Another selloff on Wall Street overnight was balanced by a strong bid across European stocks as risk markets continue to dance around the lower volatility trading period before Christmas. Potential progress in peace talks in Ukraine saw oil prices drop again while the USD continues to drift lower against the majors as bonds rallied on speculation the Fed is likely to cut at least twice next year due to the Trumpian economic woes. The Australian dollar drifted slightly below the mid 66 cent level but remains firm.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets saw some selling with the Shanghai Composite down 0.5% to stay well below the 3900 point level while the Hang Seng Index reversed its recent gains to fall more than 1% to stay below the 26000 point level.
The daily chart of the Hang Seng Index shows a complete fill of the March/April selloff with a resumption of buying above 26000 points as momentum tried to build but failed to push aside resistance. The latest small bounce off support does not have a lot of momentum here so I am wary of a dead cat bounce which is forming:
Japanese stock markets also saw a solid selloff with the Nikkei 225 down more than 1.3% at 50172 points.
Daily price action was looking extremely keen indeed as daily momentum accelerated after clearing resistance at the 42000 point level with another equity market that looks very stretched. ATR support was broken at the 50000 point level but daily momentum did not get considerably oversold so there might be life here:
Australian stocks fell back in afternoon trade as the Santa Rally was stopped in its tracks with the ASX200 losing 0.7% to 8635 points. SPI futures are flat despite or because of the mixed sessions on both sides of the Atlantic overnight.
The daily chart pattern shows that short term support has been abandoned, as momentum builds for a broader selloff but watch for some stability that could turn into a bounceback above the 8600 point area:
European markets got out of sell mode across the continent as the Eurostoxx 50 Index finished some 0.6% higher at 5752 points, re-engaging to the short term uptrend from mid-November.
The market has been failing to make headway here due to the too high valuations but short term support was put under a lot of pressure before finding some buyers to stabilise, as this could turn back into a revisit of the recent highs:
Wall Street continues to stumble around led by tech stocks with the NASDAQ losing 0.6% while the S&P500 fared a little better, falling just 0.2% to close at 6816 points.
The four hourly chart showed a steady if not exciting climb back to recent highs with somewhat firming support but that nascent trendline was broken recently but support had steadied before the Fed meeting. The breakout here was pretty obvious but has turned out to be a fake out so watch for continued selling below support:
Currency markets continue to selloff USD by and large with a near 3% decline in recent weeks by the DXY across the main undollars with Euro holding strong from its Friday night position above the 1.17 handle for a new monthly high.
The union currency was building strength as it climbed above previous ATR resistance at the 1.1580 area previously and is now accelerating above the 1.17 level although maybe getting ahead of itself in the short term:
The USDJPY pair was taken down to the 156 level on the Fed cut and is now pre-positioning before the BOJ meeting with a fall back to the 155 handle overnight.
The previous price action was sending the pair beyond the March highs and had the potential to extend those gains through to start of year position at the 158 handle and this recent volatility repeated this move. Watch for a potential retracement back to the dominant downtrend below the 155 level next:
The Australian dollar saw some volatility post the RBA hold versus the Fed rate in the previous week on Chinese macro influences but held out amid the slightly risk off nature of markets on Friday night, although it did weaken a little below the mid 66 cent level overnight.
Price action was not looking good for the Pacific Peso in the medium term as the interest rate differential squeeze sent it back to the doldrums, but this has inverted as the RBA moves to a much hawkish position. Resistance at the 65 cent area has been pushed aside with a run up through the 66 cent level which is now going to become support going forward:
Oil markets have been on a multi week/monthly downtrend with Brent crude now pushed below the $61USD per barrel level overnight on USD weakness and potential progress in Ukrainian war talks, taking the market back to the October lows.
The daily chart pattern shows the post New Year rally has a distant memory with any potential for a rally up to the $80 level completely dissipating. There is still potential here for a run down to the $60 level where the monthly lows sit at key critical support next:
Gold is now using the key $4200USD per ounce level as a springboard to new highs, launching up towards the $4300 level on Friday night on USD weakness after having gone nowhere since last week.
As I previously mentioned that after some stability, another large upside potential move was looming again for the shiny metal as the desire for USD dwindles and here we are:
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!