Tech stocks dragged Wall Street back from exuberance overnight as traders position themselves for the end of month volatility and then tomorrow night’s US non-farm payrolls employment print. The latest US GDP print came in slightly lower than expected, and combined with election volatility gave the USD some pause as it fell back against Euro while other majors remained under the pump, including the Australian dollar.
US bond markets were somewhat sanguine with 10 year Treasury yields up one point to remain just below the 4.3% level while Brent crude lifted higher to get back above the $73USD per barrel level. Gold had another solid session to make another new high to almost breach the $2790USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets started flat but fell going into the close with the Shanghai Composite losing more than 0.6% to retreat below the 3300 point level while the Hang Seng Index fell even sharper, down 1.5% to 20380 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. Price action is again bunching up at the 20000 point level setting up for another potential breakdown if short term support breaks:
Meanwhile Japanese stock markets had much better sessions on the lower Yen with the Nikkei 225 up nearly 1% to 39277 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. Futures are looking better here:
Australian stocks went alongside their Chinese counterparts with a fall across the board as the ASX200 closed 0.8% lower at 8180 points.
SPI futures are up 0.4% due to the better results on Wall Street overnight. The daily chart pattern was potentially signalling a top as short term price action suggests a pause at least with momentum retracing from overbought status, however the medium term picture still looks firm but this rollover could extend further so watch the 8100 point zone closely:
European markets faltered sharply on rate cut concerns with losses across the continent as the Eurostoxx 50 Index closed nearly 1.3% lower to finish at the 4885 point level.
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 was picking up here but the lower Euro is not yet helping as support comes under attack here:
Wall Street was battered around by economic releases, political volatility, Fed cut speculation and tech earnings before and after the session with the NASDAQ dragging everything down eventually, closing 0.6% lower while the S&P500 finished off by 0.4% to close at 5813 points.
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 it lower again. We can expect more volatility as we barrel into the end of the US election cycle with momentum still in negative mode:
Currency markets have been dominated by USD strength for sometime but this flipped overnight on the GDP print with Euro finally breaking out of its bottoming action as traders get ready for the next NFP print later this week.
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 been breached at the mid 1.08 level with momentum overdone already so this could be a short term move as it fails to beat the previous breakout high:
The USDJPY pair is cooling its heels after a series of steps up higher as it settled again at the 153 handle overnight, just off its previous high.
Momentum is cooling down but remains quite positive as Yen weakness seems baked in for now, but this could all pivot on tomorrow night’s NFP print so watch for trailing ATR support at the 152 handle to hold here:
The Australian dollar is still breaking through both short and medium term support despite a mid week bounce at the 65 cent level as it failed to make good on temporary USD weakness 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 no longer looks like a bottoming action with momentum clearly oversold and ready for more downside here:
Oil markets remain somewhat high in volatility with some OPEC shenanigans possibly helping lift both markers overnight as Brent crude reversed course and headed back above the $72USD per barrel level.
Short term momentum remains in negative territory as medium term price action still supports a downtrend with my contention of another sharp retracement forthcoming if the $70-72 zone is not defended:
Gold was able to push up further into new record highs on the slightly weaker USD to advance towards the $2800USD per ounce level overnight.
Price action is again accelerating in confidence as new levels of support are being created for the shiny metal regardless of USD strength but it will be interesting to see what happens in next week’s US election as momentum remains nicely overbought:
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!