Green across the board across both sides of the Atlantic on Friday night with Wall Street having its best week since the election in November as traders weigh up the lifting of the Trump Circus Tent come Monday morning. The USD had a late surge after pulling back against most of the undollars throughout the week as Euro remained slightly above the 1.02 handle while Yen finally gave up a little ground due to its own strong advance. Meanwhile the Australian dollar has failed to make any inroads and retreated below the 62 cent level.
US Treasuries only saw action on the early end of the yield curve with the 10 year barely moved at the 4.6% level while oil markets stabilised and have pulled back slightly after their recent surge as Brent crude retraced back to the $80USD per barrel level. Gold also tried to advance above the $2700USD per ounce level but is now feeling the weight of a resurgent USD.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets moved slightly higher with the Shanghai Composite up 0.2% or so as it advances slightly above the 3200 point level while the Hang Seng Index finished just 0.3% higher to remain slightly above 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 unable to do any better as reactions remain mixed around Yen oscillations with the Nikkei 225 closing 0.3% lower at 38451 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 also unable to translate some recent gains into anything sustainable with the ASX200 slipping some 0.2% lower, closing the week out at 8310 points.
SPI futures however are indicating a good sized lift after the weekend gap given the positive mood on Wall Street on Friday night. The daily chart pattern and short price action suggests another attempt at breaking through resistance overhead at the 8300 point level next:
European markets were the standout again with big moves across the continent as the Eurostoxx 50 Index closing more than 0.8% higher to extend well above the 5100 point level, finishing at 5148 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 finally got back on trend with a solid finish to the week with the NASDAQ closing some 1.5% higher while the S&P500 was up exactly 1% to finish just below the 6000 point level.
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 with King Dollar dominating since before the most recent NFP print with more economic news out of the US confirming that mood. Almost all the undollars pulled back on Friday night with Euro retracing back below 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:
The USDJPY pair finally moved higher after a solid slump all week, returning to just above the 156 handle on Friday night, but this does not look that sustainable.
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 as I warned last week, the potential for a rebound was building here:
The Australian dollar is still quite depressed although its wanting to find 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, retracing below that key level on Friday night.
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 on Friday night with Brent crude retracing back below 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 but was unable to advance further on Friday night 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!