Wall Street failed to extend its recent record highs as traders thought more about Thanksgiving than broader macro concerns with poor tech earnings also muddying the waters. European shares slid further back again on trade concerns while the USD weakened even further against most of the majors with Euro breaking out to a new weekly high while the Australian dollar remains under pressure on tariff concerns but managed to almost push up through the 65 handle.
US bond markets saw more strength with 10 year Treasury yields falling back more than 5 points to the mid 4.2% level while oil markets pulled back on continued Middle East volatility as Brent crude barely finished above the $72USD per barrel level. Gold remains under the pump following its own retracement but was unchanged at the $2630USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are rebounding strongly into the close with the Shanghai Composite up more than 1.5% to punch through the 3300 point level while the Hang Seng Index is up more than 2% to cross well above the 19000 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 setting up for another potential breakdown if short term support breaks:
Japanese stock markets were the worst performers again with the Nikkei 225 closing 0.8% lower to 38146 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 had a better session as the ASX200 closed 0.6% higher at 8406 points.
SPI futures are up more than 0.2% despite the pullback on Wall Street overnight with hesitation likely without any positive lead due to the Thanksgiving break. 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 head straight into a Santa Rally but daily momentum remains at extreme overbought levels:
European markets are again faltering with losses across the continent overnight with the Eurostoxx 50 Index closing nearly 0.7% lower to finish at the 4733 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:
Wall Street fell back on reduced volumes and some poor tech earnings results with the NASDAQ down 0.6% while the S&P500 lost nearly 0.4% to finish just below the magical 6000 point level as it recedes from its recent record high.
Price action is still 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. Watch short term support here at the 5940 point level however:
Currency markets remain somewhat volatile amid Middle East ceasefires talks and US political news with USD now on the back foot as Euro reversed course overnight to get back above the 1.05 handle after a volatile Friday night session.
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. I still contend we are still likely on our way back to parity as traders start to price in the now very unclear future for the continent so watch out for this to turn into a dead cat bounce:
The USDJPY pair is now in full retracement mode after testing the 154 handle on the weekend gap as USD weakened on the Treasury secretary news as Yen accelerated its strength to cross below the previous weekly low and finish just below the 152 level this morning.
Short term momentum remains quite negative with price action unable to make new short term highs so this is setting up for a further breakdown here below the 151 level in the coming sessions, but watch for a recovery bounce:
The Australian dollar had been one of the more robust undollars through the US election volatility but is facing more pressure on the upcoming trade war, although last night it bounced back up towards the 65 cent level in a relatively weak move.
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 remain volatile with the tariff news and post US election tensions and potential peace talks/ceasefires in the Middle East as Brent crude was again struck below the $73USD per barrel level overnight as the daily chart pattern continues to tighten like a spring.
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 remains under pressure following its swift selloff down below the $2700USD per ounce level from Friday night after the Treasury news, but held the line overnight with almost no change, finishing just above the $2630 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!