Daily Market Analysis – 19.10.2017

Asian trading was somewhat muted across Asia on Wednesday, but most indices still ended the session higher. Japan’s Nikkei gained for the twelfth consecutive session as it continues pushing through a 21-year high. Japanese investors have been pushing equities higher ever since the dissolution of the Japanese Parliament and call for snap elections on October 22, as they see a victory for the incumbent Prime Minister Shinzo Abe which will consolidate his power. Mainland Chinese shares finished mixed as there was some caution among investors due to the start of the 19th China National Party Congress, which will determine leadership for that country for the next five years. Like Japan, investors see the incumbent Chinese President Xi Jinping as being able to increase his domination over Chinese politics. Australian shares edged higher, as did shares in Hong Kong.

European markets ended the session with broad based gains after the German Constitutional Court threw out a resolution that could have put an end to the European Central Bank’s massive bond buying program. The Euro was also weaker for the day, adding to the gains for European exporter stocks. London’s FTSE gained as well as the Pound softened and U.K. wage data showed falling wages for British workers for the sixth consecutive month, giving the Bank of England less reason to raise interest rates later this year.

U.S. markets saw the three major benchmark indices hitting new record highs, but once again it was slight gains for most of the benchmarks that took them to new highs. The exception was the Dow, which punched through the 23,000 level with a 0.7% gain, mostly on the back of a 90 point addition from IBM (NYSE:IBM) as the multinational tech company rocketed higher by 8.9% following stronger than expected earnings and revenues. As for the S&P 500 and Nasdaq, they registered slight gains of 0.07% and 0.01% respectively.

While General Electric is becoming attractive to value investors and earnings are expected to begin moving higher, the stock price could still continue to decline as there are several headwinds to consider. Barring an extremely better than expected earnings report on Friday, the stock should continue moving lower, having broken support at the $23.90 level recently. The next area of support for the stock is around the $20, and this is where we could really see bargain hunters begin to increase their buying. Until then we have to consider that GE is still in the midst of a massive restructuring, and compounding the difficulty of this is the management controversy currently ongoing at the company. New CEO John Flannery certainly is looking to shake things up, but we feel his idea of shaking things up couldn’t have been the departure of several key board members, and the current CFO Jeff Bornstein. GE has been a bearish bet, and remains so for the time being.

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While most USD pairs remained in a fairly tight range Wednesday, this pair surged higher during the European session. It was able to close the session above the 113.00 level, which has been the top of its trading range over the past six weeks. This is a bullish case for the pair, and it should continue higher, with the longer term resistance sitting at the 114.25 level, where the pair printed a double top from this past July and May. There is a good chance we will see the pair test this resistance in the coming days as traders have been bearish on the Yen in anticipation of the October 22 snap general election in Japan. We don’t believe the pair can get past that resistance before the election, which means we could even see a test and pullback ahead of the weekend.

Written By: AvaTrade