A very busy end of month session on Friday night saw a drop in US consumer spending but Wall Street played the short covering game while Chinese volatility spiked earlier in the session, causing European shares to make no advances. The USD is coming back against the undollars with new daily lows in Euro due to the disgusting Oval Office Trump Trap with the Australian dollar almost pushed below the 62 cent level.
10 year Treasury yields shifted lower again to almost cross below the 4.2% level while oil prices failed to rebound on hopes that OPEC+ might consider further production cuts with Brent crude steady at the $73USD per barrel level. Gold is also failing to get back above the $2900USD per ounce level after its recent setback, making a new low at the $2850 level.
Looking at stock markets from Asia in Friday’s session, where mainland Chinese share markets moved sharply lower in afternoon trade with the Shanghai Composite down more than 1.9% while the Hang Seng Index has slumped more than 3% lower to finally crack below 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 but as I warned last week – be cautious here in the face of another reversal:
Japanese stock markets are also in crashing mode with the Nikkei 225 losing nearly 2.8% to close at 37174 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 unlikely:
Australian stocks are the best in the region relatively speaking with the ASX200 closing 1.1% lower at 8172 points.
SPI futures however are up 0.7% due to the window dressing on Wall Street from Friday night so we could see a better start to the trading week on the open here. The daily chart pattern and short price action suggests resistance overhead at the 8500 point level is far too heavy for the market to overcome with short term momentum oversold and ready to go lower:
European markets were basically unchanged across the continent, although it seems some optimism is creeping in again despite the tariff threats as the Eurostoxx 50 Index closed just 0.1% lower at 5463 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 showed some buying exhaustion setting in as I continue to watch for any inversion this week with the harbinger a close below the low moving average (red line):
Wall Street was getting hit hard by the White House nonsense at first but recovered due to end of month window dressing and bottom picking with the NASDAQ and S&P500 both closing nearly 1.6% higher, the latter at 5955 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 above that level. As I said last Friday, watching ATR support at the 6100 point level proper for an inversion as the selloff was beckoning with momentum ready to take this lower:
Currency markets are swinging back to King Dollar on the latest initial jobless numbers plus the full scattergun approach to tariffs from the White House with the once resurging Euro forced back well below the 1.05 handle overnight after recently matching its weekly highs.
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 although short term momentum is fighting back with a slightly push above the 149 level proper 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 has completely given up its recent gains with the false breakout above the 64 cent level proving very short lived with this retracement now extending into the low 62 cent level overnight against 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 of shot over the 200 day MA (moving black line) with a clear inverted head and shoulders pattern – but did not come to pass. This has hall the hallmarks of rebalancing so I expect some further downside here:
Oil markets are failing to get back on track but we did see some strong bids on speculation OPEC+ might do something about production overnight with Brent crude pushed back above the $73USD per barrel level although it still looks 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 return to the 2024 lows is building here:
Gold is failing to continue its surge above the $2900USD per ounce level with a sharp retracement in the previous session now back on track overnight as it retraced to the $2860USD per ounce level this morning.
Price action is finding a lot of resistance just under the $2960 zone and this continued overnight with a swing down to ATR support on the four hourly chart that then turned into a selloff. Watch for the $2900 level to now become resistance going into the end of the trading week:
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!