Wall Street is trying to continue its rebound from its Friday night slump while navigating a speech by Fed Chair Powell as other risk markets are still expecting another TACO trade setup when the Fat House eventually capitulates. Meanwhile the USD was unable to continue its nascent lift with most of the majors returning to their previous positions including the Australian dollar managed to get back above the 65 cent level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets lifted slightly going into the close before the Shanghai Composite retracing 0.7% after a poor morning session while the Hang Seng Index was down more than 1.5% at 25441 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 reopened after a long weekend with a big slump with the Nikkei 225 closing more than 2% lower at 46847 points.
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 and were up slightly with the ASX200 closing 0.2% higher at 8899 points. SPI futures are up 0.8% to play catch up on the open despite a mixed session on Wall Street overnight.
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 recovered only slightly overnight with mixed moves across the continent with the Eurostoxx 50 Index pulling back 0.3% lower at 5552 points, mainly due to German stocks.
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 is coming back again, although the NASDAQ is struggling the most to recover while the S&P500 rebounded 0.2% to recover to the 6654 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 had been reeling against a resurgent USD in recent weeks before Friday night’s reversal but the small amount of strength that returned to King Dollar is starting to pull back again. Euro lifted back above the 1.16 handle after bouncing off the 1.15 mid level after a mild gap over the weekend while Pound Sterling is still holding down at the 1.33 level.
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 nowhere near overbought:
The USDJPY pair gapped higher over the weekend after falling sharply following the Trump tariff tantrum on Friday night, but is heading back below the 152 level after looking weak initially.
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. The weekend gap saw a bit more smoothing throughout the session as it then returned back above the 65 cent area, but only just.
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 as both WTI and Brent crude pushed around by Israeli attacks throughout the Middle East and Ukrainian strikes on Russian oil refineries. Friday night saw the Brent marker fall swiftly below the $63USD per barrel level with only a little bit of stability overnight.
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 soar higher with a 2% gain overnight to punch through the $4100 USD per ounce level in what looks like an unstoppable trend, although its now going parabolic!
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!