Wall Street is diverging in fortune with the headline Dow again retreating overnight while the tech heavy NASDAQ made yet another new high. Over in Europe it was all uncertain with most stock markets pulling back in the wake of a crisis in German politics, seemingly mirrored in Canadian halls of power early this morning as well. Currency markets are relatively calm as traders await the Fed and other banks for expected cuts this week as the USD was largely unchanged in direction as most undollars drifted lower. Euro stabilised somewhat while Yen continued its downtrend as the Australian dollar finished at its recent lows just above the 64 cent level.
US Treasury 10 year yields remained at a near one month high above the 4.4% level while oil markets stabilised as Brent crude drifted slightly below the $74USD per barrel level. Gold remains at its recent lows near the $2650USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are having a poor session to start the trading week with the Shanghai Composite down more than 0.4% in afternoon trade to remain below the 3400 point level while the Hang Seng Index was off by nearly 1% at 19786 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 was trying to get back to these overextended highs but has failed in subsequent waves so watch for another potential breakdown here:
Japanese stock markets were able to tread water with the Nikkei 225 closing 0.1% lower at the 39457 point level.
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 but futures indicate a rocky start to the trading week:
Australian stocks remaining in sell mode with the ASX200 closing 0.5% lower at 8249 points.
SPI futures are down 0.2% due to the lack of solid action on Wall Street overnight, which will likely more downside as the trading week goes on. The daily chart pattern and short price action suggests this rollover could build momentum to the downside as it appears support at the 8400 point level was illusory indeed:
European markets failed to continue their strong rebound with losing sessions across the continent as the Eurostoxx 50 Index eventually closed 0.4% lower at 4947 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance again 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 has started to rollover here:
Wall Street is all over the place with the NASDAQ advancing yet again, up more than 1.2% while the S&P500 closed 0.3% higher at 6074 points.
Price action was looking extremely positive but perhaps the Orange Santa rally is running out of steam as the 6000 point level might turn into support going forward. If tonight’s session can reverse the recent losses watch for last week’s NFP highs to come under threat next for a continued rally into the New Year:
Currency markets remain in the thrall of King Dollar with relatively low volatility on Friday night in the wake of the ECB and SNB cuts, continuing the downtrend in undollars following the recent US CPI print as traders now await this week’s Fed, BOE and BOJ meetings. Although Euro managed a small bounceback later in the session after breaking into the 1.04 zone, it has barely managed overnight to hold above the 1.05 level.
This all still fits in with my contention that we are still likely on our way back to parity as traders start to price in the now very unclear future for the continent. The union currency is now making new weekly lows after the false NFP breakout and could slide further going into the end of the trading year:
The USDJPY pair was able to push higher from its recent modest rebound this time extending just above the 154 level for a new monthly high.
Short term momentum has switched back to overbought settings as price action makes a breakout in the short term, although I’m way of a post weekend pullback here back down to the 153 level on overextension:
The Australian dollar remains depressed with a series of false breakouts throughout last week’s price action just pushing it lower and lower, with yet another rollover on Friday night sending it back below the 64 handle and staying there after the weekend break.
The Pacific Peso remains under pressure on reweighting risks and the lack of action from the RBA as it wants to hold through to Feb/March next year given that a rate cut from the Fed is imminent, with a possible further breakdown going into the end of year at the 63 or even lower levels:
Oil markets are trying to re-engage post the OPEC meeting as Brent crude tries to get out of its depressed mood around the $72-73USD per barrel level, finally breaking through the $74 level on Friday night but couldn’t manage to fulfill this bounce overnight.
The daily chart pattern continues to tighten like a spring with short term momentum definitively 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 broke through the $2700USD per ounce level on Chinese bank buying speculation last week but that has been all taken back and more as the shiny metal settled down again overnight, holding just above the $2650 level.
Price action had been accelerating in confidence as new levels of support were being created regardless of USD strength but this pullback and rebound both had been fighting too much under the $2700 zone so I’m skeptical of any lasting breakout lasting 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!