Friday night’s US non-farm payrolls aka unemployment print was bad but good for stock markets as Wall Street rebounded while the latest election shenanigans were bad but good as well? This week will be dominated by the US elections, starting Tuesday amid another slew of earnings releases. The USD pushed back against the mid week surge in the undollars as a result of the print with Euro back down to the 1.08 handle while the Australian dollar remains firmly under the 66 cent level.
US bond markets saw higher yields across the curve as 10 year Treasuries jumped 10 points to almost breach the 4.4% level while Brent crude was knocked back slightly, closing the week out below the $73USD per barrel level. Gold also fell back again, this time to its start of week position at the $2740USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets were up modestly going into the close with the Shanghai Composite but then turned around to fall more than 0.3% to remain well under the 3300 point level while the Hang Seng Index has surged more than 1% higher to 20506 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 fell back sharply in the wake of more BOJ comments around rate settings with the Nikkei 225 down more than 2.6% to close at 38053 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 flat as we start a new trading week:
Australian stocks were down again as the ASX200 finished 0.5% lower at 8118 points.
SPI futures are up at least 0.4% due to the rebound on Wall Street on Friday night. 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 rebounded strongly across the continent as the Eurostoxx 50 Index closed nearly 1.2% higher to finish at the 4877 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 but momentum is now deeply oversold despite the solid Friday finish with price action now below previous support:
Wall Street was able to recover from its previous session with tech earnings leading the way after the NFP print absorption as the NASDAQ gained over 0.8% while the S&P500 finished nearly 0.5% higher, closing the week out at 5728 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 about to rollover into oversold mode on the daily chart:
Currency markets had tried all week before Friday’s NFP to reverse the domination of USD strength but this was short lived as King Dollar returned to his throne, knocking Euro back down to the 1.08 handle.
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 bounced off of key short term support at the 152 handle to make a somewhat unconvincing move higher to almost get back above the 153 level on Friday night.
Momentum has reverted out of oversold mode but is only barely neutral here as more BOJ/Gov’t machinations keep Yen volatile so watch for trailing ATR support at the 152 handle that must hold here:
The Australian dollar was barely holding on at medium term support around the 65 cent level before the US NFP print and ended the week on a sour note as a result of USD strength.
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 may start to look like a bottoming action with momentum returning back to neutral settings, but wait and see:
Oil markets remain somewhat high in volatility with some OPEC shenanigans and Iranian war tensions this time puling back both markers as Brent crude retreated below the $73USD 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 unable to hold on its recent new record highs or break through the $2800USD per ounce level during the week with another move back towards last week’s more sustainable high at the $2740 level instead.
Price action had been accelerating in confidence as new levels of support are being created for the shiny metal regardless of USD strength but as I’ve been saying, it will be interesting to see what happens in next week’s US election as momentum now returns to neutral settings:
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!