Breakouts aplenty on risk markets overnight with Wall Street making another record high, pulling along European equities again while the USD pushed Euro and other currencies into submission while oil prices broke down as Israeli “promised” not to target Iranian oil wells. This should translate to more bids here in Asia across stocks at least.
Bond markets were closed for a holiday while oil prices were slammed lower as Brent crude eventually ended up around the $75USD per barrel level, adding to the volatility. Gold was relatively stable given the gains in USD as it paused its bounce off the $2600USD per ounce level to almost get back to its previous highs.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were still quite volatile with a break at the start before the Shanghai Composite lifted more than 2% to finish just below the 3300 point barrier while the Hang Seng Index pulled back somewhat, off by more than 0.7% to 21902 points.
The Hang Seng Index daily chart shows how short term resistance was finally being pushed away with a huge breakout above the 19000 point level that then set up for a run at the 20000 level in the response to PBOC stimulus. I was always wary of a sharp retracement on profit taking here on the return of mainland markets and here we are with the 20000 point level setting up for support in wait and see mode:
Meanwhile Japanese stock markets had another holiday with Nikkei 225 futures indicating a positive start on the open today.
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:
Australian stocks are putting on a strong first session for the trading week with the ASX200 up 0.5% to 8252 points.
SPI futures are up nearly 0.4% following Wall Street’s successful session overnight. Short term momentum and the daily chart pattern was potentially signalling a top but price action still shows a clear breakout to new highs with momentum somewhat overbought:
European markets pushed higher yet again with solid gains across the continent as the Eurostoxx 50 Index closed 0.7% higher to push further above the 5000 point level, finishing at 5041 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 as momentum begins to pickup again here:
Wall Street saw another series of new record highs across the board with tech stocks this time leading the way as the NASDAQ gained more than 0.8% while the S&P500 closed 0.7% higher at 5859 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 breakout on the previous NFP print but the sequential hurricanes and Middle East tensions took a toll before CPI/PPI volatility is swinging back higher again. This is looking extremely bullish as we barrel into the end of the election cycle:
Currency markets are remaining in the thrall of USD strength amid the geopolitical strife as King Dollar keeps squeezing Euro below the 1.10 handle, following its breakdown on last Friday’s NFP print.
The union currency had been structurally supportive before the Fed meeting and US jobs report but a double plunge indicated more weakness in the short term as momentum collapsed into the oversold zone with a breakdown of short term ATR support as well. Overhead resistance has now moved to the 1.11 level in the short term with any breaks above the 1.10 level likely temporary as the 1.09 level comes under stress next:
A stronger USD has kept the USDJPY elevated over the weekend gap as its holds above the 149 level overnight despite another bank holiday in Japan.
Momentum had gotten very oversold following the break of the bearish rising wedge pattern and I thought this could be a dead cat bounce with another return to the 140 level but that was nullified with this reversal potentially having more legs in the coming sessions so watch for the 150 level to possibly come under threat next:
The Australian dollar is still bound at short and meditum term support after dropping below the 68 cent level before last week’s NFP print but has failed to fully bounce off the 67 cent level on oversold reactions, almost falling below that level overnight.
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. This looks like a bottoming action but I’m wary of a potential reversal here:
Oil markets are still high in volatility as the Middle East wars spread, with Brent crude pushed sharply lower to almost close below the $75USD per barrel level overnight.
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 but short term momentum was only slowly getting out of negative territory, but this could set up another sharp retracement:
Gold had previously failed returned to its former high at the $2660USD per ounce level after bouncing off short term support but was able to push further on Friday night with a sustained move up that level but its now only just holding on.
Price action is trying to get back to the more dominant medium term trend amid the short term confusion and volatility around the US CPI print and this looks like shaking itself it out but it needs to clear the $2660 zone firmly next:
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!