The post US election euphoria seems to be dissipating, not helped by the somewhat disappointing Chinese stimulus outcomes on Friday which has led to another reweighting on risk markets. Wall Street went it alone on Friday night with some small advances while European stocks pulled back further alongside oil prices and the Australian dollar as proxies for global growth concerns. The USD remains somewhat strong as Euro gave up all its post election gains for a new low while the Aussie, Loonie and Kiwi all fell back in unison.
US bond markets came back slightly with 10 year Treasury yields dropping back to just above the 4.3% level while oil markets lifted in volatility once again as Brent crude was pushed below the $74USD per barrel level. Gold failed to rebound on the latest Fed rate cut after slumping post election, remaining slightly below the $2700USD per ounce level.
Looking at markets from Friday’s session in Asia, where mainland Chinese share markets were barely moving most of the session before selling off into the close on the stimulus disappointment with the Shanghai Composite down 0.5% but still holding well above the 3400 point level while the Hang Seng Index was down around 1% to the 20728 level.
The Hang Seng Index daily chart shows how short term resistance was finally being pushed away with a huge breakout above the 19000 point level that then set up for a run at the 20000 level in the response to PBOC stimulus. Price action is again bunching up at the 20000 point level setting up for another potential breakdown if short term support breaks:
Japanese stock markets are also sanguine with the Nikkei 225 closing just 0.3% higher at 39500 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 possibly on the cards as positive momentum is building.
Australian stocks were the best performers in the region as the ASX200 closed more than 0.8% higher at 8295 points.
SPI futures are down more than 0.4% however despite the continued rally on Wall Street from Friday night. The daily chart pattern was potentially signalling a top as short term price action suggests a return to the pre election uptrend, with the lower Australian dollar helping as we slowly go into what could be a Santa Rally?
European markets are slipping further into fear mode after being at first cautious around the US election outcome with broad losses across the continent on Friday night as the Eurostoxx 50 Index closed more than 1% lower to finish at the 4802 point level.
This was looking to turn into a larger breakout with support at the 4900 point level quite firm with resistance just unable to breach the 5000 point barrier. Price had previously cleared the 4700 local resistance level as it seeks to return to the previous highs but momentum is still oversold due to the poor Friday finish with price action still below previous support:
Everything is still awesome for Wall Street although tech stocks took some heat out on Friday with the NASDAQ barely advancing while the S&P500 put on more than 0.4% to finish at 5995 points on its way to another record high.
Price action is looking extremely positive as all the stops will literally be taken out of business regulation, taxation, competition etc in a new dominating GOP Congress with the sky the limit here for big business – and with the Fed cutting rates, add more to the punchbowl:
Currency markets are still reacting or over reacting to the US election with the USD still maintaining dominance across all the undollars as Euro was unable to bounce back on Friday night with another reversion back to its weekly lows at the 1.07 handle.
The union currency had been pushed higher after remaining oversold for weeks in a dominant downtrend, then cleared overhead resistance at the mid 1.08 level in the lead up to the election. However the retribution has been swift and we are likely on our way back to parity as traders start to price in the now very unclear future for the continent:
The USDJPY pair shot higher on the election but has given up most of those gains, heading back down post the FOMC meeting to dive back below the 153 handle on Friday night.
Momentum has reverted back into extreme overbought mode with the previous weekly highs at the 152 level likely to turn into support here:
The Australian dollar had been one of the more robust undollars through the US election volatility but it can’t make any further headway due to global macro concerns (read: not enough iron ore demand) and suffered a further retreat on Friday night, heading back below the 66 cent level.
The Pacific Peso could come under more pressure here on reweighting risks and the lack of action from the RBA as it wants to hold through to Feb/March next year, and this move had been already with a retracement back to the 65 handle most likely next:
Oil markets are building again in volatility in the post US election tensions as Brent crude was pushed swiftly below the $74USD per barrel level on Friday night due to USD strength and global growth concerns.
Short term momentum remains in negative territory as medium term price action still supports a downtrend with my contention of another sharp retracement forthcoming if the $70-72 zone is not defended:
Gold had suffered the most out of the undollars with a swift selloff down below the $2700USD per ounce level but this is trying hard to turn into a rebound on the FOMC rate cut with little effect so far. Friday night saw a rebound up towards but not above the level as short term momentum remains weak at best.
Price action had been accelerating in confidence as new levels of support were being created for the shiny metal regardless of USD strength but this pullback and rebound both now remain under the $2700 zone so I’m skeptical of a new breakout here:
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!