Overnight saw another stumble on Wall Street as large industrial stocks warned of recessionary fears with European shares also failing to get back on trend as the Ukrainian situation sours in Russia’s favour. A reversal in fortune for USD as all the undollars led by Yen made big gains overnight with the Australian dollar leaping above the 64 cent level.
10 year Treasury yields fell back again on more tariff nonsense while trading in oil saw some minor gains with Brent crude extending slightly above the $76USD per barrel level. Gold remains on an uptrend after snapping below the $2900USD per ounce level, back struggled to make further gains above the $2930 level overnight.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets are barely higher in afternoon trade with the Shanghai Composite still trying to hold above the 3300 point level while the Hang Seng Index has gone down more than 1% to 22694 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 were also deep in the red on the higher Yen with the Nikkei 225 closing 1.2% lower at 38603 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 continued their post RBA retracement with the ASX200 closing more than 1% lower at 8322 points.
SPI futures are fairly stable despite the falls on Wall Street from overnight so I expect a dour finish to the trading week. 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:
European markets continued to fumble around after their one night reversal in the previous session with falls in the German DAX offset by rises in the peripheral markets as the Eurostoxx 50 Index closed steady at 5461 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 this week:
Wall Street failed to push forward after the previous muted session with the NASDAQ and the S&P500 both losing nearly 0.5% overnight, the latter closing at 6117 points.
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 as overhead resistance is firming – watch ATR support at the 6100 point level proper for an inversion:
Currency markets are now almost fully anti-USD in their mood as the global trade order continues to be upended with the recent pullback in Euro retracing to the 1.04 level turned into a reversal up through the 1.05 handle overnight.
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 was overextended with support clear at the 1.04 level before this move higher:
The USDJPY pair failed to get out of its funk with a major breakdown overnight after a very brief deceleration phase into the early February lows around the 151 level with short term momentum showing the struggles to get off the ground.
Short term momentum was extremely oversold before the start of week bounce but required price action to at least get over the 156 level to call this a proper trend higher. As USD weakens structurally overall and domestic policies continue to strengthen Yen I’ve been warning for sometime about a strong break below the 151 level:
The Australian dollar as been surprisingly strong in the wake of continued tariff threats and USD weakness as it finally broke into the low 64 cent level overnight following the “hawkish” cut at the 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 pushing slightly above its previous daily lows at the $76USD per barrel level after its recent sharp reversal but still looking weak internally on the short run as resistance looms overhead.
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 after suffering a sharp retracement last week but is not quite setting up for a run at the $3000 level with another modest return 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 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!