Nikkei 225, Hang Seng show signs of life at their lows

Nikkei futures market positioning – COT report

If market positioning is anything to go by, an extended rally on the Nikkei seems unlikely. Even if it shows the potential to extend its bounce a little further. The data looks at asset managers on the CME exchange, specifically in yen terms. And what is shows overall is that this set of traders have been reducing their exposure overall, since net-long exposure peaked in Q2 2023.

It therefore seems unlikely that we’ll be seeing a record high on the Nikkei any time soon. Furthermore, last week shows that asset managers decreased longs and shorts have been increased two of the past three weeks. This makes sense as it coincides with the bearish Marabuzo week (large engulfing candle with little upper or lower wicks).

Nikkei 225 futures technical analysis

The daily chart shows that prices have held above Monday’s bullish pinbar, and its low perfectly respected the high-volume node (HVN) just above 35k. Two lower wicks have also formed, each part of a higher low relative to the pinbar. Also note that the open and close prices have held above the 38.2% Fibonacci level.

The 1-hour chart shows how bullish momentum ramped up, although it seems to have peaked for now and points towards a pullback on this timeframe. Bulls could seek evidence of a swing low to form above the 36k area, which includes a weekly VPOC (volume point of control) at 36,300 and swing high at 36,300.

Bulls could target 37,100, just beneath the monthly pivot point and prior swing high
A break above 37,300 takes prices into the upper half of the weekly marabuzo, where volumes were thin (this could help the rally extend)
However, I would then be seeking evidence of a swing high and for momentum to return in line wit the bearish move from its record high on the weekly chart

Hang Seng technical analysis

In some ways a similar setup, Hang Seng futures are also suggest a swing low has formed on the daily chart. What I find particularly interesting is how it has formed around a 61.8% Fibonacci ratio. It is unclear whether it will simply reach for the September high, and such a move might require a broad risk-on rally for global stocks or a hefty level of stimulus from Beijing. But it might be able to muster up the strength for at least a smaller rally from current levels.

A bullish divergence formed on the 1-hour chart ahead of this week’s swing low. Prices have since recovered above the monthly S1 and respected it as support. The RSI (14) is nearing overbought, so perhaps a pullback may be due on this timeframe. Bulls could consider dips within yesterday’s range while prices hold above 17,000 and target the 17,500 area near cycle highs and the monthly pivot point.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.