Wall Street failed to advance on its latest surge overnight mainly due to a fall in tech stocks, led by Apple while European shares remained boisterous across most of the continent. The USD fell back against most of the undollars although Euro only advanced slightly on its new weekly high as Yen continued its own strong advance. Meanwhile the Australian dollar has failed to make any inroads above the 62 cent level.
US Treasuries saw a mild rises in yield with the 10 year remaining at the 4.6% level while oil markets stabilised after their recent surge as Brent crude hovered around the $82USD per barrel level. Gold also continued its steady recovery, finally heading back above the $2700USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets moved slightly higher with the Shanghai Composite up 0.3% or so as it remains slightly above the 3200 point level while the Hang Seng Index was up more than 1% to finish just above the 19500 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 as price oscillates downward:
Japanese stock markets were doing slightly better but still mixed with the Nikkei 225 closing 0.3% higher at 38572 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 best performing in the region with the ASX200 closing some 1.4% higher at 8326 points.
SPI futures however are only indicating a small lift at the open given the unchanged mood on Wall Street overnight. 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 the standout overnight with big moves across the continent with the Eurostoxx 50 Index closing more than 1.4% higher to extend well above the 5000 point level, finishing at 5106 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 couldn’t sustain its previous big rally however with the NASDAQ losing some 0.5% while the S&P500 was dead flat at 5949 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 but short term resistance has now been cleared with this one off move. The next target to beat is the New Year high before the Trump Circus begins:
Currency markets had been in a strong USD mood overall with King Dollar dominating well before the NFP print last Friday night but the weekend gap has set up some weakness before last nights CPI print which has seen further pushback that continued overnight as Euro launched above the 1.03 level.
The union currency was ready to make new lows in a very oversold condition so this isn’t that surprising as markets re-align as I still think it will likely slide further back towards the new year low and head towards parity soon as medium term momentum remains quite negative. Note how it wasn’t able to hold on to last nights gains:
The USDJPY pair continues to move down after gapping lower in the previous sessions with another solid selloff overnight to almost finish below the 155 handle this morning.
Short term momentum has reverted out of extremely overbought settings but is now fully entrenched in negative settings as price seeks the to break below the 155 level but watch for a potential rebound here:
The Australian dollar is still quite depressed but has found some traction on the USD weakness following the CPI print as it finally broke into the 62 cent zone but has failed to advance since then.
The prior breakdown had 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, but short term overhead ATR resistance on the four hourly chart was not longer rejected in last night’s move. Wait for a potential follow through to the high 62’s before another retracement as rate cut bets locally accelerate again:
Oil markets didn’t continue their breakout overnight with Brent crude retracing back down to the $81USD per barrel level in a welcome pullback after being so overbought.
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 further overnight after recently running out of steam as it finally broke through the $2700USD per ounce 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. 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!