Amid a lot of macro chaos, stock markets continue to make new highs with the German DAX pushing European bourses higher while a closed Wall Street almost made a record close on Friday night despite a poor retail sales print and crashing export volumes to Canada. The USD continues to give up ground against most of the undollars with a swing back to Yen strength while the Australian dollar is holding steady above the 63 cent level at a new monthly high as everyone awaits today’s RBA meeting where the lack of a decent cut will bring the volatility.
US bond markets were also closed while trading in oil was muted with Brent crude still weak below the $75USD per barrel level. Gold was also unable to get back on track after snapping back below the $2900USD per ounce level after being overextended all last week, remaining at the $2890 level overnight.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets lost ground in afternoon trade with the Shanghai Composite just above the 3300 point level while the Hang Seng Index has pulled back from its well overbought position from Friday, down 0.8% to 22447 points.
The Hang Seng Index daily chart shows how this recent move looks very unsustainable to the upside after recently setting up for another potential breakdown around the 20000 point level. Momentum is extremely overbought after beating the previous monthly highs at the 21500 level so I’d be very cautious here:
Japanese stock markets are dead flat despite the higher Yen with the Nikkei 225 closing at 39156 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 the support level that must be supported for another run higher:
Australian stocks are having a pullback session as well due to some mixed earnings reports with the ASX200 closing 0.2% lower at 8537 points.
SPI futures however are up 0.2% despite the lack of a lead from a closed Wall Street from overnight. The daily chart pattern and short price action suggests resistance overhead at the 8300 point level is starting to weigh on the market with a big push through required soon to get back to the 2024 highs. I’m a bit concerned about those negative candlesticks going into the RBA meeting but watch out for a breakout here as Trump’s bluff is called yet again:
European markets have done very well in recent weeks and continued overnight despite the higher Euro with the Eurostoxx 50 Index bouncing back nearly 0.5% overnight to get back above the 5500 point level, closing at 5519 points.
This has the hallmarks of a rally that is running out of steam although daily momentum is overbought its not quite at extreme readings yet. Daily candlestick analysis shows some buying exhaustion setting in however, so watch for any inversion on the re-open this week:
Wall Street was closed for Elected Kings Day with futures somewhat steady just below the nominal S&P500 record high.
Price action had all the trademarks of a continuation below the 6000 point support level as the potential to overshoot and overreact to the FOMC meeting and following NFP print was building. This should have set up a rally into the 6200 point area but could the first stage of a pump and dump scheme although overhead resistance is weakening:
Currency markets are still putting USD in its place, despite a lack of economic prints overnight with no major weekend gap events as Euro almost went above the 1.05 level on Friday night, staying below the level in the London session yesterday.
The union currency was looking weak at the start of last week but surged as the bluffs were called on Trump’s tariffs, with short and medium term support building after being under threat. Momentum is overextended and we could see some stabilisation through a gap down to the mid 1.04s but so far so good:
The USDJPY pair can’t get out of its funk with Yen pulling it back to reality although deceleration into the early February lows around the 151 level is starting here, albeit with short term momentum still only slightly oversold with potential for more downside.
Short term momentum was extremely oversold before the start of week bounce but requires price action to at least get over the 156 level to call this a proper trend higher for USD and this hasn’t come to pass as USD weakens structurally overall and domestic policies continue to strengthen Yen. Watch for a big strong break below the 151 level:
The Australian dollar remains surprisingly strong in the wake of continued tariff threats but its really about more USD weakness with volatility around the 63 handle holding overnight as we await today’s RBA meeting.
The recent follow through to the high 62’s and low 63’s was always high risk going into the live February RBA rate meeting and after the Trumpian tariff crusade although this bounceback could shoot over the 200 day MA (moving black line) with a clear inverted head and shoulders pattern – but wait and see!
Oil markets are cooling down with Brent crude holding around its previous daily lows at the $75USD per barrel level after its recent sharp reversal but still looking weak internally on the short run.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways action for the latter half of 2024. The potential for a new rally to form above the $77USD per barrel level from here is dwindling as recessionary fears mount:
Gold wants to continue its surge above the $2900USD per ounce level but after being overextended through the latter half of last week it snapped back to short term support at the $2880 level and has not yet bounced back.
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 as the previous weekly high is now surpassed although momentum is quite overbought:
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!