Risk markets continue to price in some stability returning to US governance with European shares also rallying on the better risk equation (aka less AI malevolence) with Wall Street again stumbling around overnight. The USD was relatively stable in the absence of any economic reports although it firmed against Yen and Pound Sterling while Euro was able slightly higher alongside a relatively weak but still lifting Australian dollar. Bond markets are still pricing in concern over the US unemployment situation while oil prices fell back on OPEC production revisions and troubles within the Ruzzian supply chain.
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 retreating to just on the 4000 point barrier while the Hang Seng Index was actually moving higher, closing up 0.8% to 26922 points.
The daily chart of the Hang Seng Index shows a complete fill of the March/April selloff with a resumption of buying above 26000 points as momentum builds properly again:
Japanese stock markets were in a slight retreat to begin with before lifting at the close with the Nikkei 225 eventually closing 0.4% higher to get back above 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 again treading water with the ASX200 down around 0.2% at 8818 points. SPI futures are up slightly despite another wobbly session on Wall Street 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 another very strong session across the continent but not in Brexitland as the Eurostoxx 50 Index closed more than 1% higher at 5787 points, sustaining a new breakout.
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 is now coming to fruition above the 5750 point area:
Wall Street was looking to extend its recent big gains but is churning instead with the NASDAQ down 0.3% while the S&P500 managed to put on 0.2% or so to close at 6857 points.
The four hourly chart shows that resistance at the 6900 point level is still quite relevant after the bounceback from the supposed end of the US government shutdown rally. Watch for a potential rollover here more on macro/political catalysts:
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, there is some movement in Pound Sterling and Yen but Euro is still trying to turn things around to almost get back above the 1.16 level.
The union currency is slowly building strength here again so watch out for a breakout above previous ATR resistance at the 1.1580 area as momentum requires quite positive in the short term at least:
The USDJPY pair put in a consolidation phase before rallying on the Fed cut, then in the post non-NFP period it has now exceeded the previous highs as it breaks above the 154 handle.
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 continues to be steady at just slightly above the 65 handle, with a small lift higher overnight to make a new intraweek high but not looking that exciting for now.
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 with a lot of buying support in the Pacific Peso. Watch for any breakout above the recent session highs:
Oil markets have been trying to remain stable with a potential breakout building but this was thwarted overnight due to some Ruzzian shenanigans around force majeures of oil supplies with Brent crude crushed back down to the $62USD per barrel level.
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 so I’m watching for this rollover potential to build from here:
Gold is still having a much better run than other undollars and zoomed considerably higher overnight after a series of steady sessions, almost breaking above the $4200USD per ounce level.
This could be another slightly overdone in the short term ride but then after some more stability, yet another large upside potential move is looming again for the shiny metal as the desire for USD dwindles:
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!