Risk sentiment is flat lining again as stock market volatility moves lower but all eyes still remain on US Treasuries and the USD itself with Swiss Franc now taking the lead while Euro took a slight back seat on poor sentiment readings in Germany. The impact on global trade continues to be felt with leading indicators suggesting slowdowns are underway everywhere. The Australian dollar is remaining above the 63 handle after yesterday’s release of the RBA minutes.
Treasuries remain the key market to watch with 10 year yields slipping again while oil prices are trying to recover but Brent crude is struggling to get back above the $65USD per barrel level. Gold is slowly down after making new highs after its recent surge above the $3200USD per ounce level, but has not slipped further overnight.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets were slightly lower in afternoon trade before the Shanghai Composite spiked at the close to finish slightly higher and remain above the 3200 point level while the Hang Seng Index did the same to finish 0.2% higher at 21466 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 reversed completely to panic selling with support at the 22000 point level completely wiped out. More to come or is everything awesome:
Japanese stock markets were the best performers in the region for a change with the Nikkei 225 up nearly 0.9% to 34267 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 alongside correlation with other risk markets are the main problem here, although futures are indicating another small bounce on the open this morning:
Australian stocks have managed a very staid session with the ASX200 barely moving at 7761 points.
SPI futures are dead flat given the lack of movement on Wall Street from overnight as caution reigns. The daily chart pattern suggests further downside is inevitable as the Chinese counter-counter tariffs take effect but watch for a potential short covering rally back to 8000 points or so first:
European markets were able to lift again overnight with solid moves across the continent with the Eurostoxx 50 Index finishing more than 1% higher at 4970 points.
Support at the previous monthly support levels (black line) at 5100 points failed to hold so 2024 lows at the 4400 point level are now in sight, baring a dead cat bounce which seems to be forming here. Still a good time for more European defence stock purchases (almost):
Wall Street again reduced in volatility with only mild losses with the NASDAQ slipping a handful of points while the S&P500 was pushed nearly 0.2% lower to eventually close at the 5396 point level.
The Trump pump and dump scheme moved out of its first dead cat bounce phase and into the “pump that cat full of steroids and see if it revives” stage, and right now that cat is laying down for a nap. I still contend we are going lower but 90 days is a LONG time – watch for ATR support here on the four hourly chart to come under pressure as momentum wanes:
Currency markets are still wanting to push the US Dollar down but Euro failed overnight to hold above the 1.13 handle as the German ZEW survey and UK unemployment gave some pause, although Pound Sterling made another new high.
The union currency spiked up through the 1.11 handle mid week before retracing in the previous session but is finding straight support at that level now to springboard higher although it is considerably overbought and has to navigate quite a few releases coming up this week:
The USDJPY pair is holding at its recent lows, settling at the 143 level without much upside potential building here.
Short term momentum was extremely oversold and showed a potential swing play here but that has disappeared as Yen can only go higher as the USD is dumped amid a new trade bloc forming in the Asia-Pacific with the US. Watch for any break below the 142 level:
The Australian dollar continues to extend its gains with a further move above the 63 cent level to now get back to the pre-tariff announcement levels, although short term momentum is slowing down here.
Stepping back for a longer point of view (and looking at the trusty AUDNZD weekly cross) price action is still solidly below the 200 day MA (moving black line) and near new five year low. This is not yet over but watch for an attempt to hold here at the 63 cent level in the short term first:
Oil markets are trying hard to hold onto its post tariff pause bounce with Brent crude remaining below the $65USD per barrel level after the weekend gap.
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 baked in and then some as demand will collapse despite the very short term change in sentiment:
Gold zoomed up above the $3200USD per ounce level last week but saw a mild pullback after the weekend gap but has now managed to hold at $3220 as of this morning as internal support remains very strong.
Short term support has firmed immensely in recent sessions showing some real strength here and while momentum is considerably overbought we could see even more upside here with the $3200 area likely to hold here with a small dip on profit taking:
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!