Wall Street continued to selloff overnight but the falls were greater across the Atlantic as European share markets lost around 2% each despite a much lower Euro. US tech stocks made lower lows mid sessions but were able to recover later on, but it seems the wobbles in the AI bubble are deepening. Macro political events between China and Japan are keeping Asian shares on edge, with local stocks still in near freefall with the Australian dollar looking more resilient than usual as it climbed back above the 65 cent level overnight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets fell back into the close with the Shanghai Composite down 0.8% to 3939 points while the Hang Seng Index was down more than 1.7%, closing at 25930 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, so watch for a proper rollover soon:
Japanese stock markets had the biggest selloff however with the Nikkei 225 down more than 3% to well and truly retreat below the 50000 point level, closing at 48702 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 as the 50000 point level has been decisively broken:
Australian stocks had a bad session as well with the ASX200 closing nearly 2% lower at 8469 points. SPI futures are down only slightly despite another selloff 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 has been abandoned, as momentum builds for a broader selloff:
European markets were again in sell mode across the continent with the Eurostoxx 50 Index closing some 1.9% lower at 5534 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 I’m wary of short term support breaking here as well:
Wall Street continued its inability to stave off the sellers with the NASDAQ down a full 1 % while the S&P500 lost just 0.5% in a hesitating session, the latter closing at 6635 points.
The four hourly chart shows that resistance at the 6900 point level is still quite relevant after the bounceback from the end of the US government shutdown rally. Watch for a potential rollover below the 6600 point area here more on macro/political catalysts:
Currency markets are still broadcasting the fact that King Dollar’s days are numbered as we await the delayed releases of job numbers – or any reliable economic data – with some mixed moves amongst the undollars overnight. Euro failed to hold on to its Friday night gains with a continued retreat below the 1.16 level overnight.
The union currency is building strength as it climbs above previous ATR resistance at the 1.1580 area but momentum is no longer overbought in the short term so I’m expecting some weakness to develop around the 1.16 handle this week:
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 and then again rallied over the 155 level last night.
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 bounced back late in the afternoon session and continued to gain above 65 cent level overnight despite the somewhat risk off mood and the Korean coal news.
There continues to be buying support in the Pacific Peso in the short term on the probability of no more cuts from the RBA, but I’m still watching for a rollover below short term ATR support at the 65 handle in the event of a proper risk off event:
Oil markets have been trying to remain stable with a potential breakout building and may find some relief as the Trump regime gets ready to invade Venezuela as Brent crude climbed well above the $64USD per barrel level overnight.
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 it does looks like a floor is being made here at the $63 area:
Gold was having a much better run than other undollars and zoomed through the $4200USD per ounce level during last week but has since given up all those gains although it managed to bounce off the $4000 level overnight in a solid, albeit short term reversal.
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. Watch for the $4100 area for signs of a further breakout:
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!