While the Dow Jones closed at a new record high, Wall Street was more broadly mixed as tech stocks pulled back from their Friday night advances while European stocks also retreated slightly. Risk markets are getting anxious about the slew of central bank meetings this week, with the BOJ going first and then the Fed later where expectations are high for a bigger than expected cut. The USD is still pulling back as a result with Euro now well above the 1.11 handle while the Australian dollar is extending its gains above the 67 cent level.
10 year Treasury yields moved slightly lower again as they settle below the 3.7% level while oil prices had another mild bounceback as Brent crude lifted towards the $73USD per barrel level. Gold is holding steady well above its recent weekly highs at the $2580USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were share markets are closed while the Hang Seng Index was able to rise just 0.3% in flat trading, closing at 17422 points.
The Hang Seng Index daily chart was starting to look more optimistic a few months back but price action has slid down from the 19000 point level and continues to deflate in a series of steps as the Chinese economy slows. Another downside move is possibly looming here again as price action just can’t clear short term resistance:
Japanese stock markets were closed with Nikkei 225 futures remaining somewhat flat here just above the 36300 point level.
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. Yen volatility is coming back so a sustained return above the 38000 point level from May/June just doesn’t seem possible. I still contend there is not enough to build positive momentum:
Australian stocks were able to put in some minor gains as the ASX200 closed 0.3% higher to extend above the 8000 point level at 8127 points.
SPI futures are up nearly 0.2% although this could translate into higher gains on the open due to the continued rebound on Wall Street from Friday night. Short term momentum and the daily chart pattern was potentially signalling a top here and this combination could still eventuate, as support at or just below the 8000 point level remains key to filling this gap and to give a chance to move higher:
European markets have started the new trading week with a mixture of gains and losses across the continent with the Eurostoxx 50 Index closing 0.3% lower to 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 just unable to breach the 5000 point barrier. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum remains neutral to middingly positive for now:
Wall Street this time was pulled back by tech stocks as the NASDAQ lost nearly 0.6%, while the S&P500 barely eked out a scratch session to close 0.1% higher at 5633 points.
The four hourly chart illustrates how the inability to clear the 5600 point level in mid August and even match the July highs was setting up for a significant retracement that could end up at the 5100 point level as the Fed punchbowl is taken away. Price action is getting a little overextended again hence the non-return overnight:
Currency markets remain in an anti-USD mood have extended their gains against King Dollar over the weekend as Euro leads the charge, pushing above the 1.11 handle after only recently making a new monthly low.
The union currency had been structurally supportive despite the start of week extended dip that reversed on built in expectations of this soft jobs print, with those expectations dashed and then some on the night. Momentum had been quite oversold in the short term but has picked up here to almost overbought with overhead resistance at the 1.11 handle the area to beat next:
The USDJPY was trying to stabilise somewhat overnight, but is struggling to get back above the 141 level, keeping the downtrend in play for another new monthly low.
Momentum was suggesting a possible bottom was brewing as the BOJ wants to get this volatility under control, but this retracement could last longer than expected and not yet out of the woods:
The Australian dollar has been able to climb out of its very weak position from the US CPI and PPI prints as speculation continues to mount of a higher than expected cut from the Fed giving it legs above the the 67 handle.
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. I still contend there remains potential to pullback here if expectations aren’t met with the 68 handle remaining very strong resistance overhead:
Oil markets remain depressed amid OPEC’s warning but continued its relief rally with Brent crude climbing towards but not above the $72USD per barrel level in an unconvincing move.
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 had been broken with short term momentum remaining in negative territory, setting up for this sharp retracement and continued selloff:
Gold was able to hold on to its gains above the $2500USD per ounce level to start the trading week in a good position as it moves towards the $2600 level next on the back of the weaker USD.
The longer term support at the $2300 level remained firm while short term resistance at the $2470 level was the target to get through last week and has been the anchor point for this week’s price action. Momentum was picking up before this breakout and is now well overextended so watch for a small pullback:
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!