U.S. indices are set up for near-term weakness, pay attention to how it develops. The DAX is moving lower off an underside trend-line test, outlook is questionable. Crude oil remains quite weak and with a little more selling it will soon be at recent lows or worse.
Technical Highlights:
- Crude oil very weak, recent lows at risk
- Dow Jones set up to pullback
- DAX turning lower off underside t-line
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Crude oil very weak, recent lows at risk
Crude oil has failed to gain much of a bid recently and while last week’s reversal candle suggested some upside could be in store this week that has not been the case. The trend-line noted in the oil weekly forecast running down from three weeks ago indeed proved to be enough to cap an advance.
This has the recent lows at 50.54 in focus and at risk of breaking. Ideally, if support is to break we see at least one small bounce off of it to further it along as a notable level. A break will have further weakness towards trend support from the Feb 2016 low coming into focus down around the 45/46-area.
WTI Crude Oil Daily Chart (watch 50.54)
Check out the Q2 Crude Oil Forecast for the intermediate-term fundamental and technical outlook.
Brent crude oil of course has a very similar look to WTI, with the 60.47 low in focus as near-term support. A hold of support and eventual drop through should continue weakness.
Brent Crude Oil Daily Chart (60.47 support)
Dow Jones set up to pullback
The Dow Jones has become extended in recent sessions, setting itself up for some weakness. How much weakness is hard to say, conviction in equities in the near-term is lacking in either direction from where I sit.
Taking a wait-and-see approach to see how a decline unfolds to determine whether a consolidation pattern wants to materialize or sellers show up in earnest. The head-and-shoulders scenario is still on the table, but will require a turn down and eventual break of the neckline some distance lower before it becomes a scenario worth getting excited over.
Dow Jones Daily Chart (watch price action on pullback)
Check out the Q2 Equities Forecast for the intermediate-term fundamental and technical outlook.
DAX turning lower off underside t-line
The DAX is turning lower off the underside of the December trend-line. Again, as is the case with U.S. equities the outlook isn’t clear here. The market may be posting a lower high from the May 16 swing-high in an ongoing bearish sequence since the peak at the beginning of last month. To the contrary, a gradual decline could be met with buying and a run towards 12400+ could be in store soon. Risk/reward does seem to be too appealing at this time for either side of the tape.
DAX Daily Chart (falling from December t-line)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
