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Both equities and cryptocurrency markets rallied together last week, as each recovered prior losses. Investors will continue to watch for signs of inflation and the trend of rising rates. The 10-year US Treasury yield has been leading global rates higher, hitting a four-year high last week of 2.93. Yet, for now, it looks like initial concerns have dissipated. The dollar is falling against most assets, which seems to be helping equities. All of the major equity markets followed were positive, with India’s BSE Sensex the weakest performer, up only 0.015%.
Much of Asia was closed last Friday due to the Chinese New Year, yet the Hang Seng was able to complete its four-day trading week with a 5.4% advance to end at 31,115.40, while the Shanghai Composite was up 2.2% to close at 3,199.16. In Japan, Bank of Japan (BOJ) Governor Kuroda announced he would stay for another term which was viewed as supporting a continuation of loose monetary policies. This was viewed positively by the market with the Nikkei 225 advancing 1.6% for the week to end at 21,720.25.
German DAX Index
The DAX found support at 13,003.4 two weeks ago, where it completed an 88.6% Fibonacci retracement of the prior upswing and was 11.7% off its 13,596.90 record peak from a month ago. That low support was also around a prior swing low from August of last year at 11,868.80, with the 14-day Relative Strength Index (RSI) in clear oversold territory. The RSI was the most oversold since August 2015. This means that the uptrend structure, of high swing highs and higher swing lows, has been maintained, at least so far. Therefore, a decent recovery could follow soon. It also means that the August low is critical support and a break below it puts the larger bull trend at risk of a deeper corrective phase.
The S&P 500 advanced for each of the past six days (due for a stall or pullback). That by itself should give investor’s pause as the odds now favor a pullback or at least a rest in the near-term. Heading into the new week US financial markets are closed on Monday for a government and bank holiday. This may affect liquidity in global markets heading into the week.
