A further rally on Wall Street overnight due to more solid earnings which overshadowed the subprime drama in regional banks, helped along by a positive reaction here in Asia in yesterday’s session to strong Chinese GDP numbers. The AUKUS trap seems to be closing as the Trump regime signed a minerals deal with Albo in the Orange Office while commodity prices were weaker. Meanwhile the USD is seeing some strength return as Yen and Euro weakened slightly while the Australian dollar came back further, edging higher above the 65 cent level. The speculative buying frenzy in gold continues as it revisited its previous high above the $4300USD per ounce level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets bounced back from their Friday falls with the Shanghai Composite up 0.8% at 3865 points while the Hang Seng Index was up more than 2% at 25854 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 stronger:
Japanese stock markets were also in rebound TACO mode with the Nikkei 225 closing more than 3% higher at 49185 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 as the 50000 point level looms:
Australian stocks were the worst performers relatively speaking, with the ASX200 closing 0.4% higher at 9028 points. SPI futures are up 0.5% on Wall Street’s exuberance 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, supporting a wider rally:
European markets were able to recover strongly overnight with broad moves higher across the continent with the Eurostoxx 50 Index closing more than 1.3% higher to 5680 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) with more upside potential building:
Wall Street made a stronger comeback with the NASDAQ and the S&P500 both advancing more than 1% higher with the latter closing at the 6735 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 the mood is shifting back to positivity with Euro retracing below the mid 1.16 level while Pound Sterling rolled over after being 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. The potential breakout above the 1.17 level is looking unlikely in the short term as momentum has retraced from being slightly overbought:
The USDJPY pair had been declining all last 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 internal political volatility that looks resolved could see some steady trends build from here:
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. Overnight it build slightly higher above the 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, but a short term double bottom pattern has been formed on the four hourly chart:
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. Price is now back on trend however with a revisit of the previous high overnight.
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. Although a short term potential double top pattern is forming here on the four hourly chart:
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!