Wall Street capped off a strong trading week with a relatively calm result on Friday night with greater advances in European stocks due to some mixed date from the recent PMI prints. The USD was strong against all the undollars with Euro slammed back to a new weekly low at the 1.04 handle while the Australian dollar also took a tumble.
US bond markets were somewhat sanguine with 10 year Treasury yields still above the 4.4% level while oil markets lifted in volatility once again as Brent crude was pushed above the $74USD per barrel level but failed to make a new weekly high. Gold put on a very strong rebound after slumping post election, finally pushing back above the $2700USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets suffered a massive blow as the Shanghai Composite closed more than 3% lower to return well below the 3300 point level while the Hang Seng Index was down nearly 2% to the 19229 level.
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 below the 20000 point level setting up for another potential breakdown if short term support breaks:
Japanese stock markets were able to outperform however with the Nikkei 225 closing 0.7% higher at 38283 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 but positive momentum is not yet building.
Australian stocks were the best performers in the region as the ASX200 closed more than 0.8% higher at 8393 points.
SPI futures are up more than 0.6% however despite the somewhat flat result on Wall Street from Friday night. The daily chart pattern was potentially signalling a top as short term price action suggests a return to the pre election uptrend, with the lower Australian dollar helping as we slowly go into what could be a Santa Rally?
European markets were the better performers across the Atlantic on Friday night with the Eurostoxx 50 Index closing some 0.7% higher to finish at the 4789 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 positive Friday finish with price action still below previous support
Everything is still awesome for Wall Street although tech stocks were flat on Friday night with the NASDAQ up 0.1% to barely advance while the S&P500 put on more than 0.3% to finish at 5969 points on its way to another record high.
Price action is looking extremely positive as all the stops will literally be taken out of business regulation, taxation, competition etc in a new dominating GOP Congress with the sky the limit here for big business – and with the Fed cutting rates, add more to the punchbowl:
Currency markets are still reacting or over reacting to the US election with the USD still maintaining dominance across all the undollars as Euro break down again on Friday night with another reversion to a new weekly low below the 1.04 handle.
The union currency had been pushed higher after remaining oversold for weeks in a dominant downtrend, then cleared overhead resistance at the mid 1.08 level in the lead up to the election. However the retribution has been swift and we are likely on our way back to parity as traders start to price in the now very unclear future for the continent:
The USDJPY pair shot higher on the election but has given up most of those gains, heading back down post the FOMC meeting to test the 154 handle on Friday night but without a lot of internal volatility.
Momentum has reverted back into extreme overbought mode with the previous weekly highs at the 153 level likely to turn into support here:
The Australian dollar had been one of the more robust undollars through the US election volatility but it can’t make any further headway due to global macro concerns (read: not enough iron ore demand) and suffered a further retreat on Friday night, heading back below the 65 cent level.
The Pacific Peso could come under more pressure here on reweighting risks and the lack of action from the RBA as it wants to hold through to Feb/March next year, and this move had been already with a retracement back to the 64 handle most likely next:
Oil markets are building again in volatility in the post US election tensions as Brent crude was pushed swiftly above the $74USD per barrel level on Friday night but failed to make a new weekly high.
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 had suffered the most out of the undollars with a swift selloff down below the $2600USD per ounce level but this is bouncing back hard with Friday night following through the $2700 level.
Price action had been accelerating in confidence as new levels of support were being created for the shiny metal regardless of USD strength but this pullback and rebound both are fighting too much around the $2700 zone so I’m skeptical of a new breakout here:
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!