A busy session of economic news and Fedspeak kept risk markets alive with volatility overnight as Wall Street returned to buying mode while another record high from the German DAX pushed European stocks higher again, despite further French political problems, Korean peninsula machinations and the rumblings of a Chinese trade war with the USA. The USD is still in flux mode as Euro sits unsteadily at the 1.05 level while the Australian dollar collapsed under pressure as it dove straight down to the 64 handle on the back of poor growth figures.
US Treasury 10 year yields edged slightly lower to cross back below the 4.2% level while oil markets saw a reversal leading up to the OPEC meeting with Brent crude drifting back below the $73USD per barrel level. Gold however remains in a sideways mood following its previous sharp retracement as it stabilises at the $2650USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were struggling to make ground with the Shanghai Composite falling some 0.4% to the 3364 point level while the Hang Seng Index returned a steady session unchanged at 19742 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 last month before a massive retracement. Price action however is again setting up for another potential breakdown if short term support breaks:
Japanese stock markets were also uneasy going into the close with the Nikkei 225 just 0.1% higher at 39276 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.
Australian stocks had the worst session in the region however with the ASX200 closing 0.4% lower at 8461 points.
SPI futures however are up at least 0.1% due to the solid lead on Wall Street overnight despite the overall macro tensions. The daily chart pattern and short price action suggests a return to the pre election uptrend, with the lower Australian dollar helping as we head straight into a Santa Rally as daily momentum remains at extreme overbought levels:
European markets continued their strong rebound with more solid sessions across the continent led by the German DAX with the Eurostoxx 50 Index closing more than 0.8% higher to finish at 4919 points.
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 getting out of oversold mode on its way back up to the previous weekly support levels:
Wall Street is finally getting back on trend with a series of strong returns across the complex overnight as the tech heavy NASDAQ lifted more than 1.3% higher while the S&P500 gained more than 0.6% to finish at 6086 points.
Price action is still looking extremely positive but perhaps the Trump Santa rally is not yet running out of steam as the 6000 point level might turn into support going forward:
Currency markets are increasing in volatility due to political tensions in France, South Korea and well, everywhere with some mixed economic prints and the Fed Chair Powell speech overnight pushing USD one way or the other. Euro remains on the back foot as it tried to stabilise just above the 1.05 handle overnight but is still well off its previous weekly high.
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 trying to get out retracement mode with a modest rebound thwarted overnight as Yen returned to strength, pushing back towards the key 150 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 150 level in the coming sessions, but watch for another potential recovery bounce:
The Australian dollar is facing more pressure on the upcoming trade war, as it collapsed down to the 64 cent level after failing to make good on any recent USD weakness.
The Pacific Peso could come under even 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 below the 64 handle proper most likely next:
Oil markets had been reducing in volatility which always precludes a volatile breakout but this was quickly turned around yet again as OPEC signalling looks modest at best as Brent crude was pushed back below the $73USD per barrel level.
The daily chart pattern continues to tighten like a spring and while short term momentum remains in negative territory, 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 in previous weeks but its now trying to hold on to the mid $2650 level as the USD is pulled in both directions across the currency complex.
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 under 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!