Trade war tensions are keeping most risk markets contained but not in selling mode as Wall Street lifted again despite sentiment around the US economy as the latest Biege Book from the Fed was released overnight. The USD continues to decline as Fed members are still broadcasting a softer economy, particularly labour markets as ICE goons put pressure on many sectors. Most of the major currency pairs returned to their previous positions including the Australian dollar which 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 after a poor previous session as the Shanghai Composite gained over 1% while the Hang Seng Index was up nearly 2% at 25910 points in a strong rebound.
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 put in a better session with the Nikkei 225 closing nearly 2% higher at 47672 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 and could be upgraded to 46000 points proper in the short term:
Australian stocks were able to put runs on the board with the ASX200 closing exactly 1% higher at 8990 points. SPI futures are up modestly so we should see the 9000 point cracked in play today.
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 again overnight but it was another mixed session across the continent with the Eurostoxx 50 Index finishing 0.9% higher mainly due to French stocks as the German DAX pulled back.
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, with the NASDAQ re-energising and lifting 0.6% while the S&P500 rebounded 0.4% to recover to the 6671 point level as the TACO trade continues.
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 are pushing back against King Dollar as pressure mounts internally and externally on the US economy due to the government shutdown, burgeoning debt and ongoing trade war with China. Euro continued to lift above the 1.16 handle after bouncing off the 1.15 mid level after a mild gap over the weekend while Pound Sterling is forging a small bounceback above 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 as short term momentum becomes nicely 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 and almost tested the 151 level overnight.
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 was pushed significantly lower on Friday night, smashed below the 65 cent handle and then tested again mid week but is making a minor comeback as it returned back above the 65 cent area, but only just, largely on interest rate differentials.
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 various macro factors and a big build in US domestic inventory didn’t help overnight as the Brent marker continued its fall below the $63USD per barrel level with WTI also at a six month low.
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 another large gain overnight, this time punching through the $4200 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 but this is looking well one sided:
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!