NASDAQ 100, NIKKEI 225 INDEX OUTLOOK:
- Nasdaq 100 futures climbed on early Wednesday, rebounding from an immediate support at 11,650
- Focus remained on the progress of US stimulus talks, while strong earnings may cushion the downside
- Nikkei 225 index opened mildly higher, forming an “Rising Wedge” on the daily chart
Nasdaq 100 Index Outlook:
Wall Street futures extended gains during early Asia trading hours, in anticipation of progression in the US relief package after House Speaker Nancy Pelosi set a deadline to approve the stimulus proposal. Netflix’s big earnings miss appeared to have little impact on the overall market sentiment, while a majority of corporate America smashed consensus forecasts’ with upbeat Q3 results.
On the macro front, today’s release of UK and Canadian inflation data, alongside a speech by ECB President Christine Lagarde, will be closely watched by forex traders. The EIA will also report a string of crude oil inventory data that may set the tone for the energy sector. Read more on our economic calendar.
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The US corporate earnings continued to fare well despite sporadic misses. On Tuesday, 15 out of 17 companies released better-than-expected earnings (table below), with the exception of Synchrony Financial and Netflix. Netflix’s Q3 results came sharply below forecasts in terms of earnings-per-share (EPS), new subscribers and forward guidance due to a drastic slowdown in sign-ups over the summer. Netflix’s share price to plunged more than 5% after market close. Nonetheless, the overall earnings picture remains upbeat, which may shelter stock markets against election and stimulus risks.
Sector-wise, 10 out of 11 S&P 500 sectors closed in the green, with 70% of the index’s constituents ending higher yesterday. Energy (+1.13%), financials (+0.82%) and communication services (+0.80%) were among the better performers, whereas consumer staples (-0.11%) and healthcare (+0.13%) were lagging.
S&P 500 Index Sector Performance 20-10-2020
Source: Bloomberg, DailyFX
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Technically, the Nasdaq 100 index appears to have entered a consolidative period after the formation of a bearish “AB=CD” pattern (chart below). The near-term trend has likely turned bearish as suggested by the formation of a “Death Cross” in the MACD indicator. An immediate support level can be found at 11,650, where the 38.2% Fibonacci retracement and the 20-Day Simple Moving Average (SMA) line overlap. Breaking below 11,650 may open room for more losses towards the next support level at 11,470 – the 50% Fibonacci retracement.
In the medium term, the recent pullback appears more like a technical correction, which may set the floor for higher highs. Both the 50- and 100-Day SMA lines remain upward-sloped, suggesting that the medium-term bull trend remains intact.
Nasdaq 100 Index – Daily Chart
Nikkei 225 Index Outlook:
Japan’s Nikkei 225 index opened 0.22% higher at 23,610, as traders scrutinize the progress of a second US stimulus package. Strong US corporate earnings and stimulus hopes may set a positive tone for Asia-Pacific trading, while traders await inflation data from the UK and ECB President Lagarde’s speech later today.
Technically, the Nikkei 225 index has likely formed a “Rising Wedge” on its daily chart, with the 20-, 50- and 100-Day SMA lines all trending up steadily over the past few months. An immediate resistance level can be found at 24,000 – the previous high seen in mid-February 2020. The 20-Day SMA can be perceived as a dynamic moving support level.
Nikkei 225 Index – Daily Chart
( 15:10 GMT )
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— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter