US stock markets pulled back alongside the USD as all risk markets start to tighten and clench at the prospect of a drawn out US election that “starts” tonight and may not have a happy ending. Wall Street slipped alongside European stocks while the USD at first fell back further from its weekend gap action but has recovered somewhat later this morning. The other newsflow was very light indeed, with all eyes still on the election with the Australian dollar remaining firmly under the 66 cent level.
US bond markets rallied somewhat with lower yields across the curve as 10 year Treasuries lost more than 6 points to get down to the 4.25% level while Brent crude spiked on the lower USD getting back above the $75USD per barrel level. Gold slipped slightly despite the weaker USD, hovering below the $2740USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were up modestly going into the close before a late rally saw the Shanghai Composite gaining more than 1% to cross above the 3300 point level while the Hang Seng Index was relatively steady gaining 0.3% to close at 20567 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 were closed for yet another holiday with Nikkei 225 futures indicating a sour start to the truncated trading week 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 were some of the best performers in the region as the ASX200 closed more than 0.6% higher at 8164 points.
SPI futures are down at least 0.4% due to the wobbles on Wall Street overnight and its likely trading volumes will be light given the election 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 faltered again across the continent as the Eurostoxx 50 Index closed nearly 0.6% lower to finish at the 4852 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 still oversold despite the solid Friday finish with price action now below previous support:
Wall Street was unable to recover from its previous session with confusion over poll numbers dominating as the NASDAQ and the S&P500 both lost 0.3%, the latter finishing at 5712 points.
Price action had a small breakout on the previous NFP print but the sequential hurricanes and Middle East tensions took a toll before election volatility is swinging it lower again. We can expect more volatility as we head into tonight’s election with momentum about to rollover into oversold mode on the daily chart:
Currency markets are still in a flux between last week’s NFP print and tonight’s US election with the once dominant USD coming under challenge from the undollars although a late rally saw Euro pulled back from breaching the 1.09 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 if it fails to beat the previous breakout high:
The USDJPY pair barely bounced off of key short term support at the 152 handle to make a somewhat unconvincing move higher to get back above that level overnight, but this does look tenuous going into the last hours of the election.
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, but has miraculuously come back from a weekend gap higher on the Iowa polls, hitting the 66 cent level in the Asian session. This was shortlived as the USD came back later in its own and coming into today’s Melbourne Cup and RBA gambles.
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 election tensions as Brent crude spiked back above the $75USD per barrel level on USD weakness.
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!