Technicals | 10:30 AM
Earlier today, Tony Sycamore, Market Analyst, IG updated his views and thoughts on financial markets, including the technical analysis updates below.
By Tony Sycamore
All material has been re-published with permission and does not by association represent FNArena’s views (we have none, we simply report).
First Up, Nasdaq100
The Nasdaq100 has been in a corrective phase since hitting its late-October peak of 26,182, with that pattern reinforced by a clear double top formed in late January.
Over the past fortnight, the index has tested the critical 24,300/23,850 support band we’ve been watching like a hawk. This crucial support zone includes the 200-day moving average at 24,301 and the November 21 low of 23,854.
If the Nasdaq100 can continue to hold this support band and then clear short-term resistance at 25,380/400, it would provide a strong indication that the correction is complete and the uptrend has resumed, opening the door for a retest and potential break of the 26,182 high.
However, should the Nasdaq100 see a sustained break below that 24,300/23,850 support zone, it would warn of a significantly deeper correction towards 23,000.
ASX200
From the ASX200’s 9202.9 high it struck two weeks ago, the ASX200 fell -745 points (-8.1%) into the 8457.2 low of March the 9th.
To negate the technical damage from this sell off, the ASX200 must reclaim (on a sustained basis) the 200-day moving average currently at 8777.
Until then, a retest of the 8457/8383 support level is possible.
Crude Oil
President Trump’s push to build a US-led naval coalition to escort tankers through the Strait of Hormuz has effectively fallen flat.
In a blunt social media post overnight, Trump declared the United States “no longer needs or desires” help from NATO nations or key partners including Japan, South Korea, and Australia.
The aggressive stance is heightened by the fact the vast majority of Middle East oil ultimately flows into Asian markets. According to multiple reports, Trump is now weighing the possibility of the US taking direct control of the Strait of Hormuz by force.
This brings us back to a crucial point: while the prices of Brent and WTI have been well behaved this week hovering about US$5 either side of the US$100 mark, it should be highlighted they are Atlantic Basin benchmarks.
Contrast this with Middle Eastern benchmarks such as Dubai and Oman, which more accurately reflect the physical dislocation of the region, and which are trading sharply higher, around US$155/bbl.
This stark difference underscores the impact this will have on Asia if the conflict continues to hamper flows through the Strait of Hormuz.
For now, we remain of the view that spikes higher in WTI will likely remain capped around the US$105 area.
We continue to expect dips to find solid support near US$75.00, which has been our base case since last Tuesday.
Gold
Gold is holding near the US$5000/oz level after dipping to a near four-week low of US$4976 earlier this week. The rebound back above US$5000 has been driven by a retreat in the US dollar and easing US Treasury yields. Although this recovery negates the immediate downside risks for now, we remain wary of the gold price for the following two reasons.
First, if the conflict drags on and pushes energy prices —and thus inflation— higher, it will reinforce a stronger US dollar and further diminish prospects for Fed easing, both clear headwinds for gold.
Second, a swift de-escalation in the region would strip away one of the primary geopolitical supports that drove gold to record highs earlier this year. Either path —prolonged tensions or quick resolution— looks bearish for the yellow metal in the weeks ahead.
Technically, the sell-off from the US$5602 high down to the US$4402 low is defined as the first wave (Wave A) of a three-wave correction.
The rally from that US$4402 low to the early March US$5419 high counts as a Wave B (the second leg of the correction).
If gold now sees a sustained break below a band of support at US$5100/US$5000, it will signal that the third leg lower (Wave C) of a three-wave correction has begun, with a likely return towards US$4400/oz.
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