Wall Street had a dour session overnight led by big falls by tech stocks as Asian and European shares lifted higher as concerns over inflation and Trump’s tariff shotgun approach weighed on risk markets. Bond markets are seeing spikes in yields while the USD came back to strength against most of the undollars as the recent surge in Euro was completely reversed back down to the 1.02 handle overnight. The Australian dollar recently gout of its funk but that too looks shortlived as we await today’s monthly CPI print.
US Treasury yields were pushed higher again across the board with the 10 year almost breaking the 4.7% level while oil markets are moving slightly higher as Brent crude inched above the $77USD per barrel level to extend its new weekly high. Gold pulled back slightly again but is finding more life above the $2650USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets gained strongly in afternoon trade with the Shanghai Composite up more than 0.7% to push back above the 3200 point level while the Hang Seng Index lost a lot of ground to close nearly 1.3% lower at 19447 points.
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 rebounded on Yen speculation with the Nikkei 225 closing more than 1.9% higher at over 40000 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 this time weren’t the best performing in the region but the ASX200 did manage to put some runs on the board, closing 0.3% higher at 8285 points
SPI futures are barely changed despite the pullback on Wall Street overnight but given the size of the fall its likely to result in a sour session today. 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. The dead cat bounce may repeat here so watch out for any falls below 8200 points:
European markets kept on building overnight but at a steadier pace with mild moves highher across the continent with the Eurostoxx 50 Index closing up 0.5% to finally crack through 5000 points.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance unable to breach the 5000 point barrier in recent months. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum has pick up strongly here with the 4900 point level turning into strong support:
Wall Street however slumped across the board with both the NASDAQ and the S&P500 losing nearly 2%, the latter closing back down to 5904 points.
Short term price action looks somewhat ominous but never discount the bottom pickers to get this back on track with a potential rebound off the 5900 point support zone if it gets back down there again:
Currency markets remain in the thrall of King Dollar with the latest ISM services PMI printing higher than expected and despite a higher flash inflation print for the Euro area, Euro fell back promptly to the 1.03 handle, wiping out its recent post NY progress.
Despite the rebound this all still fits in with my contention that we are still likely to see the union currency on its 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 back towards the new year low at the 1.02 level first:
The USDJPY pair was unable to move much higher although it remains very well supported despite the talkie-talk from financial ministers yesterday as it holds just below the 158 handle overnight.
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 with the very weak fightback before Xmas turning into nothing sustainable as it loses traction and retreats in full back down to the 62 handle.
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, now pushing just above the $77 level to clear the Friday night highs in what looks like a solid breakthrough.
The daily chart pattern has broken out of its spring formation with short term momentum bursting into overbought territory with a run up to the $80 level probable:
Gold is trying to get back on track and while it has held above the $2600USD per ounce level since the mild retracement from last Friday night it looks to have stalled 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:
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!