Risk markets continue to price in some stability returning to US governance – ha! – but then Wall Street stumbled towards the close, unable to build on its big rebound at the start of the week. The USD was relatively stable against the majors although Euro was able to temporarily push above the 1.16 handle, while gold held back but still remains firm above the $4100USD per ounce level. Meanwhile the Australian dollar is holding on above the 65 cent level as Bitcoin continued its woes with another lower session.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets fell back going into the close with the Shanghai Composite staying just above the 4000 point barrier while the Hang Seng Index was eventually able to close just 0.2% into the green, up to 26696 points.
The daily chart of the latter 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 most recent Trump tantrum. A resumption of buying here above 26000 points is slowly underway as momentum builds properly again:
Japanese stock markets were looking to lock in some gains but fell back at the close with the Nikkei 225 down 0.2% to slide back below the 51000 point level.
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 as the 50000 point level becomes the crucial pivot point going forward:
Australian stocks were just treading water with the ASX200 down around 0.2% at 8818 points. SPI futures are up slightly despite the wobbly session on Wall Street session 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. Short term support is just holding on, but the momentum is just not here although watch for a potential violent swing higher evident by those long lower tails:
European markets had a very strong session across the continent and in Brexitland as the Eurostoxx 50 Index closed more than 1% higher at 5725 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. The market has been failing to make headway here due to the too high valuations but upside potential looks to be building again so watch for a breakout above the 5750 point region:
Wall Street was looking to extend its recent big gains but failed at the end of the session with the NASDAQ down 0.2% while the S&P500 managed to put on 0.2% or so to close at 6846 points.
The four hourly chart shows how this retracement headed back to the 6800 point level before stabilising. Short term resistance at the 6900 point level has been tossed aside on the one way bet with a substantial move higher so watch for a potential fill up to previous highs next:
Currency markets are still reeling from the actions and words of the Fed meeting last week, which saw the USD eventually push back against everything after the December cut expectations were almost eliminated. Post the non NFP event, major undollars have held on to their recent nascent gains although Euro is still trying to turn things around to almost get back above the 1.16 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 breakout above previous ATR resistance at the 1.1580 area:
The USDJPY pair put in a consolidation phase before rallying on the Fed cut, but post non-NFP it has almost returned to its previous highs as it again hovers around the 154 handle 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 and this recent volatility is wanting to repeat this move:
The Australian dollar is steady at just slightly above the 65 handle, unable to extend the start of week gains overnight.
I was looking for this to become a more sustained breakdown if the China/US trade war heats up but support has firmed considerably in the past week. Watch for any breakout above the recent session highs:
Oil markets have been trying to remain stabile and saw some buying support overnight with Brent crude able to get back above the $65USD per barrel level almost at a new weekly high.
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 was potential here for a run down to the $60 level next but so far a rollover hasn’t happened as support firms:
Gold is still having a much better run than other undollars but put in a steady session overnight, settling just above the $4100USD per ounce level after a slow build up of buying support on Friday night and then a surge on the weekend gap.
This might be slightly overdone in the short term but could lead to more upside potential from here after fully forming a proper bottom pattern.
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!