Friday night saw the release of the latest US PCE (personal consumption expenditure) print and it came in a little softer than expected, but this still gave no relief to Wall Street as tech stocks sold off slightly. European stocks did much better, translating the outsized returns here in the Asian session into a solid finish for the trading week. The USD was pushed around somewhat by end of month/quarter flows but the new Japanese PM was the biggest catalyst to Yen which firmed appreciably. Euro returned to the mid 1.11 level while the Australian dollar just held on above the former 69 cent barrier.
10 year Treasury yields moved slightly lower to maintain above the 3.75% level while oil prices stabilised as Brent crude remained stuck at the $72USD per barrel level. Gold was again the most resilient but was unable to push further above the $2660USD per ounce level as momentum starts to wane.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets were launching higher again on rate cuts with the Shanghai Composite up nearly 3% while the Hang Seng Index was up about the same as it breaks through the 20000 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 huge breakout above the 19000 point level sets up for a run at the 20000 level, but I’m wary of a sharp retracement on profit taking here:
Japanese stock markets were also doing well with the Nikkei 225 gaining more than 2% to 39329 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 building but futures are indicating a pullback:
Australian stocks were trying to be pushed along by Chinese equities but the ASX200 only managed a 0.1% lift to finish the week at 8212 points.
SPI futures are up 0.3% despite the mild pullback on Wall Street from Friday night. 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 another solid session to finish the week in a much better postiion with strong bids across the continent as the Eurostoxx 50 Index closed 0.6% higher to 5067 points, solidifying above the 5000 point barrier.
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 continues to struggle to find positive momentum as tech stocks lagged with the NASDAQ losing nearly 0.4% while the S&P500 tread water to close the week at 5738 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 remained somewhat in their anti-USD mood, with a small pullback in USD in the wake of the soft PCE print almost retraced however by the end of the session. King Dollar is still in somewhat of a dovish mood as traders await this week’s Fed speech and NFP print.
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 1.12 level is still possible here despite this setback:
The USDJPY had the most volatility to end the week almost below the 142 level on the new Japanese PM and the hawkish response thereof, with a push up through the 145 level finally running out of momentum and turning into a rout instead..
I had indicated something was afoot with the formation of a bearish rising wedge pattern on the four hourly chart and we got that resolution in spades on Friday night. Momentum is now very oversold but this could still result in a retracement back to the 140 level:
The Australian dollar was on its way to breaking through the 69 level following the hold at the recent RBA meeting and its having a solid go at it again with short term momentum and the slightly weaker USD helping 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 more upside remains here although momentum is clearly well overextended:
Oil markets remain depressed and are somewhat building in volatility as the Middle East conflagration spreads, with Brent crude eventually steadying at the $72USD per barrel level on Friday night as the mid September bounceback rolls over.
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 a mild pullback on Friday night but was able to recover as it continues to be the best of the undollars to finish the trading week at the $2660USD per ounce level.
Price action is starting to show signs of upside exhaustion here as momentum slows down in the short and medium term timeframes. Watch for any break of short term support at the $2600USD level going into the NFP print as a prelude to a wider retracement on profit taking:
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!