Yet another solid night of corporate earnings on Wall Street has kept risk appetites full with a fine finish to the trading week on Friday night. The USD actually finished even against the majors and commodity currencies, with the defensive Yen underperforming while Aussie and Euro ceased their rebound promptly. The bond market actually lifted slightly across the curve in response to the stronger than expected US retail sales print, while commodities were mixed as WTI and Brent futures were up 1%, copper lifting more than 2% while gold was flummoxed despite the weak USD trend with a return to weakness as traders abandoned the surge to get back above the $1800USD per ounce level.
Bitcoin soared through the $60K level and then some on Friday night, almost blasting up to its previous record high (upper solid black horizontal line) in a frenzy of buying. This caps off a 100% plus gain since mid July with the typical weekend gap taking a little heat out of this action as it starts again just below the $60K level this morning:
Looking at share markets in Asia from Friday’s session, where the Shanghai Composite finished 0.4% higher at 3572 points while the Hang Seng Index reopened from its holiday to close nearly 1.5% higher at 25330 points. This confirms the previous breakout above the high moving average and the beyond the medium term downtrend line at the 25000 points level for a good follow through. For a new trend to develop the next level requires a push beyond 26000 points and the usual overbought momentum readings above 100:
Meanwhile Japanese markets surged strongly with the Nikkei 225 closing 1.8% higher to 29068 points. The daily chart shows a near complete fill of the previous swift corrective phase that took the market down to monthly support at the 27000 point level. The next stage here on this swing trade, with daily momentum not yet positive, is a clearance of trailing ATR resistance overheard at 29300 points:
Australian stocks also rallied nicely going into the end of the trading week, with the ASX200 closing 0.7% higher as it wants to return to the 7400 point level, finishing at 7361 points. SPI futures are up nearly 30 so we could see a return to that level, but like the Nikkei 225 chart above, daily momentum is not yet positive and this remains a swing trade only as this minor corrective phase continues:
Green across the board for European markets although it was a solid, not spectacular finish to the trading week as the rebounds continued after putting in a base mid week. The German DAX finished 0.8% higher at 15587 points with the daily chart showing a definite bounce off that key 15000 point level as yet another classic swing play is turning into a re-engagement of the major trend, but this requires a proper clearance of overhead trailing ATR resistance at the 15800 point level:
Wall Street continued its own fill and cover bounceback with the headline Dow moving to a record high, lifting more than 1% while the NASDAQ and S&P500 both finished 0.5% higher, the latter at 4471 points. The daily chart mimics the German DAX as well, with the same conditions: while daily momentum is now positive and the downtrend line has been cleared, overhead ATR resistance at the 4480 level beckons before calling this correction over:
Currency markets were more sanguine in volatility levels on Friday night in response to the US retail sales print which was offset by a very low consumer sentiment survey. The USD reflected in the DXY dollar index ended up unchanged with a look at the four hourly chart of Euro showing a point of control in contention at the 1.16 handle While the union currency remains somewhat supported here, a series of breakouts have been thwarted above that level but price action remains above previous trailing ATR resistance. I still contend it may not yet be enough to stifle the medium term downtrend until we see a solid move above the mid 1.16 level:
The USDJPY pair was also in a stabilising mood after its recent breakout and making another yearly high, finishing the week above the 114 handle. The technical picture remains quite bullish but with the expected pullbacks when traders get ahead of themselves selling Yen. Momentum had gotten way overbought here and is retracing smartly, which should see some stabilising around the 113.70 level above ATR trailing support throughout the week:
The Australian dollar was also listless in a very tight trading session to finish the week on a new weekly/monthly high nonetheless. Price remains well above the previous weekly highs (solid black upper horizontal line) which I contend is still a solid medium term anchor point but momentum is slowly waning – so watch the usual iron ore correlation which could pickup again here:
Brent crude futures lifted another 1% to finish the week well above the $84USD per barrel level on Friday night, building on the large trend from the August lows. This rally continues to have strong momentum readings as it remains well above the previous medium term downtrend with the potential for a retracement receding into the distance. Uncle points at the trailing low moving average level are doing well for now to lock in profits:
Gold had been trying hard to breakthrough the $1800 level after recently at trailing ATR support for over a week, but failed miserably on Friday night with that intraday resistance proving too strong, with a return to the low moving average level at $1767USD per ounce instead. While short term momentum had gone extremely overbought it wasn’t enough to close the week out above the psychological $1800 level and while price is still above the downtrend line from the early September rout, this one day price move is worrisome:
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!