Wall Street was doing well until late into the close as profit taking set in, finishing with small losses despite the latest initial jobless claims coming in weaker than expected while European stocks continued their rebound led by the German DAX as those risk markets continue to ignore the collapse of French government. The USD is still in flux mode although Euro is finding some life as it builds above the 1.05 level while the Australian dollar remains under pressure at the mid 64 cent level.
US Treasury 10 year yields edged slightly higher to cross back above the 4.2% level in anticipation of tonight’s US jobs print while oil markets continued their reversal leading up to the OPEC meeting with Brent crude drifting back below the $72USD per barrel level. Gold however broke down out of its sideways mood with a small drop down to the $2630USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are trying to make some ground with the Shanghai Composite still unchanged at the 3360 point level while the Hang Seng Index was down nearly 1%, closing at 19560 points.
The Hang Seng Index daily chart shows how short term resistance was finally being pushed away with a huge breakout above the 19000 point level that then set up for a run at the 20000 level in the response to PBOC stimulus last month before a massive retracement. Price action however is again setting up for another potential breakdown if short term support breaks:
Japanese stock markets were doing slightly better but its all relative, with the Nikkei 225 just 0.3% higher at 39395 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Yen volatility remains a problem here, with a sustained return above the 38000 point level from May/June possibly on the cards as positive momentum is building.
Australian stocks were also still indecisive ASX200 closing just 0.1% higher at 8474 points on the back of lower iron ore prices.
SPI futures are again down at least 0.1% due to the slight stumble on Wall Street overnight so we can expect this pause to continue into the end of the trading week. The daily chart pattern and short price action suggests a return to the pre election uptrend, with the lower Australian dollar helping as we head straight into a Santa Rally as daily momentum remains at extreme overbought levels:
European markets continued their strong rebound with more solid sessions across the continent again led by the German DAX with the Eurostoxx 50 Index closing more than 0.6% higher to finish at 4951 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance just unable to breach the 5000 point barrier. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum is now way into overbought mode on its way back up to the previous weekly highs near the 5000 point level:
Wall Street is remaining well on trend although it did suffer a small pullback at the close with the tech heavy NASDAQ and the S&P500 losing about 0.1% each, the latter finishing at 6080 points.
Price action is still looking extremely positive but perhaps the Orange Santa rally is not yet running out of steam as the 6000 point level might turn into support going forward:
Currency markets are increasing in volatility due to political and macro tensions emanating everywhere, pushing USD one way or the other as traders also set up for tonight’s US NFP print. Euro had been on the back foot as it tried to stabilise just above the 1.05 handle during the week but finally broke out and almost cleared the recent weekly high just below the 1.06 level.
I still contend we are still likely on our way back to parity as traders start to price in the now very unclear future for the continent so watch out for this to turn into a dead cat bounce if the 1.06 handle is not cleared decisively tonight:
The USDJPY pair is trying to get out retracement mode but its recent modest rebound has been pushed aside by Yen returning to strength, pushing back towards the key 150 level this morning.
Short term momentum remains quite negative with price action unable to make new short term highs so this is setting up for a further breakdown here below the 150 level in the coming sessions, but watch for another potential recovery bounce:
The Australian dollar is facing more pressure on the upcoming trade war, as it fell back to the 64 cent level after failing to make good on any recent USD weakness, holding at that level overnight.
The Pacific Peso could come under even more pressure here on reweighting risks and the lack of action from the RBA as it wants to hold through to Feb/March next year, and this move had been already with a retracement below the 64 handle proper most likely next:
Oil markets are not anticipating much support from OPEC as Brent crude was pushed back below the $73USD per barrel level again overnight.
The daily chart pattern continues to tighten like a spring and while short term momentum remains in negative territory, medium term price action still supports a downtrend with my contention of another sharp retracement forthcoming if the $70-72 zone is not defended:
Gold is starting to crumble under pressure again following its swift selloff down below the $2700USD per ounce level in previous weeks as it fails to hold on to the mid $2650 level overnight.
Price action had been accelerating in confidence as new levels of support were being created for the shiny metal regardless of USD strength but this pullback and rebound both are fighting too much under the $2700 zone so I’m skeptical of a new breakout here:
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!