Risk markets were again quite muted overnight with the USD falling slightly in the wake of the recent inflation print as markets overall are positioning for next week’s Fed meeting. Wall Street stumbled again after trying to make another new high while European stocks performed soundly. Asian shares will try to claw back the previous session losses but Chinese markets remain in a wary position. The US Dollar Index was down 0.2% with Euro still looking firm while short term resistance is seeing the Australian dollar finding it hard to push through the 66 cent level.
10 year Treasury yields rose again to finish just below the 4.2% level, while commodities were generally better – except iron ore of course – as a refinery strike in Russia sent Brent crude up towards the $83USD per barrel level while gold finished its breather and returned to its very positive uptrend, currently above the $2170USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets were flat with the Shanghai Composite down nearly 0.2% while the Hang Seng also did not advance at all, closing at 17092 points.
The daily chart is starting to look more optimistic with price action bunching up at the 16000 point level before breaking out yesterday, now making a run for the end of 2023 highs at 17000 points with the downtrend line broken:
Japanese stock markets are falling slightly despite the weaker Yen with the Nikkei 225 closing nearly 0.3% lower at 38697 points.
Trailing ATR daily support was never threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum getting back to overbought readings with a significant breakout. A selloff back to ATR support at 38000 points remains unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here on any volatility, with futures looking a bit better this morning:
Australian stocks were the only share market to actually advance with the ASX200 closing just 0.2% higher at 7729 points.
SPI futures are up 0.3% despite the mixed results on Wall Street overnight which could mean a volatile opening start. The daily chart was looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. As I said previously, watching for any continued dip below the low moving average could see a significant pullback but watch ATR support which has been defended so far:
European markets pulled back slightly on confidence but broadly managed an uplift across the continent, with the exception of the German DAX with the Eurostoxx 50 Index finishing 0.3% higher at exactly 5000 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly of overbought phase. This was looking to turn into a larger breakout but watch for these falls below the low moving average or ATR support proper:
Wall Street struggled to push higher with tech stocks again pulling back as the NASDAQ fell back 0.5% while the S&P500 finished 0.2% lower at 5165 points.
The daily chart shows a fantastic 2024 trading season so far but this is looking slightly overcooked, so watch for a mild pullback that could occur back towards the trendline around the 5100 point level:
Currency markets remain somewhat in anti-USD mode as the USD fell post the recent inflation data as traders try to posit the Fed’s position for next week’s meeting. Most of the majors lifted slightly or not at all with Euro again fairly well supported just above the 1.09 level as it matches its Friday night highs as a result.
The union currency had made another new monthly high with a view to getting above the 1.09 handle as momentum retraces from being overbought in the short term with price action in neutral mode. Watch for any pullback to the 1.0820 level and any test of the 1.08 handle itself however on a reversion:
The USDJPY pair is still trying to find a bottom after last week’s large downside volatility that saw it break below the 147 level with some stability returning again without making any new session lows and finishing just above the mid 147 level.
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is obviously very negative as Yen buyers step in but watch for a potential violent upswing through the mid 148 level:
The Australian dollar was unable to get back on trend from the bounce from late last week, with a very small lift above the 66 handle and the early February highs with resistance building at the mid 66 cent level as evident on the four hourly chart below.
The Aussie has been under medium and long term pressure for sometime before last week’s breakout but there signs of normalisation here before the next RBA meeting, but the Pacific Peso has had almost no reaction to last night’s US inflation data. Watch for trailing ATR support on the four hourly chart to come under threat next:
Oil markets are now trying to regain their December highs with Brent crude almost getting above the $84USD per barrel level overnight, just on the previous weekly highs but not yet completing a breakout pattern.
After retracing down to trailing ATR daily support at the $77 level, price is still above the weekly resistance levels that so far have held from the January false breakout with the short term target the late January highs above $84 still the next target:
Gold is again moving higher after some recent deceleration, still well above the $2100USD per ounce level as it tried to get back to its previous daily highs, closing just above the $2170 level overnight as it confirms short term support.
Last week daily momentum was nearly off the charts – never a good sign – with short term support at the $2000 level turning to what could be rock solid medium term support but still the critical area to watch ahead on a likely pullback due to excessive volatility:
Glossary of Acronyms and Technical Analysis Terms:
ATR: Average True Range – measures the degree of price volatility averaged over a time period
ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility
CCI: Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)
Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement
FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)
DOE: US Department of Energy
Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out/wrong on your position, so cry uncle and get out!