Wall Street slumped overnight as the slim chance of a Santa rally before the Xmas/NY break evaporated into thin air on negative sentiment. . Currency markets saw a resumption of the stronger USD trade with Euro and Pound Sterling both falling back as Yen remained somewhat stable compared to its mammoth moves earlier in the week. US Treasury yields were largely unchanged with the 10 year issue remaining above the 3.6% level while the commodity complex saw oil prices pull back slightly in the wake of the stronger USD with Brent crude retracing to just above the $81USD per barrel level as gold slumped back below the $1800USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were holding on to some small gains going into the close but rolled over instead with the Shanghai Composite finishing down 0.5% and still below the 3100 point level, closing at 3055 points while the Hang Seng Index still zoomed higher closing up 2.7% to the 19679 point level. The daily chart was still showing the typical end to a breakout that has run out of steam with momentum and price action now retracing lower in recent sessions. Watch support which has to be strongly defended at the 17600 area as overhead resistance is just too strong:
Japanese stock markets have finally stopped selling off in the post BOJ pivot phase with the Nikkei 225 closing nearly 0.5% higher at 26507 points. Futures however are indicating a bad finisht to the trading week with a possible return to the September lows as this pre-Xmas shock is still reverberating in Japanese circles. The rollover down to short term ATR support at the 27500 point level had already converted into a proper breakdown with daily momentum now extremely oversold, combined with a poor lead from Wall Street does not augur well:
Australian stocks had moderate gains with the ASX200 pushing some 0.5% higher as it continues its bounce off key support at the 7000 point level, finishing at 7151 points. SPI futures are suggesting a pullback to end the week on a bad note however, due to the slump on Wall Street overnight. The daily chart has been showing price action and daily momentum still retracing below neutral settings in the last couple of sessions with ATR support at the 7200 point area turning into resistance. Looks like a thin Santa rally has failed to regain some of the losses in this dip and we could be looking at a break down to the 7000 point level:
European markets slipped easily enough back into hesitation mode with mild selloffs and scratch sessions across the continent as the Eurostoxx 50 Index closed more than 1.2% lower at 3823 points. The daily chart shows key overhead resistance at the 3900 point area still unable to be pushed aside as daily momentum remains oversold as a potential swing trade setup is evaporating. Prrice action is not yet above former trailing ATR support which was broken after the October rally. The 4000 point level is the key psychological resistance in the long term where 2023 wants to start afresh:
Wall Street just couldn’t hold to two good sessions in a row with another slump overnight, sending the NASDAQ down over 2% and the S&P500 falling some 1.5%, the latter still well below the 4000 point psychological barrier at 3822 points. Price action is still stubbornly below the dominant medium term trendline (upper sloping black line) and had tested the recent weekly low (lower flat black line) as the nascent swing trade found too many obstacles overhead to really recover here:
Currency markets are still reducing in volatility on thinner trading volume, which is giving USD a lift as Euro melted a little bit to fall back below the 1.06 level and recent daily support. This level is still a solid weekly and monthly high with strong support evident at the mid 1.02s in the medium term. Price action could be slow moving as a result and is starting to play catchup so watch for a retracement below short term ATR support at the high 1.05s on any further risk aversion:
The USDJPY pair had almost zero movement overnight despite the stronger USD as traders pack away for the Christmas break, not knowing what to do with this out of the blue move from the BOJ, holding just above the 132 handle overnight. After a solid crash post the BOJ re-adjustment Yen is now back to a six month high against USD. Future direction is hard to discern after such an epic move and will be quite isolated:
The Australian dollar was under the pump again, lifting up to the mid 67 level and overhead ATR resistance before getting slammed back to its session lows at the mid 66 level overnight. This looks like some end of year pre-positioning as we go into what could be a quite volatile start to 2023 as the RBA will sit on its hands until the February meeting, now having to deal with a hawkish BOJ as well. Interest rate expectations will continue to drive this trade for the rest of the year and while price hasn’t dropped below the December lows yet, it bears (sic) watching with the low moving average now under pressure as price action rollsover:
Oil markets are still trying to find a bottom here with the slightly stronger start to the trading week not yet turning into anything significant as Brent crude finished back below the $82USD per barrel level overnight. Daily momentum is now out of oversold settings and setting up another minor swing play with another move above the high moving average that is suggesting the buying may not yet be over:
Gold was looking to be the resilient undollar but failed again overnight, slumping straight through the $1800USD per ounce level that it had built up throughout the week. As I mentioned post the inflation print last week, the key thing to watch now is for $1800 to turn into a solid area of support, and hopefully not turn into resistance, but I’m still waiting for a proper push above the $1820 level to enact a proper uptrend beyond this short term move:
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!wrong on your position, so cry uncle and get out!