Friday night saw a lot of unsettled trading on stock markets as the usual end of month window dressing transpired against the backdrop of more US corporate earnings and a surprise uplift in Eurozone inflation and 3Q GDP results. While Wall Street put in a new record high, European markets were held back by these prints, with Euro reversing all its mid week gains against USD. All the action remained in bond markets -particularly local as the RBA may have its hand forced sooner rather than later – with the 10 year Treasury falling back again to the 1.5% level while commodity markets were relatively bearish as oil held on while industrial metals and natural gas alongside iron ore fell sharply. Gold again was unable to hold on above the $1800 barrier.
Bitcoin came back on Friday after a mid week wobble, eventually finishing the week where it started just above the $62K level. Short term momentum has returned to a positive setting but price action remains below the previous record high, let alone the new record high which is where its likely to return in the week ahead:
Looking at share markets in Asia from Friday’s session, where Chinese shares were quite mixed as news about more property developer debt problems weighed, with the Shanghai Composite shaking it off to rise 0.8%, closing at 3547 points while the Hang Seng Index finished down nearly 0.7% as it rolls over from its recent rally, putting in a bad week. Price action show a complete rollover, as the solid level of resistance at the key 26000 points level at the previous September highs remains out of reach. The daily chart is suggesting a follow through on this rollover is likely, returning this to the dominant downtren, so watch for a close below the 25000 point level next:
Japanese markets however showed some signs of life as the Nikkei 225 lifted nearly 0.3% to 28892 points, but price action on the daily futures chart shows price still poised here in a tight band of support and resistance. Overhead trailing ATR resistance at 29300 points remains a stumbling block, with daily momentum still negative, so don’t get excited until we see the recent highs cleared at the 29300 point level or support failing at the 28500 level:
Australian stocks were the odd ones out with the ASX200 falling more than 1.4% to cross well below the 7400 point level, closing at 7323 points, capping off a volatile week. SPI futures are looking to close this gap, currently up nearly 70 points or almost 1% in what looks like a volatile picture. While daily momentum is now positive its not yet overbought indicating that the previous uptrend is short term in stature only, despite a desire to return to the former highs in August:
European markets again diverged in fortunes with peripherals markets pushing ahead while the FTSE and German DAX lost ground again, the latter closing 0.1% lower at 15688 points. The daily chart is still showing a near completion of the fill back to trailing ATR resistance, but it has not yet been breached, although momentum readings do look good for another attempt as a much lower Euro is surely a good tailwind:
Wall Street was able to put in new nominal highs, but only just with the NASDAQ making the biggest gains, up 0.3% while the S&P500 finished only 0.2% higher at 4605 points. The daily chart shows the market twirling towards freedom again, pushing through the 4600 point level as daily momentum gets nicely overbought again, suggesting even more upside as we head into the Taper:
Currency market volatility was much higher in the wake of the EZ GDP and CPI prints with the Euro slammed to the ground with a whopping 160 pip move after bursting right through the 1.16 level on the previous ECB meeting. The union currency is now all over the place in the short time as inflation oscillations start to spill over from bond markets to currencies, so again I’m watching for some consolidation here:
The USDJPY pair was able to put in a swing play on Friday night, but didn’t get past the previous intrasession weekly high, settling just below the 114 handle. This technically keeps it on a downward path with a series of lower highs, so again watch levels of support that could break here on a follow-through at the 113.40 level:
The Australian dollar couldn’t find anymore strength after very slowly lifting throughout the trading week as commodity prices failed yet again to re-engage to the upside. The Pacific Peso finished just above the 75 handle and while it nominally looks strong here, momentum readings and the lack of punch through overhead resistance is likely to weigh here as traders try to determine if the RBA is ready to pullback on its hands off rhetoric around interest rates:
WTI and Brent crude futures were very quiet on Friday with almost no movement seeing the latter stabilising around the $83USD per barrel zone. There is still the potential for rounding top pattern here and another close below the low moving average would seal the deal, at least in the short term with a target down to the $76 area:
Gold still can’t clear that key $1800USD per ounce level even as short term sentiment builds into a bullish case for gold, with daily momentum well into the positive zone, and price action both rising and all contained within a lifting average band. The big problem is the actual resistance level at $1830 or so that needs proper clearance first – watch for a rollover here on the open:
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!