A bath of blood overnight on all risk markets with the NASDAQ dropping 6% while the S&P500 lost nearly 5% as bond markets surged on a rush to safety and the USD was hit on all fronts with undollars lifting 2% or more against what was “King” Dollar before wannabe King Don upended the global trade system overnight. The Australian dollar almost broke above the 64 cent level before retracing to the low 63 level this morning.
10 year Treasury yields are now below the 4% level with the yield curve implying a US recession as a certainty, while oil prices have plunged to new lows, wiping out their recent breakout with Brent crude declining back to the $69USD per barrel level. Gold also suffered after being the stable standout and almost retraced below the $3050USD per ounce level, before pulling back to be just above the $3100 level.
Even without the usual non-farm payroll aka US jobs number print tonight this is going to a volatile session here today in Asia.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were down in afternoon trade after a very bad start with the Shanghai Composite off by 0.3% while the Hang Seng Index has lost at least 1.5%, closing at 22835 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. Momentum has retraced from being well overbought after beating the previous monthly highs at the 21500 level and is moving into the negative zone with support firming at the 22000 point level:
Japanese stock markets were having the worst of it with the Nikkei 225 down nearly 3% to 34735 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 still unlikely with futures indicating big losses on the open this morning:
Australian stocks were again the best performing but its all relative with the ASX200 closing nearly 1% lower at 7859 points.
SPI futures are down at least 1% but this is likely to be much lower on the open given the bloodbath 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 oversold with price action setting up a nice dead cat bounce completion here for a potential return to the 7700 point level in the aftermath:
European markets were unable to escape the widespread selling with big moves lower across the continent with the Eurostoxx 50 Index finishing down 3.6% to 5113 points.
This was setting up for a breakdown with short term support taken out and the ATR support from the recent uptrend now broken as momentum went into oversold mode with this overshoot now coming to pass. Watch however for support to firm at the previous monthly support levels (black line) at 5100 points which must hold:
Wall Street is loving Herr Trump’s tariffs aren’t they? This is what happens when you purposely engineer a recession and the biggest tax increase in recent history! Anyway, the NASDAQ collapsed 6% while the S&P500 eventually closed 5% lower at 5396 points, their biggest one day losses in over five years.
The Trump pump and dump scheme is back in business with a new low made since January 20 (the height of the market for the next four or eight years?) and could bounce around on any new tariff re-negotiation announcement but it looks like this pill has more swallowing to go:
Currency markets flew higher against USD with Swiss Franc leading the way, followed by Euro and Pound Sterling as the Trump regime’s tariff tirade comes home to roost against “King” Dollar. This could be earth shattering in hindsight with all the undollars facing some big appreciation in the months ahead, albeit with the usual volatility as deals and counter tariffs are tried and applied.
The union currency spiked up through the 1.11 handle before retracing back down slightly to the mid 1.10 level this morning and is likely to oscillate around that level in the coming session as we also need to take into account the monthly US employment print – aka NFP – although that impact may now wane over time as the US purposely gives up its mantle as the biggest economy in the world:
The USDJPY pair continued its sharp decline as Yen appreciated due to the tariff announcements, falling back down to the 145 handle before a quick recovery later in the session to just breach the 146 level as of this morning.
Short term momentum is now again extremely oversold and likely to stay here as everyone scratches their head to work out what’s going on with Japanese export industry likely to crumble unless some significant moves are made by the BOJ and Japanese government alongside China:
The Australian dollar had a wild ride like other undollars but is still facing a lot of headwinds although it did finally manage to steady just above the 63 cent level again.
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 with price action having breached the 200 day MA (moving black line) which has now turned into resistance. Short term momentum has now inverted but I contend we are likely to see more oscillation rather than price direction:
Oil markets had finally broke out as they made positive headway all last week but a double whammy of an engineered US recession plus OPEC+ production increases are seeing a sharp reversal underway with Brent crude pushed sharply lower and now below the $70USD per barrel level overnight.
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 was building here before this short term bounce and is now almost baked in :
Gold finally suffered some volatility which could be its correlation with silver, which fell 6% overnight as the shiny metal retraced sharply below the $3100USD per ounce level after a false breakout post the tariff announcement, to then recover and finish almost at a new daily low.
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. Watch for short term support to hold at the $3100 level with the potential to springboard from here on USD weakness:
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!