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Nasdaq Leads Wall Street Gains, China A50 Surges as Xi Visits Greater Bay

NASDAQ 100, CHINA A50,NIKKEI 225 OUTLOOK:

  • Nasdaq 100 index leaped 2.5%, eyeing a key resistance level at 12,420 with strong upward momentum
  • China A50 index (A50) jumped the most since July 6th, cheering on Xi Jinping’s visit to the Greater Bay Area
  • Japan’s Nikkei 225 index may rise alongside the rest of Asia, forming a ‘rising wedge’ price pattern
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Nasdaq 100 Index Outlook:

Wall Street equities registered decent gains on Monday, led by technology and financial sectors as investors awaited for this week’s big bank earnings. JP Morgan, Citigroup, Bank of America, Goldman Sachs and Wells Fargo are among the earliest to report their Q3 results. Earnings expectations have been revised up over the past three months, according to Factset reports. Consensus now see a decline of -20.5% YoY in S&P 500 earnings, versus the -25.3% forecast seen in June.

Market participants seemed to also have shrugged off recent election-related news and looked beyond for post-election stimulus hopes. President Trump called to cancel the second presidential debate. Democratic candidate Joe Biden is still leading the polls with vast advantage over Donald Trump.

The VIX volatility index fell a fourth day to 28.0, and the US Dollar index declined to a three-week low. This suggests that positive sentiment is prevailing risk assets. Asia-Pacific markets opened broadly higher, led by mainland Chinese, Australian and Japanese shares.

Technically, the Nasdaq 100 index looks set to extend its upward trajectory with harmonic movements (chart below). The Bollinger Band width has widened as prices test the upper bound, showing strong bullish momentum. The upper Bollinger Band is also perceived as an immediate resistance level.

A bearish “AB=CD” pattern has likely formed in the daily chart, suggesting that a technical pullback is possible as the price appears to have been temporarily overbought. If that happens, the Nasdaq 100 may consolidate before re-attempting its all-time high at 12,450.

Nasdaq 100 IndexDaily Chart

Nasdaq Leads Wall Street Gains, China A50 Surges as Xi Visits Greater Bay

China A50 Index Outlook:

The China A50 index (A50) registered its biggest gain in three months, rising 3.14% on Monday. The Shanghai and Shenzhen Composite both rallied on news that President Xi Jinping is paying a visit to the Greater Bay Area and will give a key speech in Shenzhen on Wednesday. He is expected to attend a ceremony along with Hong Kong leader Carrie Lam for the 40th anniversary of the special economic zone, strengthening the inter-connections within the Greater Bay Area and stressing Beijing’s commitment to reform and opening up.

Technically, the A50 has broken above the 38.2% Fibonacci retracement level (15,570) and thus has opened room for further upside. The next resistance levels can be found at 16,000 (23.6% Fibonacci retracement) and then 16,650 (the recent peak). An abrupt widening of the Bollinger Band points to a possible start of a bullish trend, after two months of consolidation.

China A50 Index Daily Chart

Nasdaq Leads Wall Street Gains, China A50 Surges as Xi Visits Greater Bay

Nikkei 225 Index Outlook:

Japan’s Nikkei 225 index has likely formed a ‘Rising Wedge’ in its daily chart (shown below), with an immediate resistance level found at around 23,740 (161.8% Fibonacci extension). Its near-term momentum remains bullish-biased, as the 20-, 50- and 10-Day Simple Moving Average (SMA) lines are all sloped upwards. An immediate support level can be found at 23,460 and then 23,300.

Nasdaq Leads Wall Street Gains, China A50 Surges as Xi Visits Greater Bay

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter