Risk markets continue to discount all negative news, like the non-existent ceasefire between Iran and Israel, and latched on to Federal Reserve Chair Powells dovish testimony in front of Congress overnight. Wall Street rallied over 1% higher while the USD was sold off again as Euro led the way while the Australian dollar found some resistance above the 65 cent level. Treasury yields also pulled back slightly again with the 10 year just below the 4.3% level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were up sharply in afternoon trade as the Shanghai Composite lifted more than 1% to get back above the 3400 point level while the Hang Seng Index has gained more than 2% to close above the 24000 point level.
The daily chart shows a near complete fill of the March/April selloff although momentum has now reversed after being slightly overbought as price action meets trailing support at the 23000 point level. This looks like a strong bounceback with firm support at the 23000 point level as a springboard:
Meanwhile Japanese stock markets were joining in the fun with the Nikkei 225 surging 1% higher to 38790 points.
Daily price action was looking very keen indeed although daily momentum has slowed down somewhat last week after clearing resistance at the 36000 point level with another equity market that looks stretched and ready to rollover again here. Watch ATR support closely which appears to be firming in recent sessions:
Australian stocks rebounded as well with the ASX200 closing nearly 1% higher at 8555 points. SPI futures however are flattening off a little despite another rally on Wall Street overnight.
The daily chart pattern is still suggesting further upside is still possible as the inverted head and shoulders pattern is nearly complete with the RBA cut helping boost this but correlation with other risk markets will come into play here – watch as daily momentum has eased off from its slightly overbought status but still very positive:
European markets were playing catchup after being weak in the previous session with the Eurostoxx 50 Index closing nearly 1.2% higher at 5297 points with the FTSE treading water.
Weekly support hasn’t moved in a few months now indicating a lack of upward momentum with a potential rollover accelerating as daily momentum remains oversold. The market has not broken below the 5200 point level proper so we could see a small rally from here back to the previous highs:
Wall Street continued its own rally with the NASDAQ and the S&P500 closing more than 1% higher, the latter finishing at 6092 points.
The four hourly S&P chart was previously supporting a potential slowdown action here that could be translating to a top on the daily chart as prices fail to get back above the pre-Trump Tariff Tax day. A big beautiful bounceback is seeing the 6000 point level brushed aside as resistance as everything returns to normal, for now:
Currency markets were supposed to run to King Dollar given the widening war in the Middle East but have continued their disdain for the US as the undollars surge higher with Euro now recovering to be just above the 1.16 handle.
The union currency had been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown. Medium term momentum was very overbought before the Israeli strike so this reversal is not unexpected but momentum is pausing at the previous weekly highs here:
The USDJPY pair was coming back on USD strength as it spiked through the 146 handle on Friday night but continues its big reversal on the weakening resolve with a selloff below the 145 level overnight.
I still contend we need to watch for any sustained break below the 139 level which completes a multi year bearish head and shoulders setup that could see the 110 to 120 level revisited. This overbought reversal play could have legs down to the mid 144 area to clear out the sinuses first:
The Australian dollar managed to continue its solid bounceback but has found significant resistance at the 65 handle overnight as it ran out of steam this morning to just below that level.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action has remained supported by the 200 day MA (moving black line) after bouncing off a near new five year low. Keep an eye on temporary support at the 63 cent level and also the series of lower highs in recent weeks of signs of less internal support:
Oil markets are now in full retreat with both WTI and Brent crude losing further value with the latter marker falling below the $67USD per barrel level overnight.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways lower action for the latter half of 2024. The potential for a return to the previous lows is building further but this volatility:
Gold is continuing its slippage below the $3400USD per ounce level as it breaks below its key uptrend line, almost heading below the $3300 level overnight.
Short term support had firmed immensely in recent sessions showing real strength but momentum became considerably overbought so this was inevitable as price action has reverted back to the uptrend line from the April lows. The desire to climb back above the recent weekly/monthly highs and still have another crack at the $3400 level is almost gone:
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!