Mixed Start For The Markets

Global equities benchmarks have commenced the first trading week of February in rather mixed fashion with US and Japanese indices breaking out, while UK and European indices remain mired. Japanese asset prices are trading higher in response to the strong earnings season there which has seen the Nikkei reaching fresh 30 year highs. Around 90% of companies reporting have seen their averages increase, helping lifting domestic sentiment.

In the US, the focus remains firmly on the incoming $1.9 trillion dollar stimulus package. Biden was successful in pushing the package through the lower chamber of congress and now just needs his majority to vote in his favour in the senate. With markets expectant that Biden will be successful, US indices are continuing to breakout into new, all-time highs.

In the UK and Europe, sentiment is a little softer this week. Ongoing concerns over the health of the two respective economies amidst continuing lockdowns is hampering upside for markets. Despite progress on the vaccination front, there is still a considerable amount of uncertainty over when and how lockdowns will end. Furthermore, as post Brexit issues continue to dog the landscape, traders are preferring to chase yield elsewhere for the timebeing.

Technical Views

DAX

The DAX briefly pierced above the 14128.76 level at the start of the week before reversing and trading back under the level. With momentum studies showing clear bearish divergence, the market is vulnerable to a further correction lower. However, in light of the broader bullish trend, while above the 13744.70 level, the medium term view remains bullish.

S&P500

The S&P has broken out to new , record highs this week. price broke above the prior 3863.75 highs, which now sit below as support. In line with the longer term bull trend, the bias remains bullish for now though bearish divergence in momentum studies is worth watching.

FTSE

Th FTSE remains fairly contained at the bottom of the recent decline for now. Price found support at a test of the 6396.4 level though remains below the 6640.6 level for now. Should price break below the 6396.4 level, the next support to note is down at the 6123.3 region.

NIKKEI

The Nikkei has traded up to its highest level since 1990 this week. While price remains above the prior 2021 highs of 29005.6, the bias remains bullish. However, as with other indices, bearish divergence in momentum studies is worth noting.

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