -  Kogan.com Ltd  (KGN.AX) 
  • -1.69%   -  Omni Bridgeway Ltd  (OBL.AX) 


Forex: ECB as dovish (yet no more than) expected

In what seems like a small while, GBP was the strongest major yesterday as risk appetite continued to improve with the Australian dollar coming in a close second place. The Japanese yen was the weakest, allowing it to rise to a three-day high.

The US dollar index (DXY) effectively closed flat after recouping earlier losses from its five-day low, printing a potential bullish pinbar above its 10-day eMA. If bullish momentum can rise from here then it brings a bullish channel into play which could target the March highs.

USD/JPY was a touch lower at -0.15% but a potential bull-flag is forming on the four-hour chart, which would be confirmed with a break above Wednesday’s high and bring 110.70 into focus.

The ECB (European Central Bank) was as dovish as expected, yet no more than expected, allowing euro bears to offload and send it initially higher against the US dollar. They effectively reiterated their view that inflation would be transitory so, whilst rates are expected to rise above 2%, do not expect an interest rate hike in response as higher inflation is forecast to be transitory.

EUR/AUD fell to a three-day low and traded slightly beneath the 1.5950 – 1.5980 support zone and invalidated trend support with a relatively high volatility candle, so this is now on the backburner. EUR/JPY failed to hold onto an earlier break high and fell to 129.60 despite a weaker yen.


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Commodities: CRB sits just below 4-year high

The CRB commodity index looks set to break to new highs, having posted three consecutive bullish candles above its 50-day eMA and sitting just beneath its four-year high. Whilst rising energy prices play a large part in its rise it does act as a proxy for inflationary pressure, as the CRB represents a large basket of raw commodities.

Gold continues to meander around 1800, although three lower wicks on the daily chart show a hesitancy to break (or even test) 1790 so perhaps a base is forming within the 1790 – 1834 range.

Silver rose for a second session as part of a countertrend move. We’ll continue to look for signs of weakness below 25.75.

WTI broke above 70.76 resistance during its third consecutive bullish session, helped by Morgan Stanley’s forecast that demand will outstrip supply by the econ half of the year.


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