The post FOMC ebullience gave way to absorbing the near dual ECB and BOE bank meetings which were less dovish but didn’t upset risk market expectations. Wall Street and European shares ended up mildly higher while the USD slid further as Euro and Pound Sterling surged. The Australian dollar almost broke through the 67 cent level as well.
The yield curve continued to drop with 10 year Treasury yields falling another 10 points to break below the 4% level while oil prices continued their small weak USD led rally as Brent crude finished above the $76USD per barrel level. Gold held on to its outsized gains, remaining well above the $2000USD per ounce level but didn’t advance much further.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell throughout most of the session with the Shanghai Composite finishing below the 3000 point barrier and 0.3% lower at 2958 points while in Hong Kong the Hang Seng Index has bounced back with a 1% gain closing at 16408 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 finally bouncing out of oversold settings as price action wants to get back above the October lows, with a small chance of stabilising here:
Japanese stock markets were under pressure due to the increased value in Yen with the Nikkei 225 down 0.7% to 32686 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 the best in the region with the ASX200 lifting well above the 7300 point level to close 1.6% higher at 7377 points.
SPI futures are up more than 0.6% as Wall Street continued to move higher 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:
European markets were finally able to advance from their solid start to the trading week but it was somewhat mixed as the Eurostoxx 50 Index finishing 0.2% higher at 4539 points, dragged back by a poor performing German DAX.
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 but I’m watching for a potential rollover here:
Wall Street was green across the board again but with much more modest targets as the NASDAQ and the S&P500 both closing just over 0.2% higher, the latter at 4719 points, extending its new weekly high.
Short term momentum is well into overbought territory with the swing play turning into a monster breakout 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 4800 point level the one to watch:
Currency markets saw another near 1% drop in the US Dollar Index on the less dovish ECB and BOE holds with Euro leading the way again, soaring up towards the 1.10 handle.
The union currency is now bouncing well above 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 is now extremely overbought with overhead ATR resistance cleared but likely setting up for a small consolidation here before a re-evaluation of USD strength:
The USDJPY pair was largely unaffected overnight but couldn’t get out of its recent bashing, still hovering above the 141 handle in the wake of the FOMC meeting.
Four hourly momentum is still in oversold mode after not quite getting into positive territory with price action matching the previous lows so we could see a potential follow through below the 141 level:
The Australian dollar too was largely unchanged, holding on to its recent blip higher to settle just below the 67 handle overnight that matched the previous weekly highs.
While the Pacific Peso remains under medium and long term pressure this looks like a relief valve being let off with short term momentum now into very overbought territory so watch the 67 level to come under threat next:
Oil markets remain volatile but are reducing in intrasession volatility somewhat with another upward session overnight on USD weakness seeing Brent crude lift 1% to get back above the $76USD 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 also consolidated above the $2000USD per ounce level following the recent USD flop and advanced slightly above the $2040 level as of this morning.
Profit taking as switched to position buying so watch for a follow through if price gets back above last week’s resistance level at the $2030 zone:
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!