Stock markets advanced overnight as the USD retreated due to weaker than expected consumer confidence numbers, with overall risk helped by the PBOC messaging about increased stimulus and rate cuts in the Asian session. Wall Street nominally put in another record high, while European stocks advanced even further. The USD was sold off against all the majors as Euro recovered all of its recent pullback to almost breach the 1.12 handle while the Australian dollar is looking bullish post the RBA hold as it almost breaks through to the 69 cent level.
10 year Treasury yields moved higher early in the session before the consumer confidence print saw a retracement with 3 points lost stay just above the 3.7% level while oil prices were relatively stable as Brent crude remained at the $75USD per barrel level. Gold continued its strong breakthrough the $2600USD per ounce level for another new high.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are launching super higher this afternoon with the Shanghai Composite up more than 4% while the Hang Seng Index is up an equal amount, almost pushing through the 19000 point barrier.
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 19000 point level sets up for a run at the 20000 level:
Japanese stock markets reopened from their holiday with the Nikkei 225 gaining 0.5% to 37940 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 didn’t like the RBA meeting outcome with the ASX200 closing some 0.2% lower at 8142 points.
SPI futures are up 0.3% on the slight advance 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 had the best session overnight with strong moves across the continent as the Eurostoxx 50 Index closed more than 1% higher to 4940 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 is still quite positive:
Wall Street is somewhat struggling to find positive momentum with tech stocks lifting as the NASDAQ gained 0.5% while the S&P500 lifted just 0.2% higher to close at 5732 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 remain in their anti-USD mood as King Dollar was put back in its place overnight as the latest consumer confidence figures were weaker than expected. This has seen everything undollar move higher overnight, led by Euro which recovered all of its early week losses and then some as it threatens the 1.12 handle again.
The union currency had been structurally supportive before the Fed meeting but this double plunge since did indicate some weakness in the short term as momentum pushes back into the negative zone. This has been filled however as another attempt at overhead resistance at the 1.11 handle looks more promising with a higher session high:
The USDJPY wasn’t able to recover further from its post Friday night moves with a slump overnight down towards the 143 level as the weaker USD weighed on the pair.
Longer term momentum was suggesting a possible bottom was brewing at the 140 level as the BOJ wants to get this volatility under control, so this bounceback could have legs to the 144 level or higher but looks to be dominated by shorter term positioning:
The Australian dollar is on its way to breaking through the 69 level following yesterday’s RBA meeting and weaker USD data overnight with another strong move.
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 more upside remains here although momentum is clearly well overextended:
Oil markets remain depressed amid OPEC’s warning and should be building in volatility as the Middle East explodes, but so far Brent crude is holding just above the $75USD per barrel level, as this little bounceback continues to look unconvincing.
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 continues its upstreak as best of the undollars as it advances well above the $2600USD per ounce level after the convincing move on Friday night, now breaching the $2660 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!