 Good morning and welcome to CMC Markets on Tuesday the 8th January 2019 and this quick technical look at some of the key markets That I will be paying particular attention to over the course of the next few days and weeks now I don't think it's any secret that Q4 of last year 2018 Was fairly disappointing for stock markets in general I think you can see that born out on the back of the S&P 500 for example if we look at a monthly chart, it's fairly unappetizing and viewing Certainly if we look at October and we look at December I think what was interesting was that we were able to Hold above the 200 week moving average on the S&P 500 which in itself is a fairly positive sign and could be an arbiter for A bit of a rebound and certainly we have started to see some elements of that Since boxing day where we posted a nice key day reversal on US markets That's just as true for the S&P 500 as it is for the US small caps And I'm really going to use I'm going to use this US small caps as My benchmark Indicator here seeing as that was one of the first US markets That started to show a little bit of sign of weakness ahead of the sell-off that we saw in The S&P and the Dow and I'm going to focus on them for the time being because They've both shown some fairly decent reversal patterns towards the end of last year a bullish Key day reversal on the US small caps. We make a lower low We then engulf the entire candle of the previous day to close at a significantly higher level So does that necessarily mean that the declines that we've seen in Q4 of last year are the end of the matter? No, it doesn't mean that at all But what it does show is that ultimately the overt bearishness that we saw in Q4 could be due a bit of a breather Now there could be any number of reasons for that of one of which has been a slightly more Ameanable tone between Chinese and US officials around trade talks And I think that's largely down to the fact that Chinese economic indicators have been a little bit weaker And as a result, I think it's made China Chinese officials A lot keener to come to the table and try and address some of the issues that US policymakers have I Think also the fact that President Trump likes to use the Dow Jones as a nice economic indicator Has also helped I think drive a much more Acceptable tone between US officials because I don't think President Trump wants to be tweeting about a crushing stock market so I think those Slightly the slightly more Amoliant softer tone between China and US officials is helping, but I think the big game changer On Friday was those comments from Jerome Powell The Fed chair where he was much more dovish than he was at his post rate rise press conference in December where he pretty much said that balance sheet reduction was an autopilot and We could expect to see an awful lot more Fed rate rises despite the fact that we've already seen eight Fed rate rises since the end of 2015 so I think going forward a slightly softer tone from the Fed has softened the dollar it has pushed rate expectations for 2019 much lower than they were at the end of 2018 and that's been reflected in the dollar selling off And also I think gold coming off a little bit as well so if Especially if you look at gold in terms of a risk-off play that has gained while equity markets have sold off So for me the next resistance on this small cap chart I'm having made a base around about 1250 is around about 1440 So that's the first key resistance there if we look at gold we can see a similar key day reversal Or be it on Friday slightly later than the reversal that we saw on US markets, but I think it is important in the context of We've made a higher high and then we've engulfed the candle on this uptrend here close lower If we push below 1275 we could well see further weakness in gold prices relative to the dollar Going forward and a further move higher in risk assets i.e. stock markets as well. So Looking at those two charts in isolation there does appear to be a reversal in US equity markets potential bullish reversals there which would presuppose That we might see further gains in the S&P towards 2600 2700 over the course of the next four to five weeks Just so long as we don't drop below the bottom of this particular candle here, which is around about 2438 That was Friday's low So I will be keeping an eye out for that particular level on any pullback on US stocks in the S&P 500 More importantly, if we look at US treasury yields, we also saw A bullish reversal after the pushdown that we saw to 254 At the end at the beginning of this year as As investors got an awful lot more nervous About the risk outlook people started piling into US treasury's pushing yields much much lower We now have seen a bit of a rebound there also the benign inflation outlook Which appears to be being played out in some of the ISM indicators prices paid They've dropped from peaks of around about 70 in the manufacturing The sector from the mid 50s now and I think that's largely as a result Of the decline that we saw in oil prices And I certainly don't think it's any coincidence that the decline in yields Has sort of mirrored the decline that we've seen in oil prices However, we do appear to be seeing a little bit of a rebound in oil prices as well And that I think is going to be largely reflected in yields And similarly, we have seen a bear a bullish reversal on WTI crude oil prices Which could precipitate a move higher here as well from the declines that we saw at the beginning of October So we've seen declining oil prices declining equity markets We are now starting to see a little bit of a rebound in oil prices, which is also correlating with a rebound in oil prices as well So I think the next resistance for me on WTI Is in and around these series of lows through here around about $50 a barrel Looking around about $0.50 and 20 cents So if we can get back through here This series of lows, let me just draw in a horizontal line for you through here So you can actually see where these lows are There we go, just above $50 a barrel If we can push up through here Then we could well see further oil price gains towards around about $55 Or even $60 a barrel But it will be a hard slog to get up there Similar sort of thing on Brent crude Again here a nice bullish reversal And again potential for us to probably edge back up Towards $64 a barrel Which proved to be a nice little support level on the way down It's also quite interesting to note That Brent crude prices stopped on the 61.8 retracement of the entire up move From the 2016 lows to the highs that we saw in October So we could head back to always around about $64 a barrel Before drifting back down again At the end of the day I do not think that the downtrend in stock markets is over yet I think it's merely due a pause And certainly those bullish reversals that we've seen on the various daily charts Would appear to support that in the short to medium term So that's it for today Thank you very much for listening to Michael Houston talking to you from CMC Markets