Eoin Treacy's view

Over the period between Christmas Eve and New Year a lot of people take some time off with the result there are fewer traders around to execute orders. Market liquidity tends to dry up. We occasionally see enterprising traders take this as an opportunity to pressure stops in an attempt to reverse short-term overbought or oversold conditions. 

Markets often rally into the last couple of weeks of the year. Investors will have realised losses so they can be written off against profits to minimise tax liability while others will be looking for what will lead into the New Year. This year the stock market has been the subject of some exaggerated swings from the beginning of Q4 while the commodity markets in particular exhibit a large number of quite extreme oversold conditions. The thin market environment may be used to pressure shorts. I pointed out a number of shares that were among the worst performers this year in yesterday’s copy that are now finding at least near-term support and they are almost all in the energy sector. 

West Texas Intermediate Crude Oil is working on an upside weekly key reversal, Additional follow through to the upside next week would enhance the potential for a rally back towards the trend mean, currently near $52. 

The FTSE 350 Mining Index is more than 25% overextended relative to the trend mean and this was the first week since early October that the Index closed on a positive note. 

The US Dollar hit a medium-term peak against the Indonesian Rupiah in early October and firmed this week to retest the region of the 200-day MA. A sustained move below IDR13.500 would represent a major inconsistency for the Dollar’s uptrend. 

The iShares MSCI Indonesia ETF hit a medium-term low in early October and bounced over the last two weeks to signal support coming back in above that nadir. A sustained move above the trend mean, currently near $22, would be required to reassert demand dominance.