Wall Street sold off sharply overnight, with 2% falls and the fourth consecutive loss which has seemingly killed the Santa rally before it even started. Risk markets have re-evaluated the recent optimism surrounding the US and European economy with a cold winter in the latter causing concern over energy prices, although crude oil slumped to a new monthly low overnight. In currency land, Euro continued its falls as USD remains strong, but it was the relative winner as Pound Sterling and the Canadian Loonie fell sharper while the Australian dollar tumbled below the 67 cent level. US Treasury yields were relatively stable, arresting their weekly decline with the 10 year yield hovering above the 3.5% level while the commodity complex saw oil prices pullback sharply again, with Brent crude below the $80USD per barrel level while gold tried to stabilise, keeping off the bears to remain at the $1770USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets started lower at the open but have managed some gains post the long lunch break with the Shanghai Composite closing above the 3200 point level while the Hang Seng Index has retreated slightly, down 0.4% to 19441 points. The daily chart was showing a perfect breakout here with a big surge up towards the 19000 point level, although futures are indicating a mild pullback which maybe good in the short term to take some exuberance out of the trend as support is still defended at the 17600 area and daily momentum remains nicely overbought:
Japanese stock markets were able to finally find a bid however it was quite modest with the Nikkei 225 finishing just 0.2% higher at 27885 points. The lack of a clear lead from Wall Street combined with heavy resistance at the 28400 point level has turned this pause into a rollover into short term support. The daily chart shows this pullback is likely to continue with futures indicating the 28000 point area to come under pressure as daily momentum switches from positive to negative. Watch ATR support next at the 27500 point level:
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