Wall Street was able to start the new trading week with confidence going into a volatile period as major central banks set their interest rates again, with the RBA the first cab off the rank today. Tech stocks helped pushed US stocks higher while European shares remain in a holding pattern. Both USD and bond yields rose with equity futures indicating a mixed start for Australian shares at least.
The US Dollar Index was up more than 0.2% for the session with Euro one of the biggest losers as it remains below the 1.09 handle with the Australian dollar also failing to find any support going into today’s RBA meeting, staying at the mid 65 cent level.
10 year Treasury yields rose again to finish at a four month high, while commodities were quite mixed as Brent crude continued its breakout above the $87USD per barrel level. Meanwhile gold recovered from its recent pullback to stabilise at the $2160USD per ounce level.
Looking at markets from yesterday’s session here in Asia, where mainland and offshore Chinese share markets are getting back on track with the Shanghai Composite bouncing back in late afternoon trade, up nearly 1% while the Hang Seng has tried to rebound but only managed a 0.1% gain to close at 16737 points.
The daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session trying to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. However this has been thwarted as monthly resistance levels are kicking in so I expect another attempt this week to break through 17000:
Japanese stock markets were the biggest movers however with the Nikkei 225 closing nearly 2.7% higher at 39740 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. Last week saw this reversed as momentum goes negative and the selloff back to ATR support at 38000 points taking the wind out of this trend. Yesterday’s reversal has given new life here however:
Australian stocks were barely able to advance with the ASX200 gaining just 0.1% to close at 7675 points.
SPI futures are flat despite the solid showing on Wall Street overnight which could easily translate into a slump on the open. 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 pulled back slightly again as confidence continued to dissipate across the continent, with the Eurostoxx 50 Index finishing 0.1% lower at 4982 points.
The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly of overbought phase. This was looking to turn into a larger breakout but watch for these falls below the low moving average or ATR support proper:
Wall Street however didn’t struggle and surged forward with the NASDAQ and S&P500 both finishing 0.8% higher, the latter closing at 5157 points.
The four hourly chart shows a fantastic 2024 trading season so far but this is looking slightly overcooked, so watch for a mild pullback that could occur back towards the trendline around the 5100 point level:
Currency markets remain in the thrall of USD following the double CPI/PPI print last week with the surge of central bank meetings this week setting the stage for increased volatility. Euro led the charge again with a failure to get back above the 1.09 level, making a new weekly low.
The union currency had made another new monthly high with a view to getting above the 1.09 handle as momentum retraced from being overbought to now oversold at least in the short term with price action stuck below. This pullback could extend to the 1.0820 level or test the 1.08 handle proper on a continued reversion:
The USDJPY pair has now recovered most of its large downside volatility from the previous week that saw it break below the 147 level with more upside on Friday night that saw it return just above the 149 level. Last night saw it hold here without any further session lows:
The medium term picture was looking very optimistic as Yen sold off due to BOJ meanderings but momentum is now stuck in overbought mode while ATR resistance has been swept aside in this bounceback, but I remain cautious as we head up to the 150 level:
The Australian dollar remained below its Friday night lows at the mid 65 cent level as short term momentum wanes.
The Aussie has been under medium and long term pressure for sometime before last week’s breakout but the inability to make a dent after the US CPI print was telling, with no buying support here for the Pacific Peso. Watch for the 66 cent handle to become resistance next as we head into today’s RBA meeting:
Oil markets are continuing their breakouts following the attacks on Russian refineries with Brent crude pushing through the $87USD per barrel level, exceeding the previous weekly highs.
After retracing down to trailing ATR daily support at the $77 level, price had been bunching up around the February highs at the $84 level with short term momentum definitely overbought and signalling potential upside from here:
Gold is now definitely stuck after some recent deceleration, still holding well above the $2100USD per ounce level but failing to make new daily highs, closing just below the $2160 level on Friday night as it hovers above short term support.
Last week daily momentum was 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!