Equity markets continued to lift higher overnight with the USD steadying after the release of the latest US PPI index numbers and FOMC minutes with no new surprises contained within. European shares stumbled slightly while Wall Street finished solidly higher with a late flourish. The Australian dollar is holding just above the 64 cent level but is getting the wobbles.
US bond markets saw a lift in yields at the short end while 10 year Treasuries fell back to the 4.6% level, flattening the curve while oil prices lost nearly 3% as Brent crude dropped to the $85USD per barrel level. Gold continued its own breakout after a brief consolidation with a solid move up to the $1875USD per ounce level.
Looking at share markets in Asia from yesterday’s session with mainland Chinese share markets finally putting in a positive session, albeit just as the Shanghai Composite finishes 0.1% higher at 3078 points while in Hong Kong the Hang Seng Index has followed through on its bounceback to lift some 1.4% to 17924 points.
The daily chart is still showing a significant downtrend that has gone below the May/June lows with the 19000 point support level a distant memory as medium term price action stays well below the dominant downtrend (sloping higher black line) following the previous month long consolidation. Daily momentum readings are now well out of oversold mode and while this bounce is turning into a breakout, I remain cautious here:
Japanese stock markets also did well with the Nikkei 225 closing 0.6% higher at 31936 points.
Trailing ATR daily resistance is now coming under threat in this very fast bounceback and while daily momentum has retraced back from oversold settings its not yet positive so just like Chinese markets I’m wary of a dead cat bounce pattern forming here:
Australian stocks were also quite positive again with the ASX200 closing some 0.7% higher at 7088 points.
SPI futures are up only slightly – around 0.1% or so on the back of mixed results in equity markets overnight, despite Wall Street’s late optimism. The 7000 point level has not formed as strong short term resistance as I expected but medium term price action continued to move sideways with further short term upside to the 7200 point level:
European markets were unable to hold on to their recent gains despite the German DAX lifting 0.2%, peripheral bourses dragged the Eurostoxx 50 Index down, ending the session some at 4200 points even.
The daily chart still shows an overall decline with weekly support at 4100 points barely defended, as weekly resistance firms at the 4300 point resistance level. There are signs of a growing bounce here as daily momentum gets well out of oversold mode but I remain cautious as this looks like another short term ill fated dead cat bounce:
Wall Street was more optimistic particularly at the end of the session with broad gains across the three main bourses as the NASDAQ closed 0.7% higher while the S&P500 lifted 0.4% to finish at another weekly high at 4376 points.
The daily chart was showing price action bunching up around the recent lows at the 4260 point area with the previous session suggesting a bullish engulfing candle giving a big lift to risk sentiment. The PPI print gave a late boost to the market with a clearance of the 4400 point area in futures so this remains the most optimistic market to watch:
Currency markets are continuing their fight back against USD with last night’s FOMC minutes not really changing the trajectory of most major currency pairs. European economic weakness is not yet overshadowing Euro which remains above the 1.06 level.
In the medium term its apparent on the four hourly chart that the union currency is wanting to break above short/medium term resistanceat the 1.06 handle. Short term momentum is well overbought but price action is starting to bunch up again, showing this hesistation:
The USDJPY pair was able to stabilise after its recent decline and big whipsaw last week with another bounce to the 149 level overnight with a successful test and rejection of last week’s low at the mid 148 level.
Four hourly momentum shows a return to positive settings but this pair is stuck in a sideways dance, so watch for a substantive breakout above the 149.50 level or below the 148 handle proper:
The Australian dollar had been under the pump against King Dollar for sometime with a big decline to the 62 handle in recent weeks but after finding some new life on Friday night its now struggling again to hold firm above the 64 cent level in the wake of the FOMC minutes.
The Pacific Peso will therefore remain under pressure as short term momentum inverts from slightly overbought readings as price action breaks the low moving average, watch for a probable dip below the 64 handle:
Oil markets pulled back sharply overnight after consolidating in the previous session despite growing concerns of a wider conflagration in the Middle East. Brent crude dropped nearly 3% to finish at the mid $85USD per barrel level level.
After almost reaching $100 in mid September, price is looking to return to the August levels where a point of control was established before the breakout at the $87USD per barrel area. Daily momentum has nearly returned to oversold readings, so beware of a dead cat bounce completion and follow through here:
After gapping considerably higher on Monday morning gold is still pushing higher after a quick consolidation to now break through the $1870USD per ounce level overnight as momentum firms in the short term.
The daily chart was showing a potential bottoming action before Friday’s NFP print with this breakout firming to a new two week high as short term momentum remains heavily overbought but not in extreme condition as yet:
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!