As the geopolitical tensions between Russia and the NATO allies have shown supposed signs of improvement, we have seen a risk recovery in major financial markets. This has enabled equity indices to embark upon a sizeable rebound yesterday. This move has though begun to stall this morning with a lack of progress in the de-escalation of geopolitical tensions. This is coming around key technical levels on major indices which leaves them at important inflexion points.
- A lack of positive headlines and no conclusive evidence of Russian troops pulling back
- Wall Street is now struggling for traction around pivot areas
- European indices need to push through resistance to prevent a bull failure
Russian withdrawal yet to be substantiated
Markets rallied yesterday amid suggestions from Russian officials that troop exercises were coming to an end and that would mean the withdrawal of troops. The reports were welcomed but seemingly are yet to be substantiated.
NATO Secretary-General Jens Stoltenberg has stated that there is no proof of the de-escalation. Furthermore, the NATO allies would want to see proof of the withdrawal of heavy land equipment before confidence in this supposed pullback can be formed. Troops could be re-assembled on the border in a matter of days, but heavy land equipment would take far longer to re-establish into attack positions.
Despite this, the Russian stance also includes attempts to ridicule. The US suggestion of an attack being scheduled for today has been roundly mocked on media channels by Russian officials. Russian ambassadors and envoys are not making military decisions, but it plays into the lack of trust that western allies currently have for any moves made by Putin.
The subsequent result is that uncertainty has yet to be cleared. Hence why market sentiment is tentative once more.
US markets move into consolidation
An early tick higher in the European session has been given back. Interestingly, this leaves Wall Street indices around near term pivot resistance areas.
On S&P 500 futures (MT5 code: SP500ft), in the past few weeks, there has been trading around a pivot area at 4438/4475. Last week this area was supportive but has become an area of overhead supply for this week’s rebound. It is also coming with Relative Strength Index momentum indicators (on both daily and 4-hour charts) unwinding towards neutral.
This leaves the S&P 500 futures around a key near a term inflexion point. A close above 4482 (today’s early high) would help to generate improving positive momentum that could then open for a test of the key February lower high of 4585. A bull failure and close below 4427 support would drive renewed downside momentum.
NASDAQ 100 futures (MT5 code: NAS100ft) are looking rather similar to the main Wall Street index for now. A technical rally into resistance between 14,580/14,680 is consolidating today. Once more, momentum needs to continue to improve otherwise there is a prospect of a bull failure. A move above 14,765 is needed to break the mid-range shackles and re-open 15,070/15,260. Otherwise another lower high in the sliding retreat of 2022 will be seen.
European markets facing inflexion points
The German DAX (MT5 code: GER40) has been one of the more volatile major markets in recent weeks. This volatility has seen choppy moves both higher and lower, however, a decisive downtrend of lower highs has formed throughout 2022.
Once more the DAX has rebounded into the trend resistance today and faltered. This leaves the prospect that unless the bulls can mobilise once more there is another potential lower high around 15,550 (under 15,625 and 15,740 respectively). The key concern is the unwind on the RSI back to 50, which has been seen in the past two lower highs before sharp moves lower again.
This is subsequently an important inflexion point for the DAX. A closing break of the downtrend would likely bring the RSI above 50 and improve the outlook for a test of 15,625/15,740. A bull failure today could drag the market back towards 15,000 again.
FTSE 100 (MT5 code: UK100) remains in a strong technical position, however, there is a persistent tendency for the market to fail around 7620/7645 in recent weeks. This is beginning to leave momentum with a less convincing positive configuration.
Whilst we are still bullish on FTSE 100 and see any weakness as a chance to buy, once more the market has failed in the resistance this morning. Unless the market can close above 7645 in the near term, this is likely to induce a retreat towards 7485/7510. However, the key area of opportunity for long positions on FTSE 100 remains around 7330/7400.