A slightly brighter start to the trading week overnight with Wall Street re-engaging to the upside and dragging the risk complex higher on the absence of any bad economic news or worsening macro conditions. The USD pulled back slightly with Euro stabilising while the Australian dollar remained around the 63 cent level.
US bond markets saw a rising of yields across the curve as 10 year Treasuries returned back to the 4.7% level, while oil prices fell back around 1% after their Friday night spike as Brent crude pushed below the $90USD per barrel level. Gold remained steady with a minor retracement back below the $1920USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets have dropped somewhat with the Shanghai Composite down 0.5% at 3072 points while in Hong Kong the Hang Seng Index was in a similar boat, off by 0.6% to 17710 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 had gotten out of oversold mode but this bounce did not become a breakout, so my caution about it turning into a dead cat bounce is coming to fruition here:
Japanese stock markets however were the worst of the bunch with the Nikkei 225 closing nearly 2% lower at 31673 points.
Trailing ATR daily resistance was coming under threat in a very fast bounceback and while daily momentum retraced back from oversold settings as price action is following Chinese markets with a typical dead cat bounce pattern forming here. Futures are indicating some stability returning in today’s session:
Australian stocks were the best in the region, relatively speaking with the ASX200 closing just 0.3% lower at 7026 points.
SPI futures are up nearly 0.7% this morning in response to the return of optimism on Wall Street overnight with the 7000 point level under pressure to prove its either strong short term resistance or support once again. The daily chart is not looking optimistic here with medium term price action continuing to move sideways at best:
European markets were able to shake off some of the bad finish to last week with minor gains across the continent with the Eurostoxx 50 Index up 0.3% to start the week at 4149 points.
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 were signs this bounce was running out of steam as daily momentum remained neutral at best although futures indicate a small potential upside move higher tonight:
Wall Street returned with a very positive session across the board lead by some positive comments from Fed members as the NASDAQ gained just over 1.2% while the S&P500 lifted more than 1% to finish at 4373 points.
The four hourly chart shows support building at the 4340 point area with upside resistance quite clear at last week’s high at the 4430 level as short term momentum now bounces back into positive territory:
Currency markets saw a one way move against USD overnight, a small reversal after the big reaction to last weeks CPI print when King Dollar had reasserted itself against most of the major currency pairs on the safe haven bid. Euro lifted straight through the mid 1.05 level but may struggle here on tonight’s ZEW Survey results.
In the medium term its apparent on the four hourly chart that the union currency is wanting to break above short/medium term resistance at the 1.06 handle and while short term momentum was well overbought price action had started to bunch up and pause in preparation for the CPI print, falling sharply on its release. This could result in further losses back to the previous weekly lows around the 1.04 mid area if the 1.05 handle is not defended:
The USDJPY pair was able to hold onto its breakout above the 149 level overnight, almost making a new weekly high after a recent successful test and rejection of last week’s low at the mid 148 level.
Four hourly momentum shows a retracement from overbought settings so I expect some further moderation in today’s session but setting up for another attempt at getting through the 150 level soon:
The Australian dollar was the biggest loser last week after stalling following the release of the FOMC minutes, with the subsequent US CPI print pushing it over the edge down to the 63 handle where it stayed Friday night.
The start of week reversal hasn’t been as kind to the Pacific Peso however, which remains under medium and long term pressure despite the recent slow climb out. The four hourly chart shows a very modest lift here that gets momentum out of oversold readings but still quite negative so watch out below:
Oil markets were relatively stable overnight after their big spikes on Friday with a minor 1% loss for Brent crude which eventually finished just above the $90USD per barrel level.
After almost reaching $100 in mid September, price was looking to return to the August levels around the $85 area where a point of control had been established before the recent breakout. Daily momentum is now jsut back to neutral/nearly positive sessions with support clearly firming at those August levels so we could see a retest of the September highs instead:
Gold remains the best undollar with almost no loss following its big surge on Friday night that saw it breakout above the $1900USD per ounce level after absorbing the latest US CPI print with aplomb.
The four hourly chart was showing a very steady uptrend since the previous weekend gap higher as momentum remained positive in the short term. This new breakout puts in a new monthly high with short term momentum extremely overbought and ripe for a pullback back to retest the $1900 level again:
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!