Friday night saw Wall Street return from its short Thanksgiving break and aside from some technical difficulties trading was bullish across the major indicies, with European stock markets also lifting into the month end. All eyes are still on the Fed’s December meeting where a rate cut is a given, with USD pulling back again as it loses nearly 1% for the week against the major currencies. Canadian GDP came in much stronger than expected – Carney doing a good job steering it away from the meth-heads in the floor below – which boosted Loonie against USD, while the Australian dollar made a two week high above the 65 cent level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets lifted slightly in afternoon trade with the Shanghai Composite up 0.3% to 3888 points while the Hang Seng Index finished down around 0.4% to 25858 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. The latest small bounce off support does not have a lot of momentum here so I am wary:
Japanese stock markets were without a solid lead so didn’t move much, with the Nikkei 225 finishing up 0.1% to stay just above the 50000 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 was broken at the 50000 point level but daily momentum did not get considerably oversold so there might be life here:
Australian stocks also put in a near scratch session with the ASX200 finishing at 8614 points. SPI futures are down 0.3% on the stronger AUD.
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 put in modest gains across the continent as the Eurostoxx 50 Index closed 0.3% higher at 5668 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, as this could turn back into a revisit of the recent highs:
Wall Street returned from thanksgiving with a lot of energy with the NASDAQ lifting 0.6% while the S&P500 gained 0.5% to close at 6849 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 as this looks like a near full fill:
Currency markets have fully processed the looming December rate cut by the Fed as King Dollar continues to move lower against almost everything during the week with that weakness building again on Friday. The Euro held just below the 1.16 handle, looking to breakout as the ECB is transmitting its happy with its current rate setting going into the new year.
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 again on Friday 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 has now repeated this move. Watch for support which must hold here or it may crack below the 155 level quickly:
The Australian dollar has been on a tear due to the hot CPI print and Friday night saw it move further higher 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 has been pushed aside with a potential run up the 66 cent level:
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 steady at the $62USD per barrel level gain on Friday.
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 broke out again above that level on Friday night on the weak USD.
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!