By Chris Becker
Risk markets were very quiet Friday night due to the long weekend in the US (the one time of year when they pronounce day/month correctly) with a forgettable session in Europe as stocks retreated, while bond yields fell slightly amid mixed reaction on currency markets due to the lack of volume. Commodoities were equally mixed with crude oil slipping while industrial commodities rose and gold fell slightly. It should be a quiet start to the week here in Asia with most futures indicating a small pullback on the open this morning on stock markets.
Looking at share markets in Asia from Friday where the Shanghai Composite is higher again, closing 2% higher to 3152 points while in occupied Hong Kong the Hang Seng Index lifted around 0.7% to 25293 points, now building above the former weekly highs throughout June and May. The daily chart suggests all systems are go for a continued uptrend here with a series of higher daily highs and lower daily lows as support builds below and momentum remains in overbought mode:
Japanese stocks put in slightly better sessions, despite the fear of rising cases of COVID-19 in the capital, with the Nikkei 225 lifting 0.3% to 22212 points. Futures are indicating a slightly lower start to this week, with the daily price chart still looking anemic here with a series of lower daily highs and very low volatility, suggesting a sharp move either way is due soon. Watch daily ATR support at the 21500 point level and the high moving average for those signs:
The ASX200 has kept well above the 6000 point barrier, up 1% at the start of the session but eventually finished with a scratch session at 6035 points. SPI futures are down over 30 points or half a percent, so we should start out the week below that magical level, which also keeps the medium term price picture in doubt for continued upside:
European markets soured on Friday night without any lead from Wall Street, with the German DAX closing down 0.6% to 12528 points. Momentum had finally picked up here previously with a clear breakout above the recent session highs but a lack of a follow through is only a little telling due to the lack of correlation with Wall Street. Wait and see for tonights open:
Wall Street was closed but S&P futures are indicating a mild pullback on the reopen tonight, failing any other catalysts during the day with stocks poised here on the daily S&P500 chart below strong resistance at the 3130 point level. This pattern is one of consolidation and will obviously require a breakout soon for re-engagement, setting up a similar pattern we see in late April/early May for another Fed-lead “recovery”:
Onto currency markets where intrasession volatility finally abated with a relatively calm session lacking any large economic prints, with service PMIs coming in as expected. Euro traded in a relatively tight range to finish the week basically where it started just below the mid 1.12 level. I had thought the former weekly lows below the 1.12 handle were going to be threatened last week and we could be in for a similar breakdown here, watching below the 1.1220 level first:
The USDJPY pair was also a wash with no movement at all, continuing a very tight range between the low and high sessions easily seen here on the four hourly chart, finishing the week just below the mid 107 level. Resistance at the 108 level is still well in play here, but trailing ATR support remains intact and no new session lows are indicative of some support but momentum is obviously waning:
The Australian dollar tried to keep on climbing with a solid session that almost setup a new weekly high just above the 69 handle until momentum slowed down later on. As I said last week, this is a nascent rally only and has yet does not have legs to tackle the previous weekly highs but I’m watching momentum levels closely:
Oil prices had little volatility due to closed US futures markets with Brent finishing the week just below the $43USD per barrel level, almost matching the previous price highs from this rebound rally. Daily momentum is still positive for now, with a breakout above the high moving average at $43 or so required before another legup in yet another central bank supported ridiculous rally:
Gold was also unable to put on a new daily high, having a tight session here to finish at the $1774USD per ounce level. Momentum remains in a solid overbought mood here, although watch for an inversion below the 100 level which is the usual sign for a swing short position:
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!