Big drama on Wall Street overnight as AI dragged tech stocks down heavily with the NASDAQ losing nearly 4% as Nvidia and others lost significant ground. Broader industrial shares were hit as well with European stocks also failing to advance, sending a dark signal for Asian markets on this morning’s open. The USD is getting weaker by the day as Trump’s isolationist policies continue to shake the global system with Euro almost back above the 1.05 handle while Yen is also strengthening. Meanwhile the Australian dollar is in a holding pattern just above the 62 cent level after a big weekend gap down and lack of trading volume.
10 year Treasury yields saw a big bid on the DeepSeek suck with a 10 point turnaround back down below the 4.5% level while trading in oil was again weak with Brent crude retracing back below the $76USD per barrel level as its corrective phase gathers pace. Gold also slumped back below the $2750USD per ounce level after almost hitting the $2800 level on Friday.
Looking at stock markets from Asia in yesterday’s session, where mainland share markets were largely unchanged with the Shanghai Composite closing near the 3250 point level while the Hang Seng Index was able make modest gains, up 0.6% to get back 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 was setting up for another potential breakdown here as price oscillated downward but has turned into an impressive bounce – can it be maintained?
Japanese stock markets were mixed with the broader Nikkei 225 closing nearly 1% lower at 39565 points, reversing the Friday session gains.
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 closed for Straya Day long weekend holiday.
SPI futures are indicating a wobbly start to the truncated trading week on the rout from Wall Street overnight so we could see a reversal pattern here today. The daily chart pattern and short price action suggests resistance overhead at the 8300 point level is starting to weigh on the market:
European markets were unable to make any gains across most of the continent as the Eurostoxx 50 Index lost nearly 0.6% to retrace below the 5200 point level, finishing at 5188 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 gapped down over the weekend and kept on selling off overnight on the Deepseek AI drama as the NASDAQ stumbled nearly 4% lower to erase its gains YTD while the S&P500 lost nearly 2% to finish at 5999 points.
Price action was looking good leading up to the Trump inauguration but it seems bad luck is coloured Orange as stocks topped out on Friday night before sliding fast into the oversold zone. This has all the trademarks of a continuation below the 6000 point support level:
Currency markets are truly putting King Dollar in its place since the most recent NFP print as weakness spreads due to the Trump Tariff and isolationist madness against Europe. Almost all the undollars advanced again with Euro nearly getting back above the 1.04 level and staying there in morning trade, making a new weekly high.
The union currency is holding on to this uptrend and although there is some overhead resistance momentum remains in overbought mode. Watch for a potential reversal here on any close below the 1.0430 level in the short term:
The USDJPY pair broke down from its weak Friday night hold over the weekend gap to get crushed back to the 153 handle before a late reprieve overnight saw it return to the mid 154 level.
Short term momentum is now extremely oversold with a likely bounce back but this is probably a dead cat bounce at best as the weak USD meme is entrenched here:
The Australian dollar is still depressed in the medium term but is looking better in the short term albeit on USD weakness alone as it held well above the 62 cent zone overnight with a proper go at the 63 cent level last week still having potential.
The potential follow through to the high 62’s as it almost hits the 200 day moving average (upper black sloping line) indicates some chance of a medium term reversal, but this is high risk going into the live February RBA rate meeting – watch for a rejection at just below the 63 cent level instead:
Oil markets are now in a proper retracement after failing to continue their breakout with Brent crude retracing back down to the $76USD per barrel level in a continued pullback after being so overbought in recent weeks.
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 was well back on track after recently running out of steam as it made further inroads above the $2700USD per ounce level recently but its recent mild pause turned into a retracement over the weekend, finishing just below the $2750 level overnight.
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 is looking more interesting:
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!