Wall Street was slammed lower mainly led by financials but also small stocks as trade war tensions are keeping most risk markets contained. The USD continues to decline with Yen and Euro both pushing to new weekly highs while the Australian dollar failed to get back above the 65 cent level due to yesterday’s release of a poor set of unemployment figures. Falling Treasury yields is keeping the gold speculative buying frenzy higher with another $100 plus move higher.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were basically unchanged going into the close with the Shanghai Composite steady while the Hang Seng Index was down 0.7% at one stage before recovering to close dead flat at 25888 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 although is holding on well here:
Japanese stock markets were doing better despite the stronger Yen with the Nikkei 225 closing more than 1% higher at 48277 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 lifted again despite the bad unemployment news with the ASX200 closing 0.8% higher at 9068 points. SPI futures are down 30 points or so however on the struggling Wall Street finish 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 again overnight but this time it was more broad based across the continent with the Eurostoxx 50 Index finishing 0.8% higher to 5652 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 could be a bear trap;
Wall Street was trying to comeback again with the AI bubble helping along the NASDAQ before it closed nearly 0.5% lower while the S&P500 slipped more than 0.6% to the 6629 point level as the TACO trade unwinds.
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 continue to pushback 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 continuing with its own 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 giving up all those gains as it heads down toward the 150 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 its nascent comeback was thwarted as the latest numberwang figures yesterday suggest a potential November rate cut from the RBA.
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 recently as the Brent marker continued its fall to head down to the $60USD per barrel level with WTI also is making new lows.
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 $4300 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!