By Chris Becker
The record highs on Wall Street keep coming while European shares overcame their recent hesitation as the US durable goods order came in higher than expected, bolstered by some Federal Reserve officials take on the stock market and economy. The USD was largely unchanged although the Australian dollar zoomed higher on the risk on mood, with commodities all over the place as oil prices stabilised, gold bounced back a little alongside iron ore. Treasury yields fell back slightly on strong demand.
Textbook example of a bubble – the US NASDAQ:
Looking at share markets in Asia from yesterday where in mainland China the Shanghai Composite fell sharply going into the close, finishing down 1.3% to 3329 points while in Hong Kong the Hang Seng Index stumbled along with a scratch session, unchanged at 25491 points. Price is still ready to push higher again through resistance around the 25400 point level but it seems there’s still some selling pressure ahead despite positive momentum and a bullish chart pattern:
Japanese stock markets are equally unmoved, with the Nikkei 225 treading water to close at 23290 points. Futures are indicating another flat start to today in line with non-Wall Street markets as resistance at or around the 23000 point level on the daily chart still needs to be cleared substantially to beat the late May highs:
The ASX200 had a solid session as well, gaining just on 0.5% to 6161 points as earning season rolls on. SPI futures are a bit mellow despite roaring Wall Street, up only 15 points or so as resistance at the May highs still remains the level to beat (upper black horizontal line) even though the daily chart still looks quite bullish and wants to breakout here:
European markets cleared away that frog in their throat from the previous session, with higher finishes across the continent. The German DAX lifted nearly 1% higher to 13190 points as risk re-aligned again with the US ebullience. The daily chart looks like clearing the triple top bearish pattern with clearance of the 13000 point level setting the stage for further advances:
Wall Street loved the durable goods orders with all three bourses popping higher, the Dow up 0.3% while the S&P500 zoomed up 1% to 3478 points to a yet another new record high, while the NASDAQ advanced nearly double, up 1.7% to keep on echoing the 1999 bubble. The daily chart continues to show a market well overbought and ready to pop even higher, although this is setting up for a potential KC signal:
Currency markets were mixed across the board in reaction to the durable goods order with Euro for example largely unchanged in the previous 24 hours, with a breakdown below the 1.18 handle filled without much aplomb. Four hourly momentum is still negative but ticking along as evidenced by the lack of no new session highs since the start of the week – wait and see mode:
The USDJPY pair however was unable to sustain its previous minor breakout and crossed back below the 106 level as it got ahead of itself, as indicated by the slowdown candles at the 106.30 level. Four hourly momentum had gone considerably overbought, setting up a swing trade below that has ceased at ATR trailing support so watch that level closely on the open this morning:
The Australian dollar finally moved higher with a nice breakout that had been building here just below the 72 handle and almost cleared trailing ATR resistance. Price had respected the daily uptrend line (black line at the 71.40 intersection) as the Pacific Peso realigned with the risk market complex and away from the strong USD. The next level to beat however remains last week’s high at the 72.70 level:
Oil futures moderated overnight despite the threats to oil production in the Gulf of Mexico and the latest oil inventory report with both Brent and WTI markers off by nearly 0.5%, with Brent remaining just above the $46USD per barrel level. This breakout may extend higher if the storms get worse if it can hold here at a new weekly high that should shake up the currently neutral positions in most portfolios:
Gold finally found some life with a head-fake breakdown below terminal support that was immediately filled and pushed back through the $1950USD per ounce level, almost back to its pre-breakdown level from last week. Watch for a follow through here on the Asian session with resistance at the $1970 level the area to beat:
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!