Overnight saw a big swing in volatility all based on US markets as AI concerns on earnings sent half of the NASDAQ down while a rally in precious metals gave undollars a lift against USD across the board. Then we saw a big bounce in oil prices with more speculation about the Trump regime bombing Iran again while 10 year Treasury yields almost got back to their five month high at the 4.3% level. And we’ve got the NFP print on Friday to look forward to as well!
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets lifted smartly in the afternoon session with the Shanghai Composite up more than 1% to stay above the 4000 point level while the Hang Seng Index just treaded water at the mid 26000 point level.
The daily chart of the Hang Seng Index showed a lot of wish washy action around the 26000 point level in the last couple of months with some recent weakness now turning into strength as it broke out above the 27000 point level. However momentum got extremely overbought with a reversal still in play here:
Japanese stock markets bounced back the strongest across the region with the Nikkei 225 up nearly 4% to zoom through the 54000 point level.
Daily price action wavered a little during the BOJ hike in the previous weeks but has firmed up strongly with the 50000 point level forming key support. This was looking like a launch point through longer term overhead resistance but the selloff in Japanese bonds and the election snap call was causing a stall but this is looking promising here:
Australian stocks still managed a lift in line with the region with the ASX200 closing nearly 1% higher to 8857 points however SPI futures are off by 0.2% due to the falls on Wall Street overnight.
The daily chart pattern shows that short term support has been reinforced after a period of hesitation before Christmas with a bounceback above resistance at the 8800 point area building into what looked like a solid breakout, but has since reversed. I’m watching ATR trailing support to come under pressure next in a wider risk off move but its holding so far:
European markets have been loving the falling Euro but put in some wobbles overnight with the Eurostoxx 50 Index closing nearly 0.3% lower at 5995points overnight, still just shy of the former highs.
The market had been failing to make headway in recent months due to the too high valuations but short term support was very solid and has pushed well above recent highs to start 2026 stronger than expected. This was looking promising but again I’m cautious:
Wall Street is getting schizophrenic with another swing down as the NASDAQ fell over 1.7% while the S&P500 lost more than 1% to close at 6897 points.
The four hourly price pattern was a solid fill and bounce back that is almost back to the recent highs after setting up for a rollover so watch for another attempt at cracking the 7000 point level proper next as this dump and pump operation keeps going:
Currency markets were swinging back to King Dollar overnight in reaction to the boisterous ISM PMI in the previous session but have bounced back or at least stabilised against USD with Euro getting back above the 1.18 handle overnight, with Pound Sterling and Canadian Loonie also doing better.
The union currency’s four hourly candle and technicals suggested an extremely overbought condition beforehand as I mentioned so some profit taking here but trailing support was not respected here so I’m looking for a further break below the 1.18 handle next:
The USDJPY pair was trying to continue its bounceback with USD strength waning a little overnight, keeping the pair above the 155 level.
However the start of year position at the 158 handle is way out of bounds for now with this rebound being relatively inconsequential as we await the Japanese elections and other missives from the BOJ. Overhead resistance has been cast aside with price action now above the previous gap down level:
The Australian dollar had a small correction going into yesterday’s RBA meeting with the bounceback above the 70 cent level on the expected rate hike holding steady overnight.
This could see a further extension back to the previous highs from last week but momentum is barely positive here:
Oil markets have been on a multi week/monthly downtrend prior to the Venezuelan invasion but shot out of the gate last week with some big gains before settling into a sideways pattern and then breaking down when the Iranian war premium was discounted. However the bombs may yet start falling again as Brent crude snapped back to the $68USD per barrel level overnight getting out of its holding pattern again:
Gold is trying to get back on track after a near $1000USD per ounce drop that saw it bounceback to just below the $5000 level overnight.
The shiny metal had been lifting ever since the Dementia Don Davos drivel with trend lines becoming more and more parabolic – I did indicate a probable top but a one way trade that led to this volatility as no one wanted to go short until it was too late. Now we have the inevitable dead cat bounce with momentum not yet positive:
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!