Wall Street had a major setback on Friday night led by tech stocks like Meta as Comrade Krasnov took another wild swing on tariffs against Europe as Germany gears up for its general election on Sunday. The USD came back against most of the undollars except Yen as inflation expectations came in much higher on the latest UMich survey with the Australian dollar snapped back below the 64 cent level.
10 year Treasury yields fell back again, off by more than 7 points to the 4.3% level while trading in oil saw some minor falls with Brent crude pulled back to the $74USD per barrel level. Gold remains on a strong uptrend but failed to make further gains, hovering around the $2930USD per ounce level.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets were higher in afternoon trade with the Shanghai Composite up more than 0.8% to well above the 3300 point level while the Hang Seng Index surged ahead on all cylinders, almost lifting 4% to 23477 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 tried to get back on track after closing lower in the previous session amid the latest inflation print but the Nikkei 225 managed to only lift a few points to close 0.2% higher at 38776 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 now unlikely as futures indicating a bad opening:
Australian stocks continued their post RBA retracement with the ASX200 closing more than 0.3% lower at 8296 points.
SPI futures are down at least 0..7% due to the steep falls on Wall Street from Friday night so expect a big gap down on the open. 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 managed to eke out a very small lift but stumbled in post closed futures with only peripheral continental markets really moving higher as the Eurostoxx 50 Index closed up 0.2% to 5474 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 had been failing to push forward all week and finally succumbed to the risk off crowd on Friday night with the NASDAQ falling more than 2% while the S&P500 lost nearly 1.8%, closing the week out at 6013 points.
This should have set up a rally into the 6200 point area but the good old Trump pump and dump scheme is working a treat here as overhead resistance rejected further calls to launch higher. As I said on Friday, watching ATR support at the 6100 point level proper for an inversion as the selloff was beckoning:
Currency markets were almost fully anti-USD in their mood all week although volatility around the upending of the global trade order continues with another mild pullback in Euro as it retraced to the mid 1.04 level on Friday night.
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 after a very brief deceleration phase into the early February lows around the 151 level with short term momentum pushing it further into the 149 level on Friday night.
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 but was then thwarted on Friday night due to the rally in USD.
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 looking to heat up again but this time probably to the downside with Brent crude pushed back to its previous daily lows below the $74USD per barrel level as it still looks 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 on Friday night.
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!