A wobbly night on Wall Street due to Oracles earnings but also a “normalised” US initial jobless claims print proving the labour market is soft as the Fed claimed in its rate cut the previous session. While tech stocks pulled back, European shares lifted with futures indicating a boost for Asian markets here on the open. The USD continued its dive with gold making a new high while the Australian dollar almost got back to the 67 cent level against USD.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets saw some sharp selling with the Shanghai Composite down more than 0.7% to stay below the 3900 point level while the Hang Seng Index has stabilised with a scratch session finishing at 25530 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 which is forming:
Japanese stock markets also had a solid selloff with the Nikkei 225 losing 0.9% at 50148 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. 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 are still processing the RBA positioning and the latest jobs print with the ASX200 gaining 0.1% or so at 8592 points. SPI futures are up nearly 1% again but this could be another false move given yesterday’s lacklustre session.
The daily chart pattern shows that 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 finally found a solid bid across the continent as the Eurostoxx 50 Index finished some 0.8% higher at 5753points.
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 re-engaged to the upside after the Fed cut and tried to follow this up again overnight although the NASDAQ actually lost 0.3% while the S&P500 only put on 0.2% to close at 6901 points.
The four hourly chart showed a steady if not exciting climb back to recent highs with somewhat firming support but that nascent trendline was broken recently but support had steadied before the Fed meeting. The breakout here is pretty obvious, watch for a new high in tonight’s session to confirm a proper Santa rally:
Currency markets continued to selloff USD by and large with Swiss Franc and Yen leading the way while Euro continued its surge straight through the 1.17 handle for a new monthly high.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and is now accelerating above the 1.17 level although maybe getting ahead of itself in the short term:
The USDJPY pair had zoomed up to the 157 level but has now reversed swiftly back to the 156 level on the Fed cut in the previous session and again more Yen buying saw it stabilise but look weak 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 repeated this move. Watch for a potential retracement back to the dominant downtrend below the 155 level next:
The Australian dollar has seen some volatility post the RBA hold versus the Fed rate in the previous session on Chinese macro influences but again more US soft economic data saw it strongly higher again 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 moves to a much hawkish position. Resistance at the 65 cent area has been pushed aside with a run up through the 66 cent level which is now going to become support going forward:
Oil markets have been on a downtrend for many weeks now but apart from some needle moving exercises it appears set in even as Ruzzian oil refineries blow up and Venezuelan oil tankers are taken on the high seas with Brent crude pushed below the $62USD per barrel level again.
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:
Gold is now using the key $4200USD per ounce level as a springboard to new highs, launching up towards the $4300 level overnight on USD weakness after having gone nowhere since last week.
As I previously mentioned that after some stability, another large upside potential move was looming again for the shiny metal as the desire for USD dwindles and here we are:
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!