A possible change in sentiment from the Trump regime towards China gave Wall Street a boost on Friday night with the TACO trade now in full swing. Meanwhile the USD saw a small reversal in its recent decline as Yen and Euro weakened slightly while the Australian dollar came back a little, managing to almost get back above the 65 cent level. The speculative buying frenzy in gold was rustled a little as well with a $100 plunge taking it back to the $4250USD per ounce level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets fell nearly 2% lower with the Shanghai Composite closing at 3839 points while the Hang Seng Index finished off by 2.4% at 25247 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 as the TACO looks like coming back:
Japanese stock markets had similar poor sessions with the Nikkei 225 closing more than 1% lower at 47582 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 the best performers relatively speaking, with the ASX200 closing 0.8% lower at 8997 points. SPI futures are down only slightly with an opening around the 9000 point level possible, but volatility is rising on Wall Street.
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 failed to recover in the physical sessions on Friday night but managed to bounceback in futures with the Eurostoxx 50 Index closing down 0.8% to 5607 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 made a better comeback with the NASDAQ and the S&P500 both advancing around 0.5% with the latter closing at the 6664 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 pushing back against King Dollar for good reason as pressure mounts internally and externally on the US economy due to the government shutdown, burgeoning debt and ongoing trade war with China. However a mood shift on Friday saw a small reversal in most of the majors with Euro retracing back to the mid 1.16 level while Pound Sterling was somewhat steady above the 1.34 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 although short term momentum has retraced from being slightly overbought:
The USDJPY pair had been declining all week following the Trump tariff tantrum on the previous Friday night, breaching the 150 level for a 300 pip move lower before a small bounce this Friday saw it get back above that key level.
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 has been under a lot of strain recently with the latest numberwang figures last week suggesting a potential November rate cut from the RBA which overshadowed what looks like multiple rate cuts from the Fed. On Friday night it had a small bounce of support at the mid 64 cent level but couldnt get back above the key 65 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 as both WTI and Brent crude with the latter continuing 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 wants to soar higher with a series of $100 plus gains in each session, punching through the $4400USD per ounce level mid week before a $100 fall on Friday night sending it back to the $4250 level to take some heat out of a parabolic trend.
This is still looking very solid indeed as more central banks indicate more gold purchases and to be frank, confidence in the USD continues to crash but be wary of more downside volatility ahead this week:
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!