Wall Street crumbled again overnight as the realisation has set in that the Don in the Oval Office is hell bent on upending the global trade order, as Canada hit back with their own tariffs. The EU is pushing for a near trillion Euro boost in defence spending which sent the Euro soaring against the USD which continues to slide against the most of the undollars even the Australian dollar which is now well above the 62 cent level.
10 year Treasury yields shifted lower yet again to cross below the 4.2% level while oil prices are falling fast as US recession fears mount with Brent crude flopping below the $70USD per barrel level. Gold is trying hard to get back on trend and has 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 higher in afternoon trade with the Shanghai Composite up around 0.2% while the Hang Seng Index has steadied around the 23000 point level with a very small loss.
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 however are giving up their recent gains with the Nikkei 225 down nearly 1.3% to close at 37306 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 small selloff with the ASX200 closing nearly 0.6% lower at 8198 points.
SPI futures are down another 1% due to the big pullback on Wall Street overnight so expect a bit more selling today. 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, this time to the downside as the new deficit spending announcement by the EU hit risk sentiment, pushing the Eurostoxx 50 Index down more than 2.7% lower at 5387 points, although it did recover substantially in post close futures.
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 are now getting momentum against King Dollar on the burgeoning trade wars with Euro this time blasting through the 1.06 handle overnight to obliterate its former 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 slight 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 is trying to get back into the swing of things with some upper movement around the mid 62 level on USD weakness overnight but this is very early days.
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:
Oil markets are failing to get back on track with Brent crude pushed further into its downtrend, breaking below the $71USD per barrel level into the 70’s briefly as it looks weak internally.
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 this post weekend rebound finally pushing above overnight but met some short term resistance.
Price action has always found a lot of resistance just under the $2960 zone so that is the likely target in this move:
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!