With the US inflation report out of the way, Friday night saw the go signs flash green on stock markets while the USD pounced back on no major news against the major currencies, although the latest US Michigan consumer sentiment survey surprised to the upside. Bond yields saw new lows with 10 year Treasuries again putting in a three month low while commodity prices were somewhat mixed as industrials lifted and gold was pulled back on the stronger USD.
It should be a solid start to Asian stock markets this week, with the ASX200 closed however, local traders will miss out on the action and play catchup on Tuesday.
Bitcoin is still dancing with the devil here with a rebound on Friday night taking it back up through the $37K level but nowhere near out of harms way following a big gap down during the week. The daily chart still shows a series of resistance levels – or steps on the way down – but also a contrary bullish falling wedge pattern that might spark some upside if price breaks above the high moving average level at least above $38K:
Looking at share markets in Asia from Friday’s session, where the Shanghai Composite closed 0.5% lower to retrace once again below the 3600 point level while the Hang Seng Index lifted 0.4% to close at 28842 points. Price action is still showing an inability to decisively clear resistance at the 29000 point level keeping this market contained but support is building at the 28500 point level with no new substantive daily lows as momentum remains positive. Not yet time to abandon and sell up just yet:
Japanese stocks were in hesitation mode yet again as Yen becomes stronger, with the Nikkei 225 closing with a scratch session at 28948 points. Daily futures are pointing to a breakout above 29000 points on the rise on Wall Street but that downtrend line on the daily chart must be breached decisively, possibly helped as Yen depreciates against USD. Watch for the low moving average to be supported here as well for a sign of more bullish intent:
Australian stocks capped off a solid week with the ASX200 closing 0.1% higher and remaining above the 7300 point level at 7312 with SPI futures up nearly 50 points or over 0.6% indicating a very solid start for tomorrow’s session. Can’t stop the music here:
European markets were finally boisterous and lifted across the continent with the German DAX representative of the lost, gaining nearly 0.8% to close at 15693 points. The daily chart has been nominally positive for sometime now, but momentum readings were wobbly but this new breakout should imbibe more buying spirits going forward, particularly with a much lower Euro:
Wall Street is moving higher in a co-ordinated fashion although relative to European issues, the moves were a bit more subdued with the S&P500 up 0.2% to finish at 4247 points, still making a new record high. Price action on the daily chart clearly shows a steady if tentative uptrend here from the early May dips but its squeezing it out only just with momentum barely overbought and nothing like a substantive rally. Have we come to the end of exhaustion buying yet?
Currency markets were whalloped for nearly no reason with USD firming against almost everything after a fairly steady week. The Euro had been roundtripping around the 1.21 mid level but decisively broke below trailing ATR support on Friday night to the 1.21 handle proper and made a new weekly low. The four hourly chart was presaging such a move, but this is well overdone with momentum extremely oversold so expect a small bounce later tonight before the real trend reveals itself:
The USDJPY pair again tried to breakout and made a little headway before hitting resistance again, finishing the week on a nominal high and with momentum nicely overbought to support more Yen selling in this trading week. Not as strong as Euro/Pound selling so there is potential here for hedging if going all in on USD strength:
The Australian dollar just can’t catch a break with the mid week liftoff aborted sharply on Friday night sending it down to the 77 handle exactly. Again, resistance at the 77.70 level and the dominant downtrend remains too hard to clear and has been a great boon for swing traders on the Aussie! While momentum is extremely oversold we could see more downside here and a possible return to the previous weekly lows around the mid 76 level:
Oil prices continue to edge higher despite a weak or strong USD with Brent crude pushed slightly further above the $72USD per barrel level for a new daily and weekly high. The potential for a run up to the 2018 high at $83 or so continues to build here with the low moving average never under threat:
Gold was looking better but not great following the transitory inflation print but just can’t break through that $1900USD per ounce barrier and was sold off sharply on Friday night to finish the week at the $1877USD level. Trailing daily ATR support at the $1850 level is the key level to watch in the short and medium term as we require another solid session to breakout above the high moving average soon:
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!