Again the lack of bad news and the Thanksgiving cheer gave Wall Street another boost which should translate into steady returns on Asian equity markets in today’s session. The near certainty of a rate cut by the Fed in tis December meeting is the juice that is powering risk makets at the moment with the USD getting weaker as the sessions past with Euro firming strongly alongside other undollars. The spectre of inflation in the antipodes however is sending the Australian dollar higher than the rest with yesterday’s hot CPI print.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were steady in afternoon trade with the Shanghai Composite drifting slightly lower to 3867 points while the Hang Seng Index was up around 0.2% to 25928 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 tried to build but failed to push aside resistance, with this rollover appearing to bounce off support around the high 24000’s:
Japanese stock markets however pushed much higher with the Nikkei 225 up nearly 2% to 49559 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 is now broken at the 50000 point level but daily momentum is not yet considerably oversold:
Australian stocks are putting in a solid session with the ASX200 up 0.8% to 8606 points. SPI futures are up 0.2% or so but expectations are for another surge due to the solid moves 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 but watch for some stability that could turn into a bounceback above the 8500 point area:
European markets were able to get out of sell mode and built a lot more confidence across the continent as the Eurostoxx 50 Index closed more than 1.4% higher at 5655 points.
The market has been failing to make headway here due to the too high valuations but short term support was put under a lot of pressure before finding some buyers to stabilise, but this is early days yet:
Wall Street continued to bounce back with the NASDAQ up another 0.8% while the S&P500 managed to finish more than 0.6% higher at 6812 points.
The four hourly chart showed that resistance at the 6900 point level was still quite relevant after the bounceback from the end of the US government shutdown rally with recent price action trying to avert last week’s dead cat bounce pattern. Support has firmed at 6500 points, with confidence – aka the Fed punchbowl – returning in full in this shorter trading week:
Currency markets are now fully processing the increased chances of a December rate cut by the Fed as King Dollar moved lower against almost everything with Euro pushing up towards the 1.16 handle overnight, with Pound Sterling and the Canadian Loonie also making new weekly highs.
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 spoke to stability and this breakout:
The USDJPY pair was having a cracking move higher helped by a much weaker Yen amid the China/Japan diplomatic stoush last week, but this has ended up with a reversion back to the 156 handle, which stabilised 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 has now repeated this move. Watch for support which must hold here or it may crack below the 155 level quickly:
The Australian dollar is on a tear due to the hot CPI print in yesterday’s session, with overnight moves accelerating, sending it above the 65 cent level.
Price action was not looking good for the Pacific Peso in the medium term as the interest rate differential squeeze sent it back to the doldrums, but this has inverted as the RBA is probably holding for the foreseeable future alongside the RBNZ. Resistance at the 65 cent area will be tested however but a run up the 66 cent level is likely here:
Oil markets have been trying to remain stable with a potential breakout building but the Ruzzian/Trump Ukraine war talks are taking a lot more heat out of the market with Brent crude pushed down below the $62USD 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 is still potential here for a run down to the $60 level next as the floor at the $63 area is melting away:
Gold was having a much better run than other undollars and zoomed through the $4200USD per ounce level and is now trying to get back to those levels after a sharp correction last week. Last night saw a build above the $4100 level after a breakout that looks like having legs.
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!