The latest US CPI print came in bang on expectations without much effect across stock and currency markets with yields initially spiking on the print before settling down to where they started. Wall Street lifted higher again as the Christmas rally continued while European stocks had a pause as the USD consolidated against the majors. The Australian dollar made a run for the 66 cent level again but failed to make it stick following the CPI print.
10 year Treasuries eventually pulled back slightly to the 4.2% level while oil prices flailed as the latest production reports were larger than expected with Brent crude pushed down to the $73USD per barrel level for a 4% loss. Gold consolidated again below the $2000USD per ounce level without any further losses but looks weak.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets started off slow but the Shanghai Composite finally broke the 3000 point barrier to close 0.4% higher while in Hong Kong the Hang Seng Index gained at least 1% to 16375 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 trying to bounce out of oversold settings but price action remains below the October lows, but possibly stabilising here:
Japanese stock markets however have not been able to translate the previous gains into anything sustainable with the Nikkei 225 putting in a scratch session at 32843 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 able to put in a modest session with the ASX200 lifting further above the 7200 point level to close 0.5% higher at 7235 points.
SPI futures are quite flat despite 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 unable to advance their solid start to the trading week with the Eurostoxx 50 Index putting in a mild scratch session, finishing 0.1% lower at 4536 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 absorbed the CPI print with aplomb and advanced across all three bourses with the NASDAQ lifting 0.7% while the S&P500 also gained 0.4% to close at 4640 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 some movement in response to the US CPI print with the US Dollar Index pulling back slightly mainly due to Euro finding a little life after its week long fall previously, this time almost breaching the 1.08 level by rebounding 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 but last night Yen came back slightly to halt this new advance.
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 is again trying to rebound but failed to make it stick above the 66 handle post the CPI print with a continued whipsaw pattern forming again on the four hourly chart.
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 now overshadowed by increased production numbers released by the IEA with another downward session overnight with Brent and WTI both off more than 4%, the former pushed below the $74USD 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 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. Last night saw a minor drag below the $1980USD per ounce level, 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!