Wall Street had another slow session overnight with an unclear picture of the US labour market weighing on high expectations that the Fed will cut in next week’s FOMC meeting. Bond markets sold off while the USD was relatively steady after an initial drop on the jobless claims print with the Australian dollar holding just above the 66 cent level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets held steady in afternoon trade with the Shanghai Composite still sitting below the 3900 point level while the Hang Seng Index was up only slightly initially but then gained nearly 0.7% to finish at 25935 points, just shy of the 26000 point level.
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 of a dead cat bounce:
Japanese stock markets had a much better time of it under BOJ likely pushing for rate hikes with the Nikkei 225 up more than 2% to close at 51028 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. 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 were going nowhere with the ASX200 eventually closing just 0.2% higher at 8618 points. SPI futures are up 0.2% in line with the staid session 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 8600 point area:
European markets were much better bid across the continent with German stocks leading the way as the Eurostoxx 50 Index finished 0.4% higher at 5718 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 continues to float along going into the Fed meeting with the NASDAQ lifting just 0.2% while the S&P500 gained barely 0.1% to close at 6857 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 but lacklustre so far:
Currency markets want to see further weakness build in USD as we await the December Fed meeting but King Dollar fought back against some of the majors overnight on the surprisingly good initial jobless claims (although there is a lot of holiday volatility inside the print) with Euro the biggest loser alongside Swiss Franc.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area and is still looking on trend here although some internal resistance was starting to creep in as it retreats back towards the 1.16 handle:
The USDJPY pair is trying to find a floor here after its weekend gap down which saw it fall back to the 155 handle proper but the mid week gains are evaporating as Yen firms.
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 has put on a nice trend given the national accounts print and the weaker USD and remained above the 66 handle overnight.
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 through the 66 cent level:
Oil markets have been on a downtrend for many weeks now and with no resolution to the Ruzzian Ukrainian wartalks both markers were steady again with Brent crude pipping just above 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 is still potential here for a run down to the $60 level next but we haven’t had a new weekly low for awhile:
Gold was having a much better run than other undollars and zoomed through the $4200USD per ounce level last week on the weaker USD but pulled back somewhat through this week as it settles just above that level without losing 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!