Wall Street was sent significantly lower on Friday night as the Trump regime was played again by the Chinese in the ongoing trade war, with another TACO trade brewing. After glowing up all week the NASDAQ fell back nearly 4% while the USD fell back against nearly everything and US Treasury yields retreated alongside oil prices. Meanwhile the Australian dollar was slammed to a two month low to head back below the 65 cent level as traders price in more volatility on the Chimerica volatility.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets slid back nearly 1% with the Shanghai Composite finishing just below the 3900 point level while the Hang Seng Index slumped nearly 2% lower to close at 26290 points.
The daily chart showed a complete fill of the March/April selloff and then some with a breakout above the 26000 point level looking like a sustained move here before the Trump tantrum. This selloff only takes out the gains in September but could spiral lower:
Japanese stock markets also pulled back with the Nikkei 225 closing 1% lower at 48008 points, taking back its start of week zoom higher.
Daily price action was looking extremely keen indeed as daily momentum accelerated after clearing resistance at the 42000 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 this has taken the wind out for now:
Australian stocks were the odd ones out with only minor falls as the ASX200 closed just 0.1% lower to 8958 points. SPI futures however will play catch up on the open as they are down nearly 1% so far.
The daily chart pattern was suggesting further upside still possible with a base built above the 8700 point level as daily momentum tried to maintain its overbought status but so far short term support is holding on:
European markets fell back as well on Friday night with large falls across the continent with the Eurostoxx 50 Index finishing 1.7% lower at 5531 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 the market was looking to make some good headway here despite the too high valuations (mainly defense stocks) as this looks a bear trap;
Wall Street fell back the most, given its overbought condition with the NASDAQ down more than 3.5% higher while the S&P500 slumped 2.7% to nearly finish below the 6500 point level.
The daily chart still looks like a stairway to heaven but the swift return to the breakout point shows this market is actually quite fragile with supremely overvalued momentum. Are we looking at the last stages (which could last months or another year or until Trump TACO’s again) of this bubble:
Currency markets were reeling against a resurgent USD in recent weeks before Friday night’s reversal with Euro leading the way back above the 1.16 handle after briefly touching the 1.15 level las week. Other undollars also saw mild reversasls as well.
The union currency had been building strength prior to the recent bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. Watch for a potential breakout above the 1.17 level next but short term momentum is not yet overbought:
The USDJPY pair gapped higher on the recent elections to head well above the 150 level but has given up some of those gains as Yen strengthened on the Trump tariff tantrum on Friday night, heading back to the 151 level where is likely to see a lot of pressure over the weekend gap.
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 recent jobs surprise puts this all on the backburner.
The Australian dollar had been largely unchanged throughout most of September, holding at the 66 cent level as it seemed the interest rate differential was more likely to close than expand but this was all taken out and then some on Friday night, smashed below the 65 cent handle.
This could become a more sustained breakdown if the China/US trade war heats up as I’ve opined that the Pacific Peso is not out of trouble although I’m wary of a lot of volatility here:
Oil markets have been failing to get any positive momentum going but both WTI and Brent crude pushed around by Israeli attacks throughout the Middle East and Ukrainian strikes on Russian oil refineries, which is not stabilising at all on top of the usual Saudi manipulations. Friday night saw the Brent marker fall swiftly below the $66USD per barrel level to make a new monthly low in a significant breakdown.
The daily chart pattern shows the post New Year rally has a distant memory with any potential for a rally up to the $80 level completely dissipating. There is potential here for a run down to the $60 level next:
Gold continues to look much stronger – maybe a little too strong – as it blows through the previous record highs on the daily and weekly charts and was able to hold on to the $4000 USD per ounce level on Friday night despite or because of the overall volatility.
This is looking very solid indeed as more central banks indicate more gold purchases and to be frank, confidence in the USD continues to crash while the Orange Mussolini and his minions drive the US economy into the gurgler:
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!