On the back of last week’s strong domestic out of the US, overnight saw some rate cut discussion from ECB officials which gave risk sentiment another boost as Wall Street rallied while European shares will play catchup if futures are to believed for tonight’s session. The USD slid back a little with the Australian dollar having a little look at the 66 cent level – but only just.
10 year Treasury yields fell back slightly to be below the 4.1% level with chances of a March rate cut starting to firm while oil prices fell back with Brent crude retracing below the $83USD per barrel level. Meanwhile gold rose around 0.4% to get back above the $2020USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell sharply in afternoon trade as the Shanghai Composite closed 0.9% lower at 2888 points while in Hong Kong the Hang Seng Index bounced back, closing up 0.8% to 16047 points.
The daily chart still shows the significant downtrend from the start of 2023 with the 19000 point support level a distant memory as medium term price action remains stuck below the 17000 point zone. However this recent bounce is seeing daily momentum readings almost reach positive 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 reach former support at the 16000 point level:
Japanese stock markets also moved higher with the Nikkei 225 closing up nearly 0.8% to 36025 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 able to advance slightly as the ASX200 closed 0.3% higher at 7578 points.
SPI futures are up a solid 0.5% given the strong rebound on Wall Street overnight. The daily chart is looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. I would still watch for any continued dip below the low moving average and conversely with a breakout above the 7600 point level:
European markets were a bit wobbly in the physical sessions but found more confidence in post close futures alongside Wall Street as the Eurostoxx 50 Index finished just 0.1% higher at 4639 points.
The daily chart was showing price action meandering and not yet making a solid attempt at breaching the early December 4600 point highs before this surge with daily momentum now well overbought and price exceeding the highs from December:
Wall Street climbed throughout the session and held on to all the gains with the NASDAQ pushed up more than 1% while the S&P500 lifted some 0.8% to close at 4927 points.
Short term momentum has returned to overbought territory on the four hourly and daily 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 initially saw a return to strength in USD as the weekend gap started but then a late reversal on doubts about the ECB saw King Dollar pushed back by Euro, which eventually settled just above the 1.08 level.
The union currency is 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, 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 to the 148 level with a small downtick at the end of the session overnight to the mid 147 level.
Four hourly momentum has calmly retraced from being extremely overbought with price firming and support building but watch for any inversion at the 147 handle below:
The Australian dollar is still the weakest undollar as traders await the February RBA meeting but there is some support building here as the 66 cent level comes under threat yet again.
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. Watch trailing ATR resistance in the short term as I think another valve could be let off soon:
Oil markets saw a proper breakout last week but stalled over the weekend despite rising tensions in the Middle East as Brent crude reversed slightly overnight to return below the $82USD per barrel level on Friday as tensions mount in the Middle East.
After clearing a key resistance level, and daily momentum now well out of negative settings this is setting up for a potential swing higher so watch carefully for a bigger breakout:
Gold remains unable to clear short term resistance at the $2030USD per ounce level but is finding some life in the short term with a lift up to that area overnight after bouncing off the $2010 level.
Watch for a potential breakout above ATR resistance at the $2040 level next as short term momentum becomes overbought 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!