No big surprises overnight as the expected softening of the US jobs situation was confirmed by the weekly initial jobless claims and private ADP prints, giving a clear run to a September rate cut by the Fed. Of course, a worsening situation for middle/lower America is gold for Wall Street which rallied nearly 1% across the board on the poor numbers as the Fed put is locked in for equity holders. Meanwhile the USD firmed up slightly but is still on the backfoot against most of the majors with the Australian dollar holding at the mid 65 cent level while US Treasury yields pulled back slightly.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets sold off again going into the close with the Shanghai Composite down more than 1% to cross below 3800 points while the Hang Seng Index was also off more than 1% to slip below the 25000 point level.
The daily chart shows a complete fill of the March/April selloff with momentum reversing back into overbought territory to try get back to its recent highs. Resistance at the 25000 point level has turned into a breakout play here with support at the 24000 point level as the springboard but this short term reversal is taking a lot of heat out of the market but not yet turning into a rollover:
Japanese stock markets did much better with the Nikkei 225 closing 1.5% higher at 42573 points.
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. ATR support has been ratcheting up for awhile but is now pausing:
Australian stocks bounced back from their recent selloff with the ASX200 closing exactly 1% higher to 8826 points. SPI futures are up nearly 0.6% due to the better lead from Wall Street overnight.
The daily chart pattern was suggesting further upside still possible with a base built above the 8500 point level as daily momentum tried to maintain its overbought status but this decline was worrying but so far short term support is holding:
European markets were able to continue their slight recovery from recent selling with moves higher across the continent with the Eurostoxx 50 Index up 0.4% at 5346 points.
Weekly support has been respected after a brief touch below the 5200 point level as the recent rebound on Euro weakness shows a complete fill. However this market is beginning to lose steam yet again with the recent falls almost taking out short term support:
Wall Street was stronger on more rate cut speculation with the NASDAQ lifting by nearly 1% while the S&P500 pushed another 0.8% higher to finish at 6502 points.
The daily chart still looks like a stairway to heaven while the four hourly chart shows the 6500 point barrier becoming a little too high to overcome as short term momentum wants to get back into overbought mode. The potential repositioning after this long weekend has occurred so this attempt at getting back on trend is working well here unless the Fed becomes hawkish or the NFP print tonight comes in weirdly (aka written over with a Sharpie) to be stronger than expected:
Currency markets are swinging away from the recently stronger USD as they play catchup to the continued poor economic prints as undollars didn’t move much overnight. Euro is holding at the mid 1.16 level as traders await the NFP print.
The union currency had been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. Short term momentum was suggesting a proper rout with a new weekly low at the 1.14 handle, but weekly support held fire before the Friday night reversal and has to hold here:
The USDJPY pair had headed back to its post Jackson Hole position as Yen weakened against USD due to talk of a potential trade deal but a return back to the 148 level overnight is keeping things in position.
The previous price action was sending the pair beyond the March highs and had the potential to extend those gains through to start of year position at the 158 handle but the jobs surprise puts this all on the backburner. USD weakness was weighing on Yen for awhile here but this reversal has given the pair more strength to return to the previous weekly highh:
The Australian dollar has been largely unchanged by the recent but well expected RBA cut and despite a poor CAPEX print last week the Pacific Peso was building more support as it remained above the 65 cent level after a failed attempt at pushing through the recent highs.
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, as there is potential for a further rollover if Fed signalling does not become more dovish, with weekly support still under a lot of pressure:
Oil markets were trying hard to get positive momentum going but both WTI and Brent crude slid back again overnight with the latter pushed below the $67USD per barrel level after a false breakout at the start of the week.
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 rally up to the $80 level after making new substantive daily highs was gaining traction but needs a lot more support in the short term:
Gold is looking much stronger now as it blows through the previous record highs on the daily and weekly charts but held fire overnight to consolidate at the $3540USD per ounce level.
Short term support had been under threat most of the last three weeks with price almost returning to the late June lows as the USD gained strength. Daily momentum was getting back into the positive zone, as support was being somewhat built but that series of new lows was too telling. This is looking very solid indeed:
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!