A decent bullish reversal candle has formed on the ASX 200 on Tuesday, which begs the question as to whether Santa’s rally is about to kick into gear. Although it is the FOMC meeting within the next 24 hours which could decide when or even if it starts at all.
By : Matt Simpson, Market Analyst
A decent bullish reversal candle has formed on the ASX 200 on Tuesday, which begs the question as to whether Santa’s rally is about to kick into gear. Were it not for the pending FOMC meeting in just under 24 hours, I’d lean towards yes. But the Fed may need to deliver a set of considerably-less dovish projections compared with their September’s outlook to see risk rally tomorrow.
If they revise their 2025 cuts to one or even none, the ASX could retest and even break below the 8200 downside target I mentioned yesterday.
Click the website link below to get our exclusive Guide to index trading in Q4 2024.
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Fed rate cuts alone may not be enough to keep driving US indices higher in Q4 if traders sniff out a recession on the horizon in 2025.
But I think there is a chance that the Fed won’t be as hawkish are expecting, mainly to save face. The 25bp cut is practically a given, so if they still suggest at least two cuts are arriving next year then it could help risk bounce in line its seasonal tendency from tomorrow. Whereas a relatively hawkish meeting could see as final drive lower for the ASX before the late-December rally kicks into gear next week.
Ultimately, I believe we are in for a Santa’s rally. But the Fed meeting could decide whether it begins on Thursday or next week.
Average daily returns for the ASX 200 in December show a clear bullish bias from the middle of the month. In fact, the ASX delivers positive average returns alongside a positive win rate (bullish days greater than 50% of the time) for each trading day between December 16th to 30th. Traders then tend to book profits and generate a negative average return and win rate (it closes the day lower over 50% of the time on 31st December).
A prominent bullish engulfing candle formed on Tuesday to hint at a swing low. But as suggested above, it is likely down to whether the Fed hint at 1 or fewer cuts next year as to whether it will dip lower. Because if they signal 2 or more cuts, then risk could rally after the close.
Regardless, seasonality suggests risk could rally next week once the FOMC dust has settled.
The daily RSI reached the extremely oversold level of zero before popping higher, so perhaps the low has already been seen. A slight bearish divergence formed on the 1-hour chart beneath the weekly R1 pivot and prices are retracing lower. The bias is to seek dips within yesterday’s range in anticipation of a break of Tuesday’s high and Santa’s really ensue. 8450 seems a reasonable target for low-liquidity, end of year conditions. Of course, take note of the tendency for the ASX to selloff on the final day of the month (which lands a week on Tuesday).
View the full economic calendar
– Written by Matt Simpson
Follow Matt on Twitter u/cLeverEdge
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A decent bullish reversal candle has formed on the ASX 200 on Tuesday, which begs the question as to whether Santa’s rally is about to kick into gear. Although it is the FOMC meeting within the next 24 hours which could decide when or even if it...
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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By : Matt Simpson, Market Analyst
A decent bullish reversal candle has formed on the ASX 200 on Tuesday, which begs the question as to whether Santa’s rally is about to kick into gear. Were it not for the pending FOMC meeting in just under 24 hours, I’d lean towards yes. But the Fed may need to deliver a set of considerably-less dovish projections compared with their September’s outlook to see risk rally tomorrow.
If they revise their 2025 cuts to one or even none, the ASX could retest and even break below the 8200 downside target I mentioned yesterday.
Click the website link below to get our exclusive Guide to index trading in Q4 2024.
Indices Q4 2024 Market Outlook - FOREX.com US
Fed rate cuts alone may not be enough to keep driving US indices higher in Q4 if traders sniff out a recession on the horizon in 2025.
But I think there is a chance that the Fed won’t be as hawkish are expecting, mainly to save face. The 25bp cut is practically a given, so if they still suggest at least two cuts are arriving next year then it could help risk bounce in line its seasonal tendency from tomorrow. Whereas a relatively hawkish meeting could see as final drive lower for the ASX before the late-December rally kicks into gear next week.
Ultimately, I believe we are in for a Santa’s rally. But the Fed meeting could decide whether it begins on Thursday or next week.
ASX 200 seasonality for December
Average daily returns for the ASX 200 in December show a clear bullish bias from the middle of the month. In fact, the ASX delivers positive average returns alongside a positive win rate (bullish days greater than 50% of the time) for each trading day between December 16th to 30th. Traders then tend to book profits and generate a negative average return and win rate (it closes the day lower over 50% of the time on 31st December).
ASX 200 futures (SPI 200) technical analysis:
A prominent bullish engulfing candle formed on Tuesday to hint at a swing low. But as suggested above, it is likely down to whether the Fed hint at 1 or fewer cuts next year as to whether it will dip lower. Because if they signal 2 or more cuts, then risk could rally after the close.
Regardless, seasonality suggests risk could rally next week once the FOMC dust has settled.
The daily RSI reached the extremely oversold level of zero before popping higher, so perhaps the low has already been seen. A slight bearish divergence formed on the 1-hour chart beneath the weekly R1 pivot and prices are retracing lower. The bias is to seek dips within yesterday’s range in anticipation of a break of Tuesday’s high and Santa’s really ensue. 8450 seems a reasonable target for low-liquidity, end of year conditions. Of course, take note of the tendency for the ASX to selloff on the final day of the month (which lands a week on Tuesday).
Economic events in focus (AEDT)
- 10:50 – JP trade balance
- 11:00 – AU leading indicator
- 18:00 – UK CPI, PPI
- 21:00 – EU CPI, construction output
- 06:00 – Fed interest rate decision
- 06:30 – FOMC press conference
View the full economic calendar
– Written by Matt Simpson
Follow Matt on Twitter u/cLeverEdge
ASX 200 Analysis: Santa’s rally timing could be down to the Fed
A decent bullish reversal candle has formed on the ASX 200 on Tuesday, which begs the question as to whether Santa’s rally is about to kick into gear. Although it is the FOMC meeting within the next 24 hours which could decide when or even if it...
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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