Another trading week passes with the latest FOMC meeting and US non-farm payrolls (aka unemployment print) solidifying risk expectations for the month and possibly rest of year ahead. Friday night saw jobs data surprise to the upside, sending Wall Street yet again to a new record high. The USD held ground but there was some intrasession volatility around the release, as Yen strengthened, but gold finally zoomed higher to climb back above the $1800USD per ounce level. Bond yields fell back sharply with the ten year yield dropping straight down to the 1.43% level after being well above 1.5% all week while commodity markets were finally buoyant with crude oil lifting over 2%, copper up 0.5% while iron ore remains under pressure.
Bitcoin’s rebound above the previous record high (solid black horizontal line) last week as failed to come to pass with a muted finish on Friday night just below the $61K level. The lack of volatility on the daily chart is indicative of a lack of directional stability although short term support at the $60K level remains firm, daily momentum is waning here:
Looking at share markets in Asia from Friday’s session, where Chinese shares retraced sharply, with the Shanghai Composite finishing exactly 1% lower at 3491 points while the Hang Seng Index fell even further, selling off quickly in the afternoon to close 1.4% lower at 24870 points. Price action continues to show a return to the dominant downtrend, with daily momentum now switching to negative settings and this close below the 25000 point level acting as confirmation of more downside to come:
Japanese markets also failed to get back on track with the Nikkei 225 closing 0.6% lower at 29611 points to clawback most of the previous session gains. Futures are indicating a possible small uplift to start to the new trading week but the higher Yen may prove a headwind. Nominally, the short term trend is up on the daily chart and daily momentum remains nicely overbought, but resistance overhead at 30000 points maybe starting to weigh:
Australian stocks had a very solid session to keep the ASX200 back above the 7400 point level, lifting nearly 0.4% to close the week out at 7456 points. SPI futures are up more than 20 points so we are likely to see the former mid October highs cleared as daily momentum moves from positive to overbought, on the way to a return to the former highs in August, as short term support builds strongly here:
European markets were again unified with the FTSE also catching a break as a lower Euro helped provide a steady tailwind to finish the week. The German DAX put in the smallest result, lifting only 0.15% to build above the 16000 point level. The daily chart is showing this runaway trend losing puff after clearing the previous highs and moving past the critical 16000 point level, and while daily momentum is nicely overbought and the lower Euro helping, short term price action is indicating a pause or small retracement ahead:
Wall Street moved ever onwards and upwards with the headline DOW up nearly 0.6%, while the NASDAQ eked out a 0.2% higher finish and the wider S&P500 almost closed above the 4700 point level for another new record high. You can’t stop the music – nobody but the Fed can stop the music – with daily momentum and price action all looking extremely overbought, but whose going to sell this market?
Currency market volatility continued obviously on the back of the NFP print and while the US Dollar Index was overall unchanged, there were some machinations across the various undollars. Euro fell to a new weekly low but then rebounded at the last, able to just finish above last week’s equally volatile Friday finish at the mid 1.15 level. The union currency remains in a significant downtrend here:
The USDJPY pair broke down as well but this time made the new weekly low stick, matching the intrasession lows of the last couple of weeks at just above the 113 handle. This finally takes it below what was a fairly wide trading range between the 113.40 and 114.40 level for the last two weeks, so watch for more Yen buying as the new trading week begins:
The Australian dollar had been falling on week in line with iron ore prices, but finally solidified a new weekly low below the 74 handle on Friday night, with a very late rally staving off a wider selloff. While momentum in the short term has reverted somewhat, the medium term trend is obviously down post the RBA meeting and the latest jobs report so this should keep the Pacific Peso in deflation mode:
WTI and Brent crude futures were able to stabilised their recent run off with a solid finish on Friday night, the latter closing back above the $82USD per barrel level. While my contention of a rounding top bearish pattern has not yet come to pass, this move down to trailing ATR daily support the $79 level next bears (sic) watching in the sessions ahead:
Gold finally was able to make a move above the $1800USD per ounce level stick after a midweek selloff looked like putting an end to this reflation rally. My contention of a return to the August/September lows just above the $1700USD per ounce level is now proving too bearish, but watch for another close above former ATR resistance to confirm Friday’s big bounceback:
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!