Good morning.

"Yesterday's Market"

U.S. stocks started strong with solid earnings, and all indices rose significantly.

As initial jobless claims fell, economic indicators also supported the market, leading to almost broad-based gains.

Inflation fears and other factors remain simmering, but the stock-picking around earnings season stood out and the market started on a favorable note.

Even amid a downward revision to the economic outlook and many uncertainties, the earnings season should be supported by active stock-picking and stay firm.

On the other hand, Japanese stock trends have entered election season following the dissolution of the House of Representatives.

Policy debates are expected to intensify, and as each party promises favorable outcomes, the market is expected to stay firm until the end of the month.

It rebounded at the neck line mentioned in the recent analysis, negating the short-term head-and-shoulders pattern.

With a favorable technical backdrop, we should keep an eye on re-testing the 29,200–30,000 yen range.

The forex market remains broadly risk-on with a steady cross-yen environment over the past few days.

The pound is somewhat faltering, but among the cross-yen pairs, the Canadian yen, which has recently hit new highs, is in a technical setup to push higher, potentially offering further gains.

As long as commodity prices stay high, yen selloffs are expected to continue, and with Saudi Arabia refusing to increase oil production, the oil market is likely to maintain a similar tone for a while.

“Stock Market”

With the weekend approaching, stock-specific earnings plays are likely to continue, though U.S. morning sessions may wobble a bit due to the release of retail sales and consumer confidence indices.

The parts driven by indicators are expected to be bought during New York hours, so I plan to judge with short-term technicals.

Recently the market had been soft, but there might be a buy-at-close algorithm for the weekend.

While I don’t expect new highs, the short-term technicals show a favorable move, so the basic plan is to target pullbacks.

The Dow Jones is hovering just below 35,000 after failing to surpass the October 7 high.

That level is a notable barrier, and whether price can break through is crucial for sentiment.

I will look at the pullback line on the short-term technicals.

First 34,800 level.

And the 34,650 support formed by yesterday’s New York session low.

If it breaks below, the red line to watch is 34,500.

For now, I think staying around this area should allow for decent trading today.

The Nikkei Average shows a slight pullback in gains.

With no solid horizontal support, profit-taking may proceed a bit more quickly than in U.S. markets.

Technically, I’m looking at a short-term half-width retracement, setting 28,400–300 as a pullback zone.

The 28,600–27,00 range is also the Cabinet’s resignation line, so I’ll watch that too.

In any case, I want to maintain a bullish bias while watching U.S. earnings into the late election period.

"Forex Market"

The environment for commodity currencies remains largely unchanged, and there is no shift in outlook.

The trend is clearer than equities, so there’s less confusion about direction.

I want to position for cross-yen buying and euro-dollar selling rallies as I trade.

Canadian dollar, which has moved higher on a break of resistance and a pivot-to-support, is favorable for scalping and can offer profits even with a single long position, targeting two levels on the horizontal.

Although indicators are heating up, I think it’s fine to ignore that and simply buy pullbacks on short-term horizontals.

Especially since the 2017 highs have been broken, options other than pullbacks are scarce from a technical standpoint.

Back to short-term analysis, the red line represents the 2017–18 high horizontal.

With 91.60 as support, I’ll set up at 91.80 and 91.60 in two tiers, with 91.4 as the final line, and if it breaks, I’ll wait for 91 yen.

EUR/USD forms a short-term head-and-shoulders, as with the Nikkei recently.

The sell order at 1.1615 is in place, but if it comes near 1.1605, I would close the position and hold a view that the head-and-shoulders is negated.

Below the 1.1585 neckline, I expect a drop toward around 1.155.

However, personally, based on today’s chart, a scalping or intraday position compromising against a head-and-shoulders negation would likely yield higher probability profits.

There is also a sense that euro-dollar is a bit “exhausted from selling,” and while I have a desire to sell, I want to do so cautiously.

U.S. stocks remain solid, and with a pathway for tapering established, the dollar is slightly weaker, so a substantial drop is unlikely, though tapering-related moves can be treated as a self-fulfilling factor.

Summary

With earnings boosts and election support, the market should stay firm as it has been in a bear phase, so the two-week horizon is to ride this favorable tone.

One concern was inflation fear around May that caused selling despite good earnings, but for now I feel more at ease.

Note: This article does not provide buy/sell timing or recommendations.

Please make your own investment decisions.

U.S. earnings season arrives and the House of Representatives dissolution