The start of the new trading week heading into Christmas saw subdued trading on both sides of the Atlantic but the prospect of more rate cuts from the Fed kept Wall Street up while European shares pulled back. The USD was held in check from its Friday night blip higher as the Australian dollar remained slightly above the 67 cent level.
The yield curve stabilised somewhat with 10 year Treasury yields lifting slightly to the 3.9% level while oil prices spiked higher as Brent crude finished well above the $78USD per barrel level. Gold is still holding 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 continued to fall throughout most of the session with the Shanghai Composite again finishing below the 3000 point barrier, closing 0.4% lower at 2938 points while in Hong Kong the Hang Seng Index also lost ground with a 1% loss to close at 16629 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, but so far there has been only a small chance of stabilising here:
Japanese stock markets remained under pressure without a positive lead despite the falling Yen with the Nikkei 225 closing 0.7% lower at 32758 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 performers in the region with the ASX200 only retreating 0.2% lower to remain above the 7400 point level to close at 7426 points.
SPI futures are up only slightly despite a strong response on Wall Street. The daily chart is again looking very optimistic here in the medium term with short term price action following the completion of a bullish reverse head and shoulders pattern with the neckline at the 7300 point area clearly broken:
European markets were unable to advance on their recent uptrend with only the FTSE 100 lifting as the Eurostoxx 50 Index finished 0.6% lower at 4521 points, again 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 however was green across the board again as the NASDAQ lifted nearly 0.6% higher while the S&P500 closed just over 0.4% higher, the latter at 4740 points, still extending its historic high.
Short term momentum is trying to slip back into overbought territory with the four hourly chart showing a need 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 some stabilisation in the post weekend gap open with Friday nights USD rally stalling for the majors with Euro holding firm just above the 1.09 handle.
The union currency had a very solid bounce 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 has retraced from being extremely overbought with price action pulling back to a more sustainable level well above trailing ATR support with a further consolidation here before a re-evaluation of USD strength:
The USDJPY pair was able to sneak slightly overnight but still can’t get out of its recent bashing, holding below the recent weekly closing low just below the 143 handle.
Four hourly momentum is retracing out of oversold mode but structurally negative so watch for a potential lift up to trailing ATR support:
The Australian dollar was largely unchanged, holding on to its recent blip higher to settle just above 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 above the $78USD 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 continues its consolidation after the wild ride above the $2000USD per ounce level following the recent USD flop and advanced slightly above the $2020 level as of this morning without making a new daily high.
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!