Stocks continued their rebound overnight although this correction maybe far from over as earnings season and downgrades get underway on Wall Street. The USD at first lost ground but it too rebounded on more interest rate cut speculation as inflation concerns linger. European stocks moved higher on more dovish speak from the ECB. The Australian dollar is trying to find a bottom above the 64 cent level as a result.
10 year Treasury yields were flat, remaining at the 4.6% level, while oil prices continued their wide ranging sessions but eventually remained still as Brent crude is stuck at the $87USD per barrel level. Meanwhile gold was unable to clawback all of its recent setback, slumping below the $2330USD per ounce level on rate cut speculation.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets are again in divergent mode with the Shanghai Composite off by 0.7% going into the close while the Hang Seng Index has gained nearly 2% to 16530 points.
The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. However this has been thwarted as monthly resistance levels are kicking in, although support at the 16400 point area is the area to watch next as price bounces off:
Japanese stock markets are having a solid rebound as well with the Nikkei 225 finishing exactly 1% higher at 37438 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term resistance has been defended with short term price action now retracing to support at the 39000 point level. Watch the 38000 level for signs of a true breakdown although futures are showing a potential follow through of yesterday’s rebound:
Australian stocks had a very solid up session with the ASX200 finishing 1% higher at 7649 points.
SPI futures are up at least 0.2% due to the rally on Wall Street overnight. 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. ATR daily support has now been broken, which is significant, taking price action back to the February support levels, although momentum is trying to get out of its oversold condition:
European markets were able to stabilise and then rebound with some solid sessions across the continent as the Eurostoxx 50 Index finished nearly 0.4% higher at 4936 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout but this retracement below short term support could turn into a larger reversal with a clear break of support at the 4900 point level that is trying to be filled here with a dead cat bounce:
Wall Street is now finding a bid on the rebound with the NASDAQ up more than 1% while the S&P500 finished nearly 0.9% higher to get back above the 5000 point level, closing at 5010 points.
The daily chart previously showed a consolidation that could have turned into a proper reversal here as price action broke below short term support as momentum became somewhat oversold. As I said previously, this break below the 5240 point area has setup for further downside. Watch firm support at 5000 points as a possible pausing point here with a breakout above four hourly ATR resistance at the 5100 point level required:
Currency markets were already in the thrall of King Dollar on the back of the US CPI print before this macro volatility with safe haven buying in USD coming back after a mild pause with Euro unable to get back above the 1.07 handle overnight.
The union currency had previously bottomed out at the 1.07 level at the start of April as medium term price action with a reprieving reversal in price action back towards the 1.09 level before last week’s inflation print. Short term support at the 1.0740 has been rejected so watch that level closely:
The USDJPY pair has been piling on breakout after breakout, managing to push aside the 154 handle at the start of last week as it tried to break above the 155 level overnight with a near constant runup that is now running out of juice.
The medium term picture was always somewhat optimistic as Yen sold off due to BOJ meanderings but momentum had been building before the CPI print, positive for all of the last week at least with ATR support upgraded throughout. This is likely overcooked in the short term but sets up for potential gains from here:
The Australian dollar remains below recent weekly support with just a small lift above the 64 handle as risk unwinds from the commodity currency as it turned over again last night.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while the previous temporary surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. Watch for potential downside below although a rounding bottom pattern is slowing being formed here as momentum builds:
Oil markets are increasing intrasession volatility after topping out during the latest round of Middle East conflicts with moves to the downside thwarted as Brent crude remains stuck around the the $87USD per barrel level again overnight.
After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR here carefully:
Gold is failing to defend its large uptrend after the minor retracement back earlier in the month with the failed breakout above the $2400USD per ounce level turning into a correction as it slumped to the $2330 level overnight.
Support at the $2200 level is still a long way off here as shorter term support at the $2330 area needs to be defended first or the early April gains will also disappear promptly:
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!