The first session of the new trading week post the latest US unemployment print – aka non-farm payrolls – saw relative calm despite some forthcoming releases this week from key central banks that should have markets on edge. Wall Street lifted even higher while European stocks consolidated their gains as the USD continued its move higher against the majors as the Australian dollar held fast below the 66 cent level.
US Treasury yields saw a mild lift across the curve as 10 year Treasuries gained nearly 5 points to the 4.27% level while oil prices were able to rebound slightly to push Brent crude back above the $76USD per barrel level. Gold’s recent blowout has now been completely reversed with the shiny metal losing another $20USD to the $1980USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were deeply in the red to start with but recovered and then accelerated going into the close with the Shanghai Composite finishing some 0.7% higher at 2991 points while in Hong Kong the Hang Seng Index lost significant ground with a near 1% loss to 16201 points.
The daily chart was showing a significant downtrend that had gone below the May/June lows with the 19000 point support level a distant memory as medium term price action remained stuck in the 17000 point range before this new losing streak. Daily momentum readings are solidly back to oversold settings with price action now below the October lows, but possibly stabilising here:
Japanese stock markets however gained a lot of lost ground after a poor session on Friday with Nikkei 225 up more than 1.4% to 32759 points.
Trailing ATR daily support was being threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum now fully retracing from the overbought zone but wanting to neutralise. Correlations with a stronger Yen are in play again as I remain wary of a selloff back to ATR support at 32000 points which so far has been defended strongly:
Australian stocks were largely unchanged despite the positive lead from Wall Street with the ASX200 putting in a scratch session to remain below the 7200 point level at 7198 points.
SPI futures are indicating at least a 0.2% lift higher on the open, following the solid gains on Wall Street from overnight. The daily chart is again looking more optimistic here in the medium term with short term price action filling a hole against the tide with a possible reverse head and shoulders pattern forming, with the neckline to break at the 7300 point area next:
European markets were able to put in slightly better sessions to start the new trading week, as the Eurostoxx 50 Index eventually finished 0.4% higher at 4540 points.
The daily chart shows weekly resistance at the 4300 point resistance level taken out with this large bounce setting up for further gains as momentum remains quite firm and nice overbought. Support is now upgraded to at least the 4300 point level with a lower Euro continuing to help here following Friday night’s NFP:
Wall Street continued its post NFP print bliss with the NASDAQ lifting 0.2% while the S&P500 also gained 0.4% to start the week out at 4622 points, extending its new weekly high.
Short term momentum is now back into overbought territory with another swing play bouncing off trailing ATR support on the four hourly chart, ready to climb higher. Key support at the 4540 point area has not been breached yet despite this volatile shake out in the past few sessions last week with a further break above the 4600 point level the one to watch:
Currency markets saw another lift in the US Dollar Index with Euro still deflating slowly after its week long fall previously, again finishing at the mid 1.07 level just above its recent new weekly low.
The union currency remains well below its recent weekly lows after topping out at the 1.10 level earlier in the previous week, as it failed to maintain momentum above the daily trendline. Short term momentum was setting up a swing play but has returned to being well oversold as this turns into a dead cat bounce although the 1.07 handle does seem to be firming as support here:
The USDJPY pair has nearly recovered from its recent epic mid week BOJ-led volatility that saw a move straight down to the 141 handle with the subsequent bounce back to the 146 level now complete as Yen continues its selloff from the near 100 pip revival on Friday night.
Four hourly momentum showed the way with price action unable to breach trailing ATR resistance but this is a very volatile situation so watch for a potential follow through above the 147 level:
The Australian dollar was previously on the rebound but failed to make it stick above the 66 handle prior to the NFP print and that’s where it will battle it out starting the new trading week, with price hovering around the mid 65 cent level instead:
The Pacific Peso remains under medium and long term pressure with short term momentum still failing to get back into more sustainable upside but the recent failure to breach the 67 cent level remains telling. I’m still watching for a further pullback to the November lows:
Oil markets remain volatile with the growing conflict in the Middle East and potential OPEC with another downward session on Friday night before a late recovery saw Brent crude pushed back above the $76USD per barrel level overnight.
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 still in oversold settings with this failed test of support at the August level setting up for further falls below:
Gold failed to get back on track despite a mid week pause and what looked like a solid consolidation well above the $2000USD per ounce level but Friday night saw nerves frayed as the USD came back on strength with a new two weekly low just above that level. The weekend gap open saw it fall sharply another $20 or so to the $1980, completing a bearish head and shoulders pattern.
As I said last week, watch out for more profit taking if price action breaks below trailing ATR support and of course, the magical $2000 level:
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!