Overnight saw some calm return to most markets without any major economic catalysts, as bond yields moved slightly higher on firming expectations of a rate cut from the Fed while the USD slipped only slightly, with gold zooming higher again. Wall Street lacked confidence to move higher while European stocks continued their rally while the Australian dollar was the outsider, falling back to the 65 cent level as Euro firmed.
10 year Treasury yields lifted slightly to get above the 4.2% level, while commodities were mixed as Brent crude fell back as gold soared above the $2100USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets were relatively positive with the Shanghai Composite up 0.4% while the Hang Seng closed dead flat at 16595 points.
The daily chart was starting to look more optimistic with price action bunching up at the 16000 point level, ready to possibly make a run for the end of 2023 highs at 17000 but as I warned previously, watch for any retracement down to the low moving average that could presage a full breakdown to the long term trend:
Japanese stock markets continued their stunning run with a new high for the Nikkei 225, up 0.5% to push through the 40000 point level, closing at 40109 points.
Trailing ATR daily support was never threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum getting back to overbought readings with a significant breakout. A selloff back to ATR support at 38000 points remains 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 unable to move higher however with the ASX200 down some 0.1% but still above the 7700 point level, closing at 7735 points.
SPI futures are flat given the mixed result on Wall Street overnight. The daily chart was looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. As I said previously, watching for any continued dip below the low moving average could see a significant pullback but watch ATR support which has been defended so far:
European markets got back into divergent mode with the German DAX stumbling but peripheral markets pushed the Eurostoxx 50 Index 0.3% higher to 4912 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum has now retraced from being well overbought with futures indicating a further pullback this evening. This is looking to turn into a larger breakout but watch for any falls below the low moving average or ATR support proper:
Wall Street couldn’t extend its recent positivity with the NASDAQ down more than 0.4% while the S&P500 finished just 0.1% lower at 5130 points.
The daily chart shows this isn’t really a problem with a stairway to heaven since the January highs were taken out and the broader index makes new historic highs. While I was wary of short term momentum again floundering, the boost above ATR support at the 5050 level will continue to setup further upside above last week’s high:
Currency markets were somewhat anti USD before Friday night’s US economic data prints which saw the DXY Index lose more than 0.3% with Euro again trying to breakout above the 1.08 handle overnight but without much momentum.
The union currency is still at a new monthly high with a view to getting back to the 1.09 handle as momentum was overbought in the short term and price action breaking out as well before last night’s wobbles. Watch for any pullback to the 1.0820 level and any test of the 1.08 handle itself however:
The USDJPY pair remains the most volatile after being the most stable for several weeks with an attempted breakout above the 150 mid level thwarted later in the session, but was able to absorb the weekend gap and almost get back to the Friday night starting point.
This was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is still considerably volatile and setting up for a violent swing back through the 150 level proper:
The Australian dollar has again been pushed back to the 65 handle overnight after a failed breakout attempt on Friday night.
The Aussie has been under medium and long term pressure for sometime with the short term moves above the 65 level unable to set up for another breakout with short term momentum really painting the picture of internal weakness here. Watch for any signs of a break below the four hourly low moving average presaging a return to last week’s low:
Oil markets are trying to regain their December highs with Brent crude unable able to exceed the Friday night highs at the $83USD per barrel level as it continues to come up against the previous weekly resistance level.
After retracing down to trailing ATR daily support at the $77 level, price is still above the weekly resistance levels that so far have held from the January false breakout with the short term target the late January highs above $84 still the next target:
Gold has returned to the November highs and then some, still doing a sterling job getting out of its formerly depressed state following the US CPI print, punching through the $2100USD per ounce level overnight to become extremely overbought.
Daily momentum is nearly off the charts – never a good sign – with short term support at the $2000 level turning to what could be rock solid medium term support but still the critical area to watch ahead on a likely pullback due to excessive volatility:
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!