While Wall Street rebounded on Friday night it was basically just a short covering exercise after falling for four weeks straight with expectations of higher volatility continuing this trading week amid the ongoing trade war and a very busy economic calendar, including the latest Fed meeting. European stocks got a breather as well but are much better placed while the USD was basically unchanged due to an absence of large economic catalysts although that could change over the weekend gap due to some Chinese shenanigans around trade. Euro and Pound Sterling are holding on near their recent highs while the Australian dollar was finally able to get back above the 63 cent level.
10 year Treasury yields pushed slightly higher reflecting moves across the yield curve to get back above the 4.3% level while oil prices couldn’t follow through with their recent bounceback with Brent crude staying at the $70USD per barrel level. Gold was also unchanged as it parks itself just below the $3000USD per ounce level.
Looking at stock markets from Asia from Friday’s session, where mainland Chinese share markets moved sharply higher in afternoon trade on stimulus speculation with the Shanghai Composite up nearly 1.9% while the Hang Seng Index pulled more than 2% higher on the supposed good news coming out of the National People’s Conference.
The Hang Seng Index daily chart shows how this recent move looked unsustainable to the upside after recently setting up for another potential breakdown around the 20000 point level but has brushed this caution aside. Momentum remains 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 were also on the rise again with the Nikkei 225 up nearly 0.7% to close at 37020 points.
Price action had been indicating a rounding top on the daily chart for sometime now with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level now in full remission. Yen volatility remains a problem here, with a sustained return above the 38000 point level unlikely although futures are indicating a bounce back:
Australian stocks finally stopped selling off with the ASX200 closing nearly 0.5% higher at 7789 points.
SPI futures are up nearly 1% due to the rebound on Wall Street from Friday night. The daily chart pattern suggests entrenched resistance overhead at the 8500 point level is far too heavy for the market to overcome with short term momentum very oversold and ready to reverse into a short term bounce towards the 7800 point level:
European markets were able to rebound after a series of falling sessions across the continent during the week, with the Eurostoxx 50 Index finishing 1.4% higher at 5404 points.
This was setting up for a breakdown with short term support taken out and the ATR support from the recent uptrend now under threat as momentum went into oversold mode but now looks like a new launching pad to buy more European defence stocks!
Wall Street finally caught its break after “winning” for so long but this could be shortlived as this engineered correction may have more to go in the coming weeks. The NASDAQ came back nearly 2.7% higher while the S&P500 also put in a 2% plus session, finishing at 5638 points.
The Trump pump and dump scheme is working a treat here as overhead resistance rejected further calls to launch higher above that 6000 points throughout Jan and Feb with momentum now taking the market back to the September 2024 lows. But as I said last week watch for the bottom pickers here:
Currency markets remain strongly against King Dollar from the follow on from the weaker than expected US CPI print and although the latest Uni Michigan consumer sentiment survey came in weak it didn’t push USD around as much with Euro retracing slightly to finish the week slightly below the 1.09 level.
The union currency is still holding on despite the tariff trade war with short and medium term support building at higher levels. Momentum was overextended earlier in the week and has now re-engaged to the upside although a potential pullback move is building here:
The USDJPY pair was trying to get out of its funk after a very brief deceleration phase into the early February lows around the 151 level as but it was shortlived after last week’s CPI print with a return to the mid 148 level instead.
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 watch for another return below the 146 level:
The Australian dollar is trying hard to get back into the swing of things with some recent upper movement around the 63 cent level but failed to make a new session high on Friday night although support just below is staying strong.
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 on the daily chart:
Oil markets are failing to get back on track as Brent crude struggled again on Friday night to make headway after recently showing some life above the $70USD per barrel level with a flat session instead.
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, although news that the Ruzzians are facing more refinery attacks from the Ukrainians could see more buying support:
Gold surged well above the $2950USD per ounce level in the previous session but it didn’t quite get above the $3000 level on Friday night as the move was little bit too overbought.
Price action has always found a lot of resistance just under the $2960 zone so that was the likely target in any upside potential but that has been deftly pushed aside but I await for the obvious short term pullback to then re-engage to the upside:
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!