Wall Street is still failing to make a comeback after its Friday night breakdown with tech stocks again on the back foot while European shares were mixed as the German DAX made a new high on the back of a new conservative government that looks set to go full steam ahead in defense spending. The USD is firming against most of the undollars except Yen with the Australian dollar dropping sharply below the 64 cent level.
10 year Treasury yields fell back again, off by nearly 3 points on some successful auctions while trading in oil saw some stability return after the weekend gap with Brent crude hovering at the $74USD per barrel level. Gold remains on a strong uptrend and made some further gains, lifting above the $2950USD per ounce level.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets were down slightly in afternoon trade after the stonking Friday session with the Shanghai Composite off by just 0.2% to remain well above the 3300 point level while the Hang Seng Index retraced somewhat to close 0.6% lower after its 4% surge on Friday, still well above the 23000 point level.
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 closed for another long weekend with Nikkei 225 futures indicating a big drop on the open today playing catchup.
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 were able to put on some runs but it was meagre at best with the ASX200 closing just 0.2% higher at 8303 points.
SPI futures are down at least 0.5% due to the continued wobbly session on Wall Street overnight. The daily chart pattern and short price action suggests resistance overhead at the 8500 point level is far to heavy for the market to overcome with short term momentum nearly oversold and ready to go lower:
European markets failed to have a good start to the trading week with minor losses across the continent although the German DAX surged 0.6% on the conservative election victory as the Eurostoxx 50 Index closed 0.4% lower at 5453 points.
This has the hallmarks of a rally that is running out of steam although daily momentum was overbought it never got to extreme readings. Daily candlestick analysis shows some buying exhaustion setting in however, so watch for any inversion this week with the harbinger a close below the low moving average (red line):
Wall Street remains in the doldrums, starting the week in poor fashion as the NASDAQ fell more than 0.6% while the S&P500 put in a scratch session to start the week out at 6011 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 are losing their anti-USD mood with geopolitical concerns mounting up with another mild pullback in Euro as it retraced to the mid 1.04 level 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 is still failing to get out of its funk 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 overnight.
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 but this breakout above the 64 cent level has been short lived with a retracement back to the mid 63 level overnight due to a 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 and is trying to set up for a run at the $3000 level with another modest return overnight up to the $2950 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 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!