Wall Street failed to rebound from its Friday night retracement with tech stocks again pulling the edifice down while European shares continued to selloff mainly due to falls in Italy. The latest US non-farm payroll aka unemployment print is still setting the scene in currency land with USD remaining firm against almost everything although there were some minor bouncebacks in Euro and Pound Sterling overnight while the Australian dollar managed to stay just above the 61 cent level.
The yield curve flattened again for US Treasuries with the 10 year really putting on the stretch to the 5% level as it almost breached 4.8% overnight while oil markets built higher on the Ruzzian sanctions as Brent crude almost closed above the $81USD per barrel level. Gold pulled back after topping out on the NFP print on Friday night, retracing back to the $2660USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets were unable to make any gains with the Shanghai Composite down 0.3% as it remains well below the 3200 point level while the Hang Seng Index was also in retreat, down more than 1% to crack the 19000 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 were closed for another holiday with Nikkei 225 futures indicating losing more than 1% to close well below the 40000 point level at 39190 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 resistance is firming:
Australian stocks were the worst performing in the region as the ASX200 closed more than 1.2% lower at 8191 points.
SPI futures are up by over 0.4% despite the wobbly performance on Wall Street overnight so expect a modest bounce on the open to recover the poor start to the week. 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 with a bearish flag suggesting a break below the 8200 point level next:
European markets were unable to get back on track again overnight due to peripheral concerns with the Eurostoxx 50 Index closing 0.4% lower to remain well below the 5000 point level, closing at 4954 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 as momentum tries to pick up strongly here with the 4900 point level turning into strong support:
Wall Street still has too many risk factors including the LA fires and other macro concerns let alone Friday’s NFP print and this mixed message is playing throughout as the NASDAQ fell back 0.4% while the S&P500 finally managed to close 0.2% higher at 5836 points.
Short term price action was looking somewhat ominous before Friday night with a triangle pattern and support at the 5900 point collapsing as the bottom pickers stood aside to make a new low:
Currency markets remain in a strong USD mood as King Dollar was dominating well before the NFP print on Friday night and this continued briefly through the weekend gap until some very mild pushback in the London session overnight. Euro was able to push slightly above the 1.02 level but this looks extremely weak to say the least.
The union currency was ready to make new lows anyway and will likely slide further back towards the new year low and head towards parity soon as short and medium term momentum remains quite negative:
The USDJPY pair moved around quite a bit during the NFP print and then gapped lower in the Asian session before rebounding overnight to finish just below the 158 handle this morning, but this has all the hallmarks of a dead cat bounce.
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, but watch for a potential rollover here:
The Australian dollar remains one of the most depressed undollars as it continues to lose traction and stays in retreat below the 62 handle, almost pushing below the 61 level on the weekend gap before a very late and week reprieve overnight.
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 breaking out significantly on the Ruzzian sanction buzz with Brent crude now spiking above the $80USD per barrel level overnight.
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 now complete, but needs another breather first as this looks considerably overdone and likely to slip in the coming sessions:
Gold is trying to get back on track and was able to advance slightly further on Friday night but it was running out of steam as it tried to break through the $2700USD per ounce level, and fell back considerably in the first session of the trading week to finish at the $2660 level this morning.
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. However this does look interesting if it can break through:
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!