The major Wall Street indices appear to be moving in different directions, with the Nasdaq 100 reaching a record high, the S&P 500 holding steady in consolidation, and the Dow Jones logging its longest losing streak since 2011. For Australian markets, this divergence spells potential trouble, as the ASX 200 closely mirrors the Dow’s bearish trajectory.
Diverging Themes in US Markets
The US services sector continues to show resilience, with the flash PMI for December rising to a 38 month high of 58.5. Firms expressed growing optimism for future output, supported by expectations of stronger economic growth under a potential new Trump administration. This upbeat data serves as a timely reminder, ahead of the Federal Reserve’s final FOMC meeting of 2024, that the US economy remains robust raising concerns that inflation could remain sticky, prompting a less dovish stance from the Fed.
While the Nasdaq 100 celebrated a fresh milestone by hitting 22,000 for the first time, accelerating above the 10 and 20 day EMAs, the story was far less encouraging for the Dow. The index fell for an eighth consecutive session, marking its longest bearish streak in over a decade and settling at a three week low. Meanwhile, the S&P 500 edged higher but remains in a holding pattern just below its record high, trading above its key EMAs but showing no clear signs of breaking out ahead of the Fed’s rate decision.
Implications for the ASX 200
For Australian investors, the ASX 200’s strong correlation with the Dow Jones adds to the concern. The ASX appears to be losing momentum, with futures pointing toward a retest of the 100 day EMA around 8192. Technical indicators suggest a bearish bias, with the 1-hour chart showing a clear downtrend. Traders may look to fade moves toward the 10 or 20 hour EMAs, anticipating further declines toward the 8200 support level.
Key Economic Events to Watch (AEDT)
Several economic data releases are scheduled for today, which could impact regional and global markets:
- 10:30 AM – Australia: Westpac Consumer Sentiment Index
- 11:00 AM – New Zealand: Economic Forecast, Budget Balance, Debt Forecast (NZ Treasury)
- 11:30 AM – Singapore: Non-Oil Exports
- 6:00 PM – UK: Employment Data (Earnings, Claimant Count, Unemployment Rate)
- 8:00 PM – Germany: Ifo Business Sentiment
- 9:00 PM – Eurozone/Germany: ZEW Economic Sentiment Index
- 12:30 AM – US: Retail Sales Data
- 12:30 AM – Canada: CPI Inflation Data
- 1:15 AM – US: Industrial Production, Manufacturing Output, Capacity Utilization
Conclusion
While the Nasdaq’s rally reflects optimism in the tech sector, the Dow’s prolonged decline is a signal of caution, particularly for Australian markets like the ASX 200. With a strong bearish trend in play, traders should monitor technical levels and global economic releases closely, especially with the Fed’s upcoming decision set to drive broader market sentiment.
