Article / 29 June 2016 at 2:26 GMT

Global Market Report: ASX200 turning bullish

Global Investment Analyst / Rivkin
Australia
  • S&P/ASX200 turning bullish on strong likelihood of bullish momentum divergence 
  • S&P500 bounces from support but too soon to rule out further declines 
  • Nikkei higher levels likely on formation of bullish momentum divergence 
  • Extended period of consolidation likely for XAUUSD
  • WTI crude oil awaiting confirmed bullish divergence before turning bullish 
  • Natural gas targeting $3.50-$3.60 over coming months


ASX200 gains expected

On the daily timeframe, once again declines were reversed with the price closing back within the noted support zone between 5,160 and 5,100 marked by the 50% and 61.8% Fibonacci retracement levels of the previous rally. 

While the price has pushed to a new near-term low this has not been confirmed by the slow stochastic and a higher close today will likely lead to confirmed bullish momentum divergence, suggesting the high probability of gains over the coming weeks.

Above current levels, resistance is located between 5,305 and 5,384, marked by previous highs and lows.

ASX200 daily chart
ASX200 Daily
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On the weekly chart, the price is within noted support as it traces what is potentially a large basing pattern. Longer-term, while we may see some further consolidation, given the confirmation of bullish momentum divergence at the February low, we believe a significant low is now in place with higher levels above 5,425 likely over the coming months.

ASX200 weekly chart
ASX200 Weekly
 
Now updating outlook to bullish while the price remains above 5,100 on a closing basis.

asx
 A higher close today for ASX200 will likely lead to confirmed bullish momentum divergence, suggesting gains over coming weeks. Photo: iStock

S&P500 Futures

On the daily timeframe, the price has now made an initial bounce following a test of the support zone between 2,007 and 1,982 marked by previous highs and lows, as well as containing both the 200-day moving average and 38.2% Fibonacci retracement level of the prior rally. 

The sharp declines over the prior two days have now allowed momentum indicators to unwind and while we may see higher levels over the coming days, it is too soon to suggest declines are complete. A close below 1,982 would open up a deeper retracement of the February to June rally back towards 1,930.

Daily S&P500 chart
S&P500 Daily
 
Longer-term, the uptrend is now invalid following the break of the May low at 2013, suggesting an extended period of consolidation. At a minimum, we would now expect to see a move into the 50% to 61.8% Fibonacci retracement zone of the 2016 rally, which lies between 1,946 and 1,908.

Weekly S&P500 chart
S&P500 Weekly
 
Outlook remains neutral.

Nikkei225 Futures

On the daily timeframe, while the price has pushed to a new near-term low, it is yet to be confirmed by the slow stochastic. A strong close higher today is likely to lead to the confirmation of bullish momentum divergence and would suggest higher levels over the coming weeks. Above current levels, initial resistance is located between 16,220 and 16,500, marked by last week's highs, the lower boundary of the rising trend channel and the 50-day moving average.

Daily Nikkei chart
Nikkei225 Daily
 
Longer-term, the weekly chart shows the price making an initial bounce following a test of the lower boundary of the declining trend channel. While some near-term strength is expected, there are no clear signs that recent declines are complete and overall the longer-term downtrend remains dominant.

Weekly Nikkei chart
Nikkei225 Weekly
 
Our outlook remains neutral.

WTI Crude Oil Futures point higher

On the daily timeframe, the price has now pushed to a new near-term low, however this is yet to be confirmed by momentum indicators, potentially leading to bullish momentum divergence that would suggest the decent probability of higher levels of the coming weeks. Above current levels, initial resistance is located between $48.39 and $50.92, marked by previous significant highs and lows, thus forming a lower high.

Below current levels, initial support is located between $44.53 and $43.20 marked by previous highs and lows from April and May.

WTI crude daily chart
WTI Crude Daily
 
Longer-term, following the confirmation of bullish momentum divergence with the price breaking higher from a large wedge pattern, we believe a significant low is in place and highly likely the price will move higher towards $60 over the coming months.

WTI crude weekly chart
WTI Crude Weekly
 
Our outlook remains neutral, turning bullish on the confirmation of bullish momentum divergence.

Natural Gas Futures point to pullback

On the daily timeframe, following an initial pullback the price has now decisively closed above the form resistance zone, now support, between $2.70 and $2.80 marked by previous highs and lows. While the price may continue higher in the near-term, momentum indicators remain highly overbought, highlighting the increased risk of a pause or pullback.

Above current levels, resistance is located between $2.9650 and $3.1020, marked by the November 2015 to January 2016 highs and lows.

Natural gas daily chart
Natural Gas Daily
 
On the weekly chart, following the completion of the large basing pattern, the price has quickly moved higher to reach initial resistance around $2.90. While there are no signs the recent gains are becoming exhausted, we may see a small pause or pullback following a test of resistance, before continuing higher towards $3.50-$3.60 over the coming months.

Natural gas weekly chart
Natural Gas Weekly
 
Our outlook remains neutral waiting for a pullback before turning bullish once again.


On the daily timeframe, following an initial push to a high of $1,355, the price has now made an initial pullback towards support between $1,303 and $1,270, marked by previous highs over the past four months. While the price may continue higher in the short-term, given the sharpness of the recent gains we may now see an extended period of consolidation before continuing higher.

Above current levels, broad resistance is located between $1,355 and $1,423 marked by previous highs and lows from 2013 & 2014.

XAUUSD daily chart
XAUUSD Daily
 
On the weekly chart, while price has moved to a new near-term high we continue to wait for this to be confirmed by the RSI to remove the possibility of bearish momentum divergence. Overall, the rally throughout 2016 has been strong and is likely the beginning of a larger move higher over the coming months towards resistance between $1,350 and $1400 region.

XAUUSD weekly chart
XAUUSD Weekly
 
Our outlook remains neutral.


– Edited by Susan McDonald

James Woods is a global investment analyst at Sydney-based Rivkin Securities
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