Risk sentiment remained buoyed overnight but the mood shifted to European markets which soared over 2% higher while Wall Street couldn’t hold onto its initial gains with only tech stocks lifting. This was despite European PMIs remaining weak while US surveys returned a strong result as the USD fell back against most of the major currency pairs. Euro got back above the 1.09 handle briefly by bouncing off its weekly low while the Australian dollar also initially broken out above the 66 cent level but it was short lived.
10 year Treasury yields were up nearly 10 points to get back above the 4.1% level with chances of a March rate cut starting to firm while oil prices were able to lift slightly again as Brent crude closed above the $80USD per barrel level. Gold however couldn’t hold on to its recent gains with a flop back down to the $2010USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets were treading water initially as the Shanghai Composite looked set to put in a scratch session, before a big surge near the close saw it finish nearly 1.8% higher at 2820 points while in Hong Kong the Hang Seng Index also put in a very strong session, lifting more than 3% higher to 15899 points.
The daily chart amply shows the significant downtrend from the start of 2023 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 have now fully retraced from oversold settings as the previous session bullish engulfing candle lit up a strong rebound that could have legs here as part of a new swing trade to former support at the 16000 point level:
Japanese stock markets however fell back after their recent big run up with the Nikkei 225 closing nearly 0.8% lower at 36226 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 remaining extremely overbought. Correlations with a stronger Yen are breaking down here with a selloff back to ATR support at 32000 points unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here on any volatility:
Australian stocks were dead flat as the ASX200 closed at 7519 points, absorbing the impact of the latest tax cut news.
SPI futures are up 0.2% or so despite the wobbly result on Wall Street overnight. The daily chart is still looking somewhat mixed here despite the medium term uptrend with short term price action however still suggesting a possible reversal underway as daily momentum starts to wane and resistance at the 7600 point level builds. Watch for any continued dip below the low moving average and conversely with a breakout above the high moving average:
European markets found a lot of confidence overnight with weaker economic conditions leading to speculation the ECB will hold the course later tonight as the Eurostoxx 50 Index finished more than 2% higher at 4564 points.
The daily chart showed price action meandering and not yet making a solid attempt at breaching the early December 4600 point highs before last night’s surge with daily momentum finally positive. The next level to beat are the highs from December:
Wall Street climbed throughout the session but didn’t hold on to all the gains with the NASDAQ pushing 0.4% higher while the S&P500 gained just 0.1% to close at 4868 points.
Short term momentum has slightly retraced from extended overbought territory on the four hourly chart, with this solid breakout taking out trailing ATR resistance and the weekly highs overhead. Overall support has been strong at the 4700 point level proper but with those December highs as very strong resistance now breached we could see a swift run up to 5000 points:
Currency markets increased in volatility as traders await tomorrow’s ECB meeting and US GDP prints with King Dollar regaining momentum against most of the majors with Euro plunging below the 1.09 handle proper.
The union currency had been still looking weak here after tracking sideways for nearly three weeks as short term momentum switched to negative as price action remains contained well below trailing ATR resistance. After being considerably oversold there was potential building for a swing trade higher here, but the break below the low moving average has seen a new weekly low:
The USDJPY pair remains in a sideways bullish/consolidating mood after its recent big surge with the 148 level still proving strong short term support as it tried to reach last Friday’s high overnight.
Four hourly momentum has calmly retraced from being extremely overbought and price firms here with support building at the 147 handle below:
The Australian dollar is still the weakest undollar as traders await the February RBA meeting with another rollover overnight sending it well below the 66 level with short term resistance just too strong for now.
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 still have another month for the RBA to come back from holidays. As I said previously, if you’d turn this chart upside down and you’d be bullish – but watch trailing ATR resistance in the short term:
Oil markets saw yet another mild uptick that could be the start of a potential breakout given the recent amount of low volatility with Brent crude breaching and staying above the $80USD per barrel level overnight as tensions mount in the Middle East.
This is a key resistance level, with daily momentum now well out of negative settings and setting up for a potential swing higher so watch carefully for a breakout soon:
Gold has been looking weak after the weekend gap with the inability to clear short term resistance at the $2030USD per ounce level with a proper breakdown overnight sending it back to the $2010 level very swiftly.
Watch for a potential return to the previous lows just above the $2000USD per ounce level next as short term momentum becomes oversold going into tonight’s session:
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!