Oh what a night! Wall Street managed to a 4% plus volatile turnaround after embracing the uber good earnings from NVIDIA before realising the AI bubble might be a bubble with no upside potential, not helped by a massaged and very late September US jobs report and a lot of Fed hand wrangling over rate cuts in December. Ructions in Japanese bond markets are not helping volatility either with the 10 year Treasury yield back at 4.1% while the USD remains strong against most undollars although Euro stabilised at the 1.15 handle it was all downhill on the the Australian dollar as it cratered towards the 64 cent level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were the odd ones out with the Shanghai Composite down 0.3% to 3934 points while the Hang Seng Index finished 0.5% lower at 25775 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 have soared higher on the new stimulus package with the Nikkei 225 up nearly 3% to 49823 points but face headwinds on the open this morning.
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 solid session with the ASX200 eventually closing 1.2% higher at 8552 points. SPI futures are down 1.5% however on the volatility 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 did a better attempt to get out of sell mode but lost it all in post close futures with the Eurostoxx 50 Index closing 0.5% higher at 5569 points.
The market has been failing to make headway here due to the too high valuations but short term support looks broken here as well with a bearish engulfing candle on the daily futures indicating more selling tonight:
Wall Street had a wild ride with the NASDAQ up 2% at one stage on the solid NVIDIA earnings before slumping 2% lower at the close while the S&P500 managed to finish 1.5% lower at 6538 points.
The four hourly chart shows that resistance at the 6900 point level was still quite relevant after the bounceback from the end of the US government shutdown rally. The breakout above the symmetrical triangle had been suggesting a possible dead cat bounce move and here we see kitty run over by the 4WD:
Currency markets have swung back fully to USD strength as the September NFP print (remember no October print and a late November one) are being overshadowed by increased inflation in the US, giving pause to rate cut chances in the December meeting. This is sending King Dollar higher against everything else with Euro managing to stabilise a little bit after its selloff around the 1.15 handle, with Pound Sterling perched on the 1.30 handle in a weaker position too.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area but momentum has switched to oversold settings in the short term with this weakness below the 1.16 handle probably broadening, but those long tails with tight wicks on the four hourly chart are speaking to some possible stability:
The USDJPY pair is having a cracking move higher helped by a much weaker Yen amid the China/Japan diplomatic stoush plus the prospect of higher rates from the BOJ, with a hold overnight after its solid breakout above the 157 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 has now repeated this move but watch for a probable violent reversal:
The Australian dollar only had a small reprieve in the previous session before rolling over fully to make a new monthly low overnight, heading straight towards the 64 handle on USD strength amid concerns about no rate cut from the Fed in December.
This is not looking good for the Pacific Peso in the medium term as the interest rate differential squeeze plus the risk off squeeze is sending it back to the doldrums:
Oil markets have been trying to remain stable with a potential breakout building but the Ruzzian/Trump regimes Ukraine war talks are taking some heat out of the market again with Brent crude pushed down towards the $63USD 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 put in a small reversal and overnight despite the volatility has remained below the $4100 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. 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!