An absence of news and catalysts saw risk markets rebound overnight following the volatile reaction to the December US NFP print from Friday night with Wall Street lifting strongly as tech stocks led the way. European shares were boosted by German stocks while the USD fell slightly against the majors with the Australian dollar getting back above the 67 cent level again.
10 year Treasury yields closed lower but remain around the 4% level while oil prices slumped again with Brent crude finishing well below the $77USD per barrel level. Gold was largely unchanged following its post weekend slump to remain below the $2030USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell sharply on tensions around property shares as the Shanghai Composite retreated below the 2900 point barrier, closing 1.4% lower at 2887 points while in Hong Kong the Hang Seng Index finished nearly 2% lower at 16224 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 retracing back to oversold settings as price action wants to return to the October lows, with little chance of stabilising here:
Japanese stock markets were closed for the long weekend with Nikkei 225 futures indicating a potential breakout on the open.
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 returning to the overbought zone. Correlations with a stronger Yen are breaking down here with a selloff back to ATR support at 32000 points unlikely as the November highs come under threat:
Australian stocks weren’t able to get moving as the new trading week started, with the ASX200 closing 0.5% lower to 7451 points.
SPI futures however are up more than 1% to follow the solid gains 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 were strong across the continent with German stocks leading the way as the Eurostoxx 50 Index finished more than 0.4% higher at 4485 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 further lift higher as daily support remains strong here:
Wall Street rebounded strongly because of tech stocks with the NASDAQ gaining more than 2% while the S&P500 closed 1.2% higher at 4763 points.
Short term momentum is now retracing out of oversold territory on the four hourly chart, with a very strong breakout pushing through trailing ATR resistance. Support has been strong at the 4700 point level proper as more trading volume and an absorption of the NFP print into macro considerations give rise to a new rally here:
Currency markets were consolidating on the back of the FOMC minutes before Friday night’s NFP print with King Dollar still dominating the general trend. Volatility on Friday night due to the weak ISM print saw some wide ranges but overnight saw only a small decline in USD as Euro remains anchored near the 1.09 handle.
The union currency was looking weak but with the potential for a swing trade higher before the print but short term momentum remains negative with price action still well below trailing ATR resistance as it remains near the December lows:
The USDJPY pair retraced from its Friday night breakout to return to just above the 144 handle and trailing ATR support on the four hourly chart due to an absence of Japanese traders.
Four hourly momentum is now slipping from overbought readings and the medium term trend (sloping black line) remains broken here but I think this move was a little too fast so watch for a possible retracement:
The Australian dollar had a wide range on Friday night but is now consolidating here with the 67 handle still proving too tough to climb over.
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 positioned for the NFP print and still have another month for the RBA to come back from holidays:
Oil markets saw a pullback overnight that is keeping Brent crude contained well below the key $80USD per barrel level with the downtrend still entrenched.
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 not finding much support in comparison with other undollars as it continues to flirt with a return to the $2000USD per ounce level as current price action remains anchored near the early December levels.
Profit taking may return here so watch the low moving average on the daily chart for signs of another possible dip with daily momentum still in 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!