Friday night saw modest gains across both sides of the Atlantic as Wall Street awaits this week’s FOMC meeting and the long expected rate cut from the Fed. Bond markets continue to sell off slightly while the USD was relatively steady but dropped to a two week low even as Euro pulled back slightly as the Australian dollar made a run for the mid 66 cent level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets held steady in morning trade and then accelerated higher into the close with the Shanghai Composite finishing 0.7% higher at 3902 points while the Hang Seng Index was up nearly 0.7% to finish at 26028 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 of a dead cat bounce but watch for a break of the recent daily highs:
Japanese stock markets however fell back with the Nikkei 225 losing more than 1% to close the week out at 50491 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 continue to go nowhere with the ASX200 eventually closing just 0.1% higher at 8634 points. SPI futures are down 0.2% as traders await the RBA meeting.
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 failed to find a solid bid across the continent as the Eurostoxx 50 Index finished just 0.1% higher at 5723 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 around 0.3% while the S&P500 gained barely 0.2% to close at 6870 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 as this slow melt up continues:
Currency markets want to see further weakness build in USD as we await the December Fed meeting as King Dollar moved to a two week low as measured by the DXY. However, some of the majors moved slightly lower on Friday night with Euro retracing back to short term support just above the 1.16 handle while Pound Sterling also stabilised.
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 after a poor week of performance amid speculation about BOJ rate hikes with a small lift on Friday night sending it back up to the 155 level.
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 on Friday night.
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 however some bidding is evident in the short term with Brent crude moving to just below the $64USD per barrel level on Friday night.
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 so watch for a breakout run here:
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 has gone nowhere since to hold or settle around 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!