The Christmas rally extended overnight with a much lower USD post the Euro core inflation print sending risk sentiment higher once as European shares and Wall Street continued upwards. The USD had been held in check from its Friday night blip higher but is now meeting considerable resistance as the Australian dollar broke free of its recent highs to extend well above the 67 cent level.
The yield curve stabilised again with 10 year Treasury yields still at a five month low at the 3.9% level while oil prices spiked higher as Brent crude almost finished above the $80USD per barrel level. Gold is still holding on to its outsized gains, matching last week’s high at the $2040USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were barely ticking over with the Shanghai Composite remaining below the 3000 point barrier at 2932 points while in Hong Kong the Hang Seng Index has retreated slightly, down 0.8% to close at 16505 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 were again breaking higher as Yen dropped in the afternoon with the Nikkei 225 finishing 1.4% higher to 33219 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 breaking down here with a selloff back to ATR support at 32000 points unlikely so far:
Australian stocks were almost the biggest climbers in the region with the ASX200 lifting nearly 0.8% higher to close at 7489 points.
SPI futures are up nearly 0.5% as it follows the strong response on Wall Street overnight. 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 finally able to advance playing catchup across the continent as the Eurostoxx 50 Index finished 0.3% higher at 4535 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 but I’m watching for a potential pause here:
Wall Street was also green across the board again as the NASDAQ lifted nearly 0.7% higher while the S&P500 closed just over 0.5% higher to 4768 points, still extending its historic high.
Short term momentum is now back into overbought territory with the four hourly chart showing a desire to just keeping climbing 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 but this has turned into a rally against USD with all the majors taking Euro’s lead with a breakout overnight sending the union currency up towards the 1.10 handle.
Euro 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 had a considerable rally post the BOJ meeting yesterday, pushing through the 144 level but has not been able to hold on to these gains overnight, heading back below and just on trailing ATR resistance.
Four hourly momentum almost got into overbought mode but remains in structurally negative settings so watch for a battle around this area as the medium term trend remains down:
The Australian dollar broke out above its recent session highs, having been buoyed by the RBA minutes release and the weaker USD overnight, pushing through the mid 67 cent level as a result.
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 68 level to come under threat next:
Oil markets remain volatile and in a downtrend trend but another upward session overnight on USD weakness saw Brent crude lift above the $79USD 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 getting out of oversold settings despite this failed test of support at the August level which should be 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 above the $2040 level to match its session highs from late last week.
Profit taking seems to have subsided for now with the switch to position buying more evident so watch for a follow through if price holds and then breaks above last week’s resistance level at the $2040 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!