Trading between Christmas and the New Year break has been the usual tempered affair with low volume and generally low volatility although the USD strengthened considerably and Wall Street hasn’t managed to get out of its funk. Other risk markets are equally cautious with commodities and bond markets not counting on a low volatile 2025. In currency land, Euro was back to its pre-Xmas low just above the 1.03 handle while the Australian dollar still can’t escape its trajectory as it makes new lows below the 62 cent level.
US Treasury 10 year yields were pushed lower by 7 points to head back to the 4.5% level while oil markets are moving slightly higher as Brent crude lifts above the $74USD per barrel level. Gold is still under the pump but stabilising above the $2600USD per ounce level.
Looking at stock markets from Asia, where mainland Chinese share markets slumped at the end of the year with the Shanghai Composite down more than 1.6% to 3351 points while the Hang Seng Index was able to stabilise at just above the 20000 point level.
The Hang Seng Index daily chart shows how resistance formed around the 21000 point level with only one false breakout in late November squashed back to the 20000 point level where price action has stayed since. This is still setting up for another potential breakdown here:
Japanese stock markets also pulled back on the last session of the year with the Nikkei 225 down nearly 1% to close out at 39894 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 also suffered with the ASX200 down nearly 1% to close at 8159 points.
SPI futures however are down nearly 1% on the poor post-Xmas showing on Wall Street. The daily chart pattern and short price action suggests this rollover has built a little too much momentum to the downside even if support at the 8400 point level was illusory indeed. Watch for this dead cat bounce here to keep rolling over:
European markets also slowed down after the Xmas break with low volatility across the continent with the Eurostoxx 50 Index eventually closing 0.5% lower at 4895 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 rolled over here with futures indicating the 4900 point level to remain somewhat spurious:
Wall Street was trying hard to get out of its recent funk on the back of the somewhat cool inflation prints but the NASDAQ fell back nearly 1% while the S&P500 was pushed nearly 0.5% lower in the final session of the year, finishing at 5881 points.
The Orange Santa rally is likely over as political machinations and the Fed’s direction clowd the future for 2025. Short term price action looks somewhat ominous but never discount the bottom pickers to get this back on track:
Currency markets remain in the thrall of King Dollar with previously oversold undollars now reversing momentum as the new year begins, with Euro leading the way as it almost makes a new monthly low below the 1.04 handle, matching the December low overnight.
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 lows and will likely slide further towards parity:
The USDJPY pair was able to push a little bit higher following its Xmas pullback, getting just above the 157 handle overnight but this does look a little bit toppy overall.
Short term momentum has reverted out of extremely overbought settings but is still very positive indeed as price action settles down but there is still potential for more upside here dependent on trading activity as the new year begins:
The Australian dollar remains one of the most depressed undollars as the RBA plays fiddlesticks amid macro volatility and local recessions with the very weak fightback before Xmas turning into nothing sustainable as it loses traction above the 62 handle and slumps below that level.
This breakdown has been on the cards for weeks and will reverberate into the new year as the currency finally reweights according to its position in the global economy – lower tier. Watch for overhead ATR resistance on the four hourly chart to be rejected again:
Oil markets are doing well to re-engage post the OPEC meeting as Brent crude gets out of its depressed mood around the $72-73USD per barrel level, almost pushing above the $75 level overnight.
The daily chart pattern continues to tighten like a spring with short term momentum now out of negative territory as medium term price action could no longer be supporting a downtrend:
Gold suffered almost as much as the Australian dollar on the Fed cut/hold but has now maintained a sustained return above the $2600USD per ounce level, steadying just below local resistance at the $2630 level.
Price action had been accelerating in confidence in early December 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 have been skeptical of any upside potential. And here we are with a new low for that is threatening the year long uptrend:
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!