By Chris Becker
An interesting divergence on stock markets overnight as European bourses tanked, falling in line with the falls in 2Q German GDP and increase in Eurozone unemployment, but Wall Street rallied despite the biggest single quarter decline in US GDP history, proving that markets do not equal economics! Coupled with the huge drop in GDP (Thank Dog below they opened earlier hey?) was the unexpected rise in initial jobless claims as unemployment continues to grow in the wake of the Trumpvirus. Precious metals are slowly down in volatility but the USD continues to tank with another 0.5% drop in the US Dollar Index as Treasury yields reached a near six month low.
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite struggled to gain traction, slipping at the close to finish 0.2% lower at 3286 points, while in Hong Kong the Hang Seng Index also had a sharp reversal of fortune nearer the close after being up nearly 1%, falling 0.7% to 24710 points. This barely keeps price just above trailing daily ATR support but momentum pushing into the negative zone and the overall dour mood could see a wider breakdown here:
Japanese stocks continued to slip, with the Nikkei 225 down 0.2% to 22350 points. Futures are down again this morning in line with other risk assets, with price looking to slip below mild support at the 22300 point level and looking weaker in the medium term as this market buckles under the weight of more Yen buying:
The ASX200 is the best market in the region, up over 0.6% and firmly bouncing off the 6000 point level to finish 0.6% higher at 6045 points, absorbing the downtrend in dwelling approvals. SPI futures are being schizophrenic again, falling 50 points or nearly 0.5% on the mixed result on overnight markets. Watch bank stocks which usually rise and fall in line with the German DAX, which was poleaxed overnight, and be particularly careful at the last few minutes of the session where I would contend the 6000 point barrier might fail going into the weekend:
European markets continue to feel not only the weight of their domestic currencies, but actual economic reality with a big reversal across the continent overnight. The German DAX closed over 3% lower to 12379 points, with other bourses falling 2% or more. Momentum has fully rolled over from its overbought status with price breaking down to interim support at the 12400 point level, with those former swing play conditions now pointing to a proper trend reversal to below 12000 points:
Wall Street was all over the place in the wake of the European and then US GDP prints, first following then spiking towards the close on the Apple split and Amazon earnings, sending the NASDAQ into positive territory, although the S&P500 technically finished 0.4% lower, it gained more in futures. The four hourly chart shows this price volatility clearly as it continues to bounce off the 3200 point support level and now likely pushing through the 3250 point resistance zone, almost matching last weeks price high:
NASDAQ says depression? What depression? Bull market baby:
Currency markets remain heavily concentrated against USD and in full lockstep with that sentiment, Euro moved to another new yearly high overnight, fully pushing through the 1.18 handle and continuing its strong runup from last week. Momentum is picking up again as everyone piles in to a no-lose situation in selling USD:
The USDJPY pair was again pushed lower with another break below the 105 level that stuck this time as the GDP print weighed down the “King”. Price had decelerated into firmer support just below the 105 handle but as I said yesterday, look for signs of a break below the recent session lows for more downside and here we are with a potential second wave that could take out the February weekly/monthly low:
The Australian dollar continued its comeback and again broke through it previous weekly highs above the 71.70 level, almost breaking the 72 handle in the process and looking very firm coming into the end of the month. Momentum remains nicely overbought as the strong signal for more Aussie upside – aka USD downside – continues to flash:
Oil futures were quite volatile overnight, triggering some short positions, but came back sharply later in the session to end up with scratch sessions as the Brent marker slipped back below the $44USD per barrel level again. Daily momentum remains in a nice positive mood but as I’ve been warning for sometime, be prepared for a violent breakout either way and last night’s price action might be the harbinger here:
Gold tried to get back to its previous record high but ended the day with a minor retracement, falling to the $1955USD per ounce level again in a relatively stable session overnight. Stepping back from the daily chart shows this short term consolidation is welcoming some breathing room before another retest of the $2000 level:
Silver tried to breakdown overnight however, but found a load of buying support at the $23USD per ounce level, which equated to last weeks resistance level, so watch this zone very closely tonight:
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!