Brakes Applied - Freefall Arrested

Daily Analysis - 27/03/2018

Indices in the Green

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American markets closed the day yesterday with SIGNIFICANT gains with the Dow Jones up 2.82 %, S&P 500 up 2.74 % and the NASDAQ 100 up 3.86 %. Asia this morning too, is robust with the Nikkei up 2.84%, the Shanghai up 0.65% and the same rise for the KOSPI.

Not all Indices Created Equal


The Milan Index is not up robustly, rather it is trying to penetrate a support level that it has been dallying with since early August 2017. We saw a dramatic penetration on the 6th of March when price reached 21448, though this was likely the market being swept up in the global wave of fear that was well in train by then. The current robustness evident in the US as well as Asia have not been similar in Milan. Technically speaking the price is still moving in a range bound by resistance at 22910 and support at 21952. We are of the opinion that price is likely to move lower than current levels. This is based on the repeated attempts to break out on the high side that failed and the overall perception that prices are falling and therefore likely to continue to do so.

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Natural Gas Rising


Gas has risen to a one week high experiencing a crossover of the short/fast 20 bar EMA from below the long/slow 50 bar EMA. This means that the market in the last 20 periods, the market has evaluated the price to be higher than it has in the last 50 periods. This is a reliable and sound indicator of sentiment and likely price direction. The gap between the two EMAs, (Exponential Moving Averages) is also expanding meaning that the sentiment of the recent 20 hours is growing more bullish that the 50 hour consensus. The phenomenon of rising gas price in a market where the price has been falling for 2 weeks is not likely to be long lived based on the volume being traded, which is low. Too, the Force Index indicator below the volume on the graph is not robust indicating weak sentiment.

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AUDCAD Falling Sharply


Continuing its 2 week decline the pair yesterday failed in their attempt to reverse the trend and now continues falling. The Moving Average crossover on the hourly chart occurred yesterday and is still solidly in train. Volume is strong, meaning that the sentiment behind the move has a lot of trades supporting it. We call that sentiment or momentum. Should the price break through its current level which we believe it will, then the .9900 level is the next likely support level followed by .9890. Fundamentally the pair is falling due to the weakness of the Aussie resulting from the slump in commodity prices and the CAD is strengthening due to the rise in crude oil prices.

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