US Equities At All Time High; Europe & Asia To Follow?

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Despite the fact that the political conditions in the US are worsened, while the earnings seasons so far seems to be positive, the US equities continued to gain more grounds, posting fresh all-time highs during yesterday’s session.

The S&P500 spiked all the way to 2403, while DowJones Industrial Average is few points away from its 21169 all-time high, which likely to be seen once again later this week and Finally, Nasdaq composite index closed above 6120 for the first time.

Such move comes despite the fact that the Federal Reserve is expected to raise the Fed Fund rate once again by 25bps in June according to the Fed Fund Futures. The question remains now, will this optimism slip into Europe?

FTSE100 Above Major Moving Averages

FTSE 100 managed to post its longest rising stake since January of this year, following the French election results, as the risk of Frexit is now at 0%.

FTSE also managed to rise for the past four sessions and continued to rise today, trading above its entire moving averages, including the 200,100 and 50 DAY MA on the daily chart.

Such move seems to be impulsive, especially after it broke above its 50 DAY MA which stands at 7311, which turns into support area.

Such move would eliminate the possibility for another leg lower as a retracement. The recent correction in April actually bottomed out around 7100.

In the meantime, further gains are more likely. Yet, there is still some major resistance ahead, including 7363 followed by 7406 before trying to test its all-time highs around 7449.

On the downside view, any downside retracement is likely to remain limited for the time being above its 50 DAY MA as noted before. However, a breakthrough that MA would clear the way for a deeper retracement toward its 100 DAY MA at 7248 where buyers are likely to appear.

Shanghai Composite Index Nearing 3000 Support

As we noted in our previous report, after Shanghai Composite Index broke through its uptrend line, in addition to breaking through with a clear weekly close below its entire Moving Averages, another leg lower is highly possible.

Since the beginning of this week, the index has been declining gradually, and today it managed to decline by nearly 1%, declining all the way to 3052 and closed the day at session low.

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With today’s close, the likely hood of a continuation is highly possible, and the next support area stands at 3050, which represents this year’s low, which should be watched very carefully, as a breakthrough that support would clear the way for further declines, probably below 3000 psychological support.

Yet, the technical indicators are heavily oversold, which eases the chances for a sharp decline ahead, and increases the chances for another bounce after testing the major support area.

For the time being, any upside is likely to remain limited below the first immediate resistance which stands at 3090 and/or 3100.

China’s Risk Under Spotlight

Traders need to be aware of the current rally in global equities, excluding the Chinese market. There are a lot of reports and talks about a possible downturn ahead, which likely to increase the fear in the market.

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In return, a washout would be possible in global equities, including Asia, Europe, and the US. Since that most equities are at record high, this would not be the right time to buy stocks. There is always tomorrow, don’t rush into the market.

 

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