Wall Street and other risk markets are drifting into holiday mode which means not a lot of selling and small gains here and there although silver and gold are making record highs while the USD is getting sold down the river. Defense stocks helped Wall Street overnight while Yen stabilised somewhat after a big move on Friday due to the BOJ meeting. The Australian dollar is also fighting back although it may hit some turbulence on the release of the December minutes by the RBA today.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets saw a solid bid in afternoon trade with the Shanghai Composite up 0.6% to cross back above 3900 points while the Hang Seng Index lifted 0.4% to 25801 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 another dead cat bounce forming:
Japanese stock markets are the biggest winners on the weaker Yen with the Nikkei 225 up 1.8% to 50425 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 looked very stretched and setup for a small correction before the BOJ meeting. The Friday bounceback and weakening Yen is setting up for another attempt back at the 50000 point level:
Australian stocks are doing very well in afternoon trade with the ASX200 closing 0.9% higher to 8699 points. SPI futures are up a few points following the solid session on Wall Street from overnight.
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 were somewhat choppy as volumes diminish across the continent with the Eurostoxx 50 Index down 0.3% to 5743 points.
The market had been failing to make headway here due to the too high valuations but short term support was able to handle the pressure before finding some buyers to stabilise, as this could turn back into a revisit of the recent highs:
Wall Street continues to lift slightly higher with the NASDAQ up 0.5% while the S&P500 gained 0.6% to close at 6878 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 bounceback has been good so far in the short term but overall the market looks peaky:
Currency markets were in a holding pattern following the softer than expected US CPI print and the looming break over the New Year but are getting charged up again on the recent volatility around the BOJ rate hike . Euro fought back overnight after dwindling down to the 1.17 handle proper which seems to reinforce the medium term uptrend.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and was accelerating above the 1.17 level but after getting ahead of itself in the short term is now building above short term support:
The USDJPY pair has subsequently exploded out of the gate more than 200 pips to the 157 handle on Friday night despite a lot of talking the currency down by the Japanese finance minister with some heat taken out 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. This could get more exciting in the next few sessions but its significantly overbought in the short term:
The Australian dollar was weakening all last week to stay well below the mid 66 cent level but found some support at the 66 handle proper in yesterday’s post weekend gap session and then more lift again overnight to breakout back to that 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 moves to a much hawkish position. However the recent selloff is putting some doubt into that position:
Oil markets have been on a multi week/monthly downtrend with Brent crude recently pushed below the $59USD per barrel level with the small lift on Friday night extended overnight to push back above the $61 level.
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 gone. There was potential for a run down to the $60 level where the monthly lows sit at key critical support next and now that has been broken – boo hoo for Saudi Arabia and Ruzzia!
Gold is now using the $4300USD per ounce level as support and made a new high overnight to finish at the $4445USD per ounce level.
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, albeit very overbought:
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!