By Chris Becker
Risk sentiment is only positive on Wall Street due to a surge in a handful of tech stocks, as market breadth stretches out as ridiculously thin as the overall PE valuations, with the NASDAQ up through 10,000 points overnight while European bourses slipped. Existing home sales in the US dropped to a decade low (might need some sweet Fed home buyer grants soon) while all commodities except iron ore lifted as USD retreated slightly.
Looking at share markets in Asia from yesterday where the Shanghai Composite was off only a handful of points while the Hang Seng Index is down 0.5% to take back some of Friday’s gains to 24511 points, still in its own little funky sideways trend despite good positive momentum building. The daily chart shows price ready to break out of its moving average bands with resistance at the 24700 point level the one to watch as momentum builds:
Japanese share markets were down slightly with the Nikkei 225 slipping 0.2% to 22437 points. Futures are indicating some more upside action today as daily ATR support at the 21500 point level remains firm but requires a proper new daily high soon before support may slip:
The ASX200 fell nearly 1% to start the week before a mild recovery on the back of some soothing RBA words has seen it finish a handful of points higher at 5944 points. SPI futures are up nearly 30 points or 0.4% going into this morning’s open on the back of a positive Wall Street take, with price wanting to get back above the 6000 point level again as momentum flat lines here:
European markets had a modest drops across the board to start the week on a poor note, although most of these were filled in post close futures alongside the gains on Wall Street. So while the German DAX nominally closed 0.5% lower to 12262 points, this was filled by futures as solid support at the recent lows is still holding. Overhead resistance at the recent daily highs/high moving average must be cleared soon or we might see a sharp retracement below 12000 points:
Wall Street has rallied from the Monday morning SP futures gap down and through to overnight, led by tech stocks with the NASDAQ up over 1% while the S&P500 eventually closed 0.5% higher to 3117 points. The four hourly chart remains illustrative, showing the relatively weak session candles and the inability to cross the downtrend of lower highs from last week’s intrasession high:
Onto currency markets where the volatility returned to USD selling, as Pound Sterling rebounded sharply over 100 pips throughout the night, dragging Euro along for the ride. The union currency broke out above the 1.12 handle, breaking the nearly week long downtrend after recently exceeding its own two week low. The swing back I was watching for is still in play but requires a break above trailing ATR resistance and probably the 1.13 handle before calling a new trend:
The USDJPY pair remains depressed and continued its caterpillar like move sideways well below short term resistance at the 107.60 level, starting the week without any new vigor. The inversion trade may start again soon if no new session highs are made shortly, as the anticipated rollover of momentum builds up steam, with the 106.50 former lows the target here:
The Australian dollar also joined in on the USD weakness meme, now up over 100 pips from its own Monday morning gap down open, with short term bears quickly filling in for a short term long swing. Its not out of the woods yet despite the rise above the 69 handle with last week’s high at the 69.60 level the area to beat before calling this a new uptrend:
Oil prices continue to lift – definitely not on fundamentals – with Brent futures almost closing above the $43USD per barrel level. Price has pushed into overbought mode on the daily momentum chart with a retest of the previous breakout highs above $42 now confirmed and suggesting a second leg of this remarkable rally:
And, finally to gold which continued its Friday breakout to close above the $1754USD per ounce level, helped along a little by the overall weak USD. This matches the previous nominal highs and sets up for further upside, but momentum is slightly overbought here and ripe for a minor pullback before re-engaging:
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)
BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe
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!