Last night saw the US Federal Reserve hold fire on interest rate changes although it did signal that stagflation is the likely outcome for Trump’s Tariffs with an uptick in inflation already observable. US stocks loved the talkfest anyway as Wall Street and European stocks pushed higher, the latter again moving mainly due to defense stocks. Meanwhile currency markets saw increased volatility as USD jostled against Euro and Pound Sterling while falling sharply against Yen following yesterday’s BOJ meeting. The Australian dollar was eventually able to hold above the 63 cent level.
10 year Treasury yields slipped slightly lower to finish just above the 4.2% level while oil prices couldn’t follow through with their recent bounceback with Brent crude rejecting the $71USD per barrel level. Gold continued its move above the $3000USD per ounce level, a clear signal that not all is right in risk world, heading up to the $3050 level.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets are slightly lower in afternoon trade with the Shanghai Composite down more than 0.2% while the Hang Seng Index has put in a scratch session on buying exhaustion, closing at 24727 points.
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 well overbought after beating the previous monthly highs at the 21500 level:
Japanese stock markets also saw little action as they absorb the BOJ meeting with the Nikkei 225 steady before closing 0.2% lower at 37751 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 small bounce back:
Australian stocks were the worst in the region with the ASX200 closing 0.4% lower at 7828 points.
SPI futures are up nearly 0.7% due to the FOMC lead rebound on Wall Street overnight. 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 to continue their moves higher across the continent with the Eurostoxx 50 Index finishing up 0.4% at 5507 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 found good news in everything with the NASDAQ up 1.4% while the S&P500 also gained more than 1% to close at 5675 points.
The Trump pump and dump scheme is still working somewhat here 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. The dead cat bounce may be over in the short term however:
Currency markets remain strongly against King Dollar amid the tariff nonsense despite the outcome of the hold in the FOMC meeting with Euro remaining just above 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 could be building here:
The USDJPY pair broke down substantially on the BOJ aftermath with a fall back below the 149 level overnight, taking out all of this week’s gains.
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 a potential return below the 146 level if the current resistance levels aren’t taken out:
The Australian dollar is trying hard to get back into the swing of things and while we saw some life above the previous weekly high point its still failing to breach the 64 cent level.
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 has been able to shoot over the 200 day MA (moving black line):
Oil markets are failing to get back on track as Brent crude struggled again overnight to make headway after recently showing some life above the $70USD per barrel level with a session that indicates a lot of internal selling again.
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 is surging past the $3000USD per ounce level after breaching it in the previous session with a run up to the $3050 level this morning, but still looks very over stretched.
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 without any substantial pullback thereafter, finding a very solid bid up here at new historic highs:
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!