Wall Street had a very rough session overnight as the AI bubble seemed to show signs of instability with domestic economic concerns following the US government shutdown. Tech stocks led the selloff but it extended across all risk markets although currency markets remained largely on their individual trends as the Australian dollar pulled back after zooming higher on the firm domestic employment print. Bond markets sold off while oil prices remained depressed 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 lifted strongly going into the close with the Shanghai Composite pushing well above the 4000 point barrier while the Hang Seng Index initially stumbled before rallying 0.5% higher to close at 27073 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 but I do note some resistance building here:
Japanese stock markets were in a slightly better mood, as the Nikkei 225 put on 0.3% to stay 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 pulling back again due to the strong employment numbers and their impact on future rate rises with the ASX200 down around 0.5% at 8753 points. SPI futures are down more than 1.5% on the slump 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 so watch for a broader selloff:
European markets were looking to have another strong session across the continent but were caught up in the Wall Street selloff with the Eurostoxx 50 Index closing some 0.5% lower at 5742 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 is now coming to fruition above the 5750 point area:
Wall Street was looking to extend its recent big gains but the mid week churns turned into an outright selloff with the NASDAQ down nearly 2.5% while the S&P500 managed to lose more than 1.6% to close at 6737 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, however post the non NFP event and now the non-release of the CPI overnight it seems the days of King Dollar are numbered. Euro is still trying to turn things around to zoom back above the 1.16 level as in general, FX markets were not affected by the risk off mood overnight.
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 broke above the 154 handle but has again pulled back to this support/resistance zone amid the risk off mood.
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 was looking to breakout overnight on the firm unemployment print and almost hit the 66 cent level before selling off amid the risk off mood on equity markets to almost hit the start of week position.
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 a rollover below short term ATR support at the 65 handle proper:
Oil markets have been trying to remain stable with a potential breakout building but continue to be thwarted by macro-political concerns although they dodged a bullet overnight as Brent crude was able to almost get back above the $63USD 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 was having a much better run than other undollars and zoomed through the $4200USD per ounce level in the previous session but pulled back slightly overnight to finish at $4171 this morning, but still above short term support.
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!