The new year continues to bring in volatile results across risk markets with Wall Street faltering again as European shares played catchup. Bond markets moved around somewhat in the wake of the latest FOMC minutes while King Dollar continued to move stronger against the majors, with Euro slumping off its recent high with the Australian dollar falling in sympathy.
10 year Treasury yields closed up nearly 2 points lower after an initial rise to remain around the 3.9% level while oil prices bounced back on larger than expected inventory drawdowns and renewed tensions in the Red Sea as Brent crude finished just above the $78USD per barrel level. Gold was unable to hold back against USD with a slump back down to the $2030USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets are trying to bounceback but the Shanghai Composite remains well below the 3000 point barrier, closing just 0.2% higher at 2968 points while in Hong Kong the Hang Seng Index finished 0.8% lower at 16646 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 have not yet re-opened to start the new trading year with Nikkei 225 futures suggesting a larger pullback below the 33000 point level.
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 but a lack of a new daily high is telling:
Australian stocks were the biggest losers in the region with the ASX200 closing nearly 1.4% lower to almost retrace below the 7500 point level, closing at 7523 points.
SPI futures however are down nearly 0.3% on the continued falls on Wall Street overnight. The daily chart is still looking very optimistic here in the medium term with short term price action however suggesting a possible reversal underway as daily momentum starts to wane and resistance at the 7600 point level builds. Watch for any dip below the low moving average:
European markets played catchup overnight, still unable to get out of their post Xmas rut with broad losses across the continent as the Eurostoxx 50 Index finished more than 1.4% lower at 4448 points.
The daily chart shows weekly support remaining firm at the 4480 point level but a failure to make a new high above the early December 4600 point level is starting to drag overall momentum down with a full retracement now below overbought settings. Futures are indicating a possible rollover so watch daily support very closely in the sessions ahead with volatility rising:
Wall Street fell across the three main markets as well with tech stocks still dragging everything down as the NASDAQ lost nearly 1.2% while the S&P500 closed 0.8% lower at 4704 points.
Short term momentum is now retracing out of overbought territory on the daily chart, indicating the Xmas rally is likely over with price action dipping well below the low moving average band. The next step to test here is trailing ATR support at the 4700 point level proper which is likely just a consolidation phase on thin trading volume:
Currency markets are further accelerating more into USD strength on the back of the FOMC minutes and expected ISM print with King Dollar still pushing back against everything. Euro remains anchored near the 1.09 handle again this morning.
The union currency was looking very bullish here but short term momentum retraced solidly from an overbought setting before price action crossed below trailing ATR support with a consolidation around the December lows expected until Friday:
The USDJPY pair brokeout significantly on USD strength overnight after a mild consolidation that had been brewing into a possible breakout as it pushes up through the 143 level after bouncing off the weekly lows.
Four hourly momentum is now well overbought and the medium term trend (sloping black line) possibly broken here but I think this move was a little too fast so watch for a possible retracement:
The Australian dollar continued its post NY selloff overnight with a further retracement almost below the 67 handle before some stability kicked in this morning.
The Aussie has been under medium and long term pressure for sometime with the latest rally just a relief valve being let off with short term momentum returning to oversold territory as traders position for the upcoming NFP print and wait another month for the RBA to come back from holidays:
Oil markets saw a rebound overnight due to an unexpected larger drawdown in inventories with Brent crude finishing just above the $78USD per barrel level to stave off a new daily low.
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 failed to push above trailing resistance at the $80 level. Daily momentum failed to get out of negative settings but is having another go here despite a possible retest of the December lows nearer the $70USD per barrel level soon:
Gold is finally playing catchup after initially being the only undollar not really moving in the new year with a selloff down to the $2030USD per ounce level overnight, retracing back to the early December levels.
As I said yesterday, profit taking may return here so watch the low moving average on the daily chart for signs of another possible dip with daily momentum now back into the oversold 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!