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Global indices test key resistance levels

Fawad Razaqzada Fawad Razaqzada 21/07/2021
Global indices test key resistance levels Global indices test key resistance levels
Global indices test key resistance levels Fawad Razaqzada
After last week’s technical damage, and the subsequent rebound, are we going to see renewed weakness for the major indices next?

After the global stock markets managed to find support on Tuesday, we have seen further follow through for European indices and US index futures so far in today’s session. However, the key question is whether this is the start of a rally to new highs, or will investors see this an opportunity to exit or trim their long exposures considering the big drop last week? If investors were so worried last week to dump risk assets, then fundamentally nothing significant has changed in the space of the past couple of days to suggest the bulls are out of the woods. Indeed, there is increased risk we may see renewed weakness come into the markets as the major indices test old support levels, which could offer resistance now that they are being tested from underneath. More on that later.

The situation with the more contagious delta strain of the Covid-19 virus is getting worse, especially in Asia. South Korea and Thailand have reported record infections, with the Japanese capital Tokyo likely to see a surge in cases as the Olympics gets underway. Efforts across many regions to curb the virus spread has dampened high expectations about demand for things like travel and tourism etc.

The only positive spin one can put on this in so far as equities are concerned is that it will help slow QE tapering by central banks. And that could be one of the reasons why we have seen the markets rebound over the past couple of days. Another reason is the generally supportive corporate earnings that we have seen so far.

But as I mentioned above, let’s see if the major indices will be able to break higher or retreat as they test broken support levels from underneath today. Given last week’s technical damage and the mostly unchanged fundamental backdrop from last week, the bears might be ready to pounce again.
 
FTSE

The UK index has been the weakest link in the recovery phase, and it was one of the first to breakdown. So, if you are bearish, this one is definitely the one to keep a close eye on:

FTSE
 
DAX

The German index managed to hold its bullish trend line that has been in place since March 2020. Watch out for a potential breakdown as it could lead to follow up technical selling given how heavily this market is traded:

DAX

S&P 500

The major US indices have fared much better than their European counterparts, but signs of cracks are appearing to show. Will broken support at 4340 be defended by the bears today?

SPX

Nasdaq 100

The US tech heavy index will remain in focus with technology earnings kicking into a higher gear. But the index has broken its short-term bullish trend line and made a lower lows below 14550 before rebounding. Was that lower low a breakdown in market structure? Time will tell.

Nasdaq


With all the above charts showing some technical damage, the bulls need to proceed with extra care as we are now in bears’ territory again after the 1.5-day recovery. The bulls must wait for their opportunity until it becomes clear that the sellers are no longer in control of price action again.
 
Macro data and earnings highlights
 
Wednesday
  • Earnings: Texas Instruments, Verizon, Coca-Cola and Johnson & Johnson
Thursday
  • ECB policy decision and press conference
  • US jobless claims and existing home sales
  • US Earnings: Intel, Twitter, AT&T and Snap
  • European Earnings: Unilever, SSE
Friday
  • Retail sales from UK and Canada
  • Global flash manufacturing and services PMIs, including from Eurozone
  • Earnings: Honeywell International (US) and Vodafone (UK)
Source for charts: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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