The Christmas rally had a big hiccup overnight as Wall Street sold off near the close due to meeting resistance as the S&P500 almost reached its 2021 high with a much lower than expected UK inflation print helping USD take back lost ground. The Euro and other major undollars all retreated with the Australian dollar heading back to its recent support level just above the 67 cent handle.
10 year Treasury yields extended their five month low to retreat to the 3.8% level while oil prices spiked higher initially as Brent crude almost finished above the $80USD per barrel level. Gold is still holding on to its outsized gains, but is retreating from last week’s high at the $2025USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were in freefall with the Shanghai Composite cracking below the 2900 point barrier, falling more than 1% while in Hong Kong the Hang Seng Index has gone the other way, lifting nearly 0.6% to 16578 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 with the Nikkei 225 finishing 1.4% higher to 33675 points, although futures suggest most of this will be taken back today.
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 had another very solid session with the ASX200 lifting nearly 0.6% higher to break through the 7500 point level, closing at 7537 points.
SPI futures are down over 1% on the late trouncing 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 largely unchanged with only the FTSE advancing materially, as the Eurostoxx 50 Index finished with a scratch session at 4533 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 as futures indicate a rollover:
Wall Street was initially green across the board but lost its cool later in the session on resistance selling with the NASDAQ falling more than 1.5% while the S&P500 closed just over 1.4% lower to 4698 points.
Short term momentum was back into overbought territory with the four hourly chart showing a desire to just keeping climbing higher before this selloff that has wiped out all of this week’s returns so far. Watch for potential shoring up at the 4700 point level next however:
Currency markets saw some movement back to USD in the wake of the latest UK inflation print that surprised to the downside as Pound Sterling lost a lot of ground, pulling back Euro and other majors with it.
Euro had been trying to get back to the last week session highs and almost broke through the 1.10 handle but was pulled back overnight as short term momentum retraced into a neutral setting. Price action remains bullish and 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 but a consolidation as helped it settle down below the 144 level with only minor movement overnight.
Four hourly momentum almost got into overbought mode but remains in positive settings so watch for a battle around this area as the medium term trend remains down:
The Australian dollar had recently broke out above its recent session highs, having been buoyed by the RBA minutes release and the weaker USD but retraced the sharpest overnight, pushing back down to the low 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 retracing from overbought territory so watch the previous session resistance level at the 67 handle proper to come under threat next:
Oil markets remain volatile and in a downtrend trend but another spike overnight on initial USD weakness saw Brent crude lift above the $80USD per barrel level before retracing later in the session.
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 remains stuck above the $2020 level after failing to exceed 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!