The recovery in equity markets has been nothing short of dramatic, with the NQ E-mini leading the way once again, with the price action of this week creating a classical V reversal on the daily chart following the unmistakable buying signals of last week, since when the daily volumes have returned to ‘normal’ levels once more. Over the last few days, each wide spread candle has built on the last, with the daily volumes validating the price action, and even more so on Wednesday, as the minor pullback reflected a lack of selling pressure, with Thursday’s rally driven by solid volume and positive results from major companies with Caterpillar leading the way. Overnight the Ebola scare coupled with the tragic events in Canada have unsettled the markets, but as on previous occasions the reaction lower appears to be short-lived with the electronic market regaining the 4000 level once more ahead of the physical open, as the index tests minor resistance in this region. The only significant news item today is New Home Sales, forecast at 473,000, a decline on last month’s 504,000, and with the last few months of releases having flip flopped between 400,000 and 500,000 over the last few months, any shortfall in this number is unlikely to have a major impact.
Yesterday’s price action was also significant as it breached the resistance in the 3950 to 3985 region, and provided we see solid and rising volumes today, and into next week, we can expect to see further gains for equities in due course, and for the NQ E-mini a return to test resistance in the 4060 region as denoted with the blue dotted line. If this level is reclaimed, then a deep and sustained platform will then be in place as the springboard for a breakout in a further move higher in the medium term.
By Anna Coulling