Friday night was a dumping ground as almost everything was sold off in reaction to more tech stock action on Wall Street plus continued political volatility with the BSOD IT crisis not helping at all. Wall Street continued to sell off alongside European stocks although the latter got no relief as Euro weakened under a much stronger USD. The Australian dollar also suffered as it came under increasingly more pressure, finally breaking below the 67 cent level, having given up its six month high.
10 year Treasuries yields bounced up another 5 points to cross the 4.2% level while oil prices fell back after looking like stabilising with Brent crude crossing below the $83USD per barrel level while gold prices slumped on the back of the strong USD to almost cross below the $2400USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets are flat with the Shanghai Composite up 0.1% while the Hang Seng Index is losing ground very fast, off by more than 2% to close at 17417 points.
The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. Price action looked like turning this falling wedge pattern into something more bullish but is looking like a dead cat bounce instead:
Meanwhile Japanese stock markets were trying to stabilise but failed amid politic-economic machinations around the Yen with the Nikkei 225 closing 0.1% lower to 40063 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term support is now broken however on this retracement, with futures are indicating another strong pullback as the new trading week gets underway:
Australian stocks were unable to advance with the ASX200 falling 0.8% or so to slip below the 8000 point level, closing at 7971 points.
SPI futures are down nearly 1% on the continued pullback on Wall Street from Friday night. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels in mid April. Momentum has retraced fully from being overbought so this could be a false breakout that spreads into a proper rout amid volatility on Wall Street:
European markets still couldn’t find a positive mood across the continent even as Euro weakened, but the Eurostoxx 50 Index still closed more than 0.8% lower at 4827 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance still looming at the 5000 point barrier. Former ATR support at the 4900 point level looks like the anchor point but has failed to hold here – watch out below:
Wall Street was again sideswiped by tech stocks with the NASDAQ and the S&P500 both falling more than 0.7%, with the latter closing at 5505 points.
The four hourly chart showed resistance overhead that had been tested last Friday before an early week slump that has now been tested and broken through, helped alongside a soaring NASDAQ. Momentum was somewhat overbought but has retraced sharply and weekly support levels are being strongly tested here so again, watch out below:
Currency markets have pivoted following the latest ECB meeting, with the USD pulling ahead further on Friday night as the union currency stayed below the 1.09 handle and finished its nearly two week long uptrend.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum building to the upside with the 1.0750 mid level as support but there is too much pressure here from King Dollar so watch for a further retracement down to ATR support at the mid 1.08 handle next:
The USDJPY short term chart still looks like tumbling down a series of steps here but Friday night saw further Yen weakness return on the safe haven bid with the pair remaining above the 157 level and almost getting into positive short term momentum territory.
This volatility speaks volumes as it once pushed aside the 158 level as longer term resistance, but then was unable to breach the 162 level as it looks like the BOJ intervention finally worked on the ever weakening Yen. Watch out below if this short term bounce fails to get past short term resistance, with another step down possible:
The Australian dollar had been struggling to make further gains after breaking out of its holding pattern as Friday night saw its continued break down as it crossed below the 67 cent handle as USD strengthened.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This move was looking more convincing with the potential to go higher as speculation of a rate hike in August building, but with short and medium term support broken that may not be enough to counter King Dollar:
Oil markets are failing to stabilise after have a solid run in the latter half of June with Brent crude breaking below short term support, this time finishing well below the $83USD per barrel level on Friday night.
After breaking out above the $83 level last month, price action had stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Daily ATR support has now been broken with short term momentum now retracing into negative mode – watch out below:
Gold failed to hold on to its recent breakout as the slow slide back under the weight of King Dollar turned into a full rout on Friday night, falling straight down to the $2400USD per ounce level as momentum inverted.
While it was the biggest casualty of the reaction to the US jobs report, the shiny metal was able to clock up some gains before this reversal, almost hitting the $2500USD per ounce level. The longer term support at the $2300 level remains key but the much stronger USD is very quickly turning the tide:
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!