Wall Street crumbled overnight as the realisation has set in that the Don in the Oval Office is hell bent on creating a recession in the US with the slew of tariffs that are now going to go ahead against almost every single major trading partner. The latest ISM print didn’t help either while European shares did very well mainly due to bids on continental defense stocks as its seems clear the US will leave NATO soon as well. The USD as a result slid back against the most of the undollars with Euro rebounding solidly although the Australian dollar is struggling to get back above the 62 cent level.
10 year Treasury yields shifted lower yet again to cross below the 4.2% level while oil prices failed to rebound as US recession fears mount with Brent crude flopping below the $72USD per barrel level. Gold is trying hard to get back on trend and has almost returned above the $2900USD per ounce level after its recent setback.
Looking at stock markets from Asia in yesterday’s session, where mainland Chinese share markets have moved a little lower in afternoon trade with the Shanghai Composite down just 0.2% while the Hang Seng Index has bounced back some 0.5% to just get back 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 but as I warned last week – be cautious here in the face of another reversal:
Japanese stock markets are rebounding fast with the Nikkei 225 up nearly 1.6% to close at 37745 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 with futures indicating a reversal in today’s session:
Australian stocks had a good run too with the ASX200 closing nearly 1% higher at 8245 points.
SPI futures however are down more than 0.8% due to the big pullback on Wall Street overnight. 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 had very strong sessions across the continent, helped by defence stocks getting bid up as the end of NATO draws near, with the Eurostoxx 50 Index closing 1.4% higher at 5540 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). But optimism might be coming to the fore again:
Wall Street failed to get any help from the bottom pickers with the NASDAQ and S&P500 both crushed overnight, the latter losing all of its Friday night gains to close nearly 1.8% lower at 5849 points. So much winning!
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 were looking to swing back to King Dollar on the latest initial jobless numbers last week but the Trump Tariffs are having an anti-USD effect – one that could be long lasting – with Euro again moving back almost above the 1.05 handle overnight to almost match 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 against USD. There was a nascent breakout in the mid session but this has been taken back later this morning:
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 after some strong bids on speculation OPEC+ might do something about production with Brent crude pushed back into its downtrend, now skating through the $71USD 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 lower action for the latter half of 2024. The potential for a return to the 2024 lows is building here:
Gold is really wanting to get back into the $2900USD per ounce level with a significant post weekend rebound that could have legs in today’s Asian session.
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 however:
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!