Risk markets are again cautious as another Middle East conflict combined with mixed global PMI readings gave some pause to any further upside momentum on both sides of the Atlantic. While Wall Street nominally put in another record high, it was marginal at best with tech stocks retreating. The USD was mixed against the majors as Euro pulled back sharply below the 1.11 handle before a late recovery while the Australian dollar is still holding well above the 68 cent level but finding some resistance going into today’s RBA meeting.
10 year Treasury yields moved higher again to well above the 3.7% level while oil prices were relatively stable as Brent crude stayed just above the $75USD per barrel level. Gold finally broke through the $2600USD per ounce level for a new high.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets have held on to some modest gains with the Shanghai Composite up 0.4% while the Hang Seng Index was slightly flat, falling 0.1% to finish at 18244 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 were closed for a long weekend with Nikkei 225 futures suggesting a slow start this morning.
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 didn’t like the local PMI prints with the ASX200 closing some 0.7% lower at 8152 points.
SPI futures are down slightly reflecting the lack of positive mood on Wall Street overnight. Short term momentum and the daily chart pattern was potentially signalling a top here but 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 but did managed a little upside later in the session as the Eurostoxx 50 Index closed 0.3% higher to 4885 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 has retraced from being overbought to just barely positive:
Wall Street is again struggling to find positive momentum as the NASDAQ barely put on any gains while the S&P500 lifted just 0.2% higher to close at 5718 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 last week and remain in their anti-USD mood but King Dollar had something to say overnight as the PMIs came through with Euro taking a large hit back to the pre-Fed level just above the 1.11 handle.
The union currency had been structurally supportive before the Fed meeting but this double plunge since does indicate some weakness in the short term as momentum pushes back into the negative zone. It seems overhead resistance at the 1.11 handle is not yet defeated:
The USDJPY wasn’t able to push further from its post Friday night recovery as it retraced back below the 144 level as it found more upside resistance.
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 trying hard to extend its climb above the 68 level as traders await today’s RBA meeting.
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 seemingly swept aside:
Oil markets remain depressed amid OPEC’s warning and should be building in volatility as the Israelis shoot anything that moves in the Middle East, with Brent crude holding just above the $74USD per barrel level, as this little bounceback continues to look 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 is having a lovely time of it as it continues to beat out the rest of the undollars as it holds on well above the $2600USD per ounce level after a convincing move on Friday night, slowing down slightly in the short term at the $2630 level..
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!