The post FOMC breakouts ceased on Friday night as other Fed officials muddied the waters with talk about the decline in inflation not as severe as once thought. Wall Street failed to hit another new record high and slid backwards, although European stocks did worse on the wobbly mood. USD remains weak with Euro still holding well above the 1.11 handle while the Australian dollar held above the 68 cent level.
10 year Treasury yields were basically unchanged at their two week high slightly above the 3.7% level while oil prices remained slightly higher as Brent crude stayed just below the $75USD per barrel level. Gold finally broke through the $2600USD per ounce level for a new high.
Looking at markets from Friday’s session in Asia, where mainland Chinese shares were relatively flat with the Shanghai Composite up 0.1% while the Hang Seng Index gained 1.4% to close 18258 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. Short term resistance is finally being pushed away here, as this break above the 18000 point level sets up for a run at the 20000 level:
Japanese stock markets also had a solid session with the Nikkei 225 lifting nearly 1.6% to 37723 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. Yen volatility remains a problem here, with a sustained return above the 38000 point level from May/June possibly on the cards as positive momentum is finally starting to build:
Australian stocks were again the poorest performers relatively speaking as the ASX200 closed 0.2% higher to 8209 points, making another new high.
SPI futures are down around 0.8% due to the fall back on Wall Street from Friday night. Short term momentum and the daily chart pattern was potentially signalling as price action still shows a clear breakout to new highs with momentum well overbought and ready to extend further:
European markets are still struggling with a clear buying signal as stocks falls across the continent as the Eurostoxx 50 Index closed more than 1.4% lower to 4871points.
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 has retraced from being overbought to just barely positive:
Wall Street just couldn’t maintain positive momentum as the NASDAQ lost nearly 0.4% while the S&P500 retraced just 0.2% lower to close at 5702 points.
The four hourly chart illustrates the series of breakouts since the early September lows as Fed signalling is doing its thing. Price action had a small pause before the Fed meeting but its now all systems go but watch for a potentially small pullback on too much exuberance too soon, as overbought momentum indicates:
Currency markets reduced somewhat in volatility following the Fed meeting and remain in their anti-USD mood as King Dollar continues to weaken. Euro is again trying to push back towards the 1.12 handle after making a new weekly high and is looking poised for more upside here.
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 overbought levels with overhead resistance at the 1.11 handle now defeated:
The USDJPY was able to recover again on Friday night with a proper surge through the 143 level but is finding some more resistance even as momentum remains amid the risk market euphoria.
Longer term momentum was suggesting a possible bottom was brewing as the BOJ wants to get this volatility under control, so this bounceback could have legs to the 144 level or higher but could be dominated by shorter term positioning:
The Australian dollar is not just holding on but now extending its climb above the 67 handle as it broke through the 68 level for a new monthly high, holding again on Friday night.
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. The potential for a pullback here has almost disappeared as resistance overhead is swept aside:
Oil markets remain depressed amid OPEC’s warning although there was some relief on Friday night, with Brent crude pushing up towards m the $75USD per barrel level, but the move still doesn’t look that convincing.
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 had the best session out of the undollars with a solid surge through the $2600USD per ounce level in a much more convincing move on Friday night.
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 is looking a lot better now in the short term, slightly overbought of course:
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!