Overnight saw the passage of the Trump regime’s Big Bloody Awful Bill for the middle/working class by the Republican controlled Congress, but this was overshadowed by a surprisingly upbeat NFP print that negated the negative ADP print the session before. While the BBB will lead to the near permanent destruction of low/middle America it is all good for stocks, particularly defense so Wall Street rallied hard while the USD had its day in the sun despite the entrenchment of a declining fiscal position. Treasury yields jumped higher of course.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets are up slightly with the Shanghai Composite remaining above the 3400 point level while the Hang Seng lost nearly 0.7% to almost slip back below 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 was looking like a strong bounceback with firm support at the 23000 point level as a springboard but resistance is building:
Meanwhile Japanese stock markets were treading water with the Nikkei 225 steady but still just below the 40000 point barrier.
Daily price action was looking very keen indeed as daily momentum has accelerated after clearing resistance at the 36000 point level with another equity market that looks very stretched and breaking out a bit too strongly here. Watch ATR support continue to ratchet up but also for this rally to have a pullback:
Australian stocks were looking good before the latest trade figures with the ASX200 closing slightly lower at 8595 points. SPI futures are up more than 0.3% on the good mood 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 had a brief return of confidence across the continent with the Eurostoxx 50 Index closing nearly 0.6% higher at 5341 points.
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 but confidence is not as outrageous as in America-Land:
Wall Street is still loving any data, jumping on the BBB and the NFP with the NASDAQ lifting more than 1% higher while the broader S&P500 closed nearly 0.9% higher, finishing at 6279 points.
A big beautiful bounceback is seeing the 6000 point level brushed aside as everyone buys everything as the asset owners all got their tax cuts entrenched forever and a day:
Currency markets had been selling off King Dollar given the weakening domestic situation in the US but last night saw a resurgence based on the surprisingly good NFP print with most undollars taking a hit before recovering somewhat later in the session. Euro was knocked off its recent new highs to head down to the mid 1.17 level but stabilised.
The union currency has been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown. Medium term and short term momentum is still definitely in its favour:
The USDJPY pair had been in the doldrums below the 144 level with momentum waning to the downside but the NFP shoved some life into it, setting up almost through the 145 handle 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 could be a one off reaction to the NFP so watch for further domestic news around the BOJ and also the non existent trade deal/framework/vaporware:
The Australian dollar remains relatively strong after pushing aside significant resistance at the 65 handle as it still held just below the 66 cent level despite an imminent RBA rate cut next week and a stronger USD all round.
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 have been licking wounds for awhile with Brent crude seeing a lift higher in the previous session but it stalled again overnight on the upcoming OPEC+ meeting with a retracement below the $69USD per barrel level.
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:
Gold is playing catchup to other undollars as it tries to get back above the $3400USD per ounce level, however it was slammed back the hardest on the NFP print, finishing below the $3330 area.
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!