Continued carnage on overnight markets as US recession fears and other macro concerns combine into a big selloff that is turning into a possible correction. Bond markets are rallying hard after the weak US jobs report on Friday night while stocks continue to fall, although there were some signs of stability later in the session. Currency markets are still selling off USD and going to safe havens like Swiss France and Yen while commodity currencies like the Australian dollar are taking the brunt of this reshuffle of risk.
US Treasuries are trying to stabilise but yields continue to fall with the 10 year still below the 3.8% level. Meanwhile oil prices flopped despite the Middle East volatility with Brent crude down to a three month low below the $77USD per barrel level. Gold prices were unable to sustain the volatility and crashed below the $2400USD per ounce level before a late bounce.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were the best in the region relatively speaking with the Shanghai Composite down by just 1.5% or so while the Hang Seng Index was looking at a 3% loss before paring that back to fall just 1.5% to close at 16698 points.
The Hang Seng Index daily chart was starting to look more optimistic a few months back but price action has slid down from the 19000 point level and continues to deflate in a series of steps as the Chinese economy slows. A few false breakouts have all reversed course and another downside move is looming here as the 17000 point level is broken:
Meanwhile Japanese stock markets are seeing epic volatility with the Nikkei 225 down more than 12% to close at its November 2023 lows at 31458 points, now off by nearly 25% in a month. The weekly chart below is very illustrative!
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. Short term support subsequently broke on that retracement, and then the front fell off. Futures are indicating a potential lift as we see the inevitable dead cat bounce:
Australian stocks couldn’t escape the carnage with the ASX200 closing more than 3.5% lower to 7649 points.
SPI futures are down at least 1% given the falls on Wall Street from overnight so we’re likely to see short and medium term support at the 7700 point level come under pressure as the new trading week gets underway. That engulfing candle was a good signal to get out of here and get to the choppa! But this sort of gapping action sets up for more volatility either way, so watch for a potential bounce here:
European markets were off by 3% or more mid session but have recovered somewhat but the damage has been done across the continent, with the Eurostoxx 50 Index still closing more than 1.5% lower to 4571 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. 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. Instead, former ATR support at the 4900 point level was only a temporary anchor point as we go deep down into correction territory:
Wall Street was off across the whole complex in every sector with the NASDAQ falling more than 3.4% while the S&P500 lost exactly 3% to close at 5186 points.
The daily chart illustrates how steep this falls have been but also puts into context that we’re only talking a month or two of returns taken out. The Sell in May crowd may now be looking to get back in on the overdone selling as momentum is extremely overextended here:
Currency markets are deliciously licking up the volatility with safe havens like Yen and Swiss Franc surging while many of the majors are also brewing higher against King Dollar, although commodity proxies like Aussie and Loonie are really struggling. Not so Euro which remains well above the 1.09 level as a result.
The union currency had previously bottomed out at the 1.07 level before gapping higher earlier in the week with more momentum building to the upside with the 1.0750 mid level as support but there was still too much pressure from King Dollar. This recovery about ATR support could be unsustainable however so I’m watching for a minor retracement tonight:
The USDJPY remains on a downwards pattern as the carry trade unwinds to retrace down to the 141 level making it a 1000 pip move in the last week.
This volatility speaks volumes as it pushed aside the 158 level as longer term resistance in the weeks leading up to the BOJ rate hike. With every man and his dog buying Yen what can you do with so much hate against USD here? Momentum is suggesting a possible bottom is brewing but this maybe just catching knives at this point:
The Australian dollar is not immune to the volatility but its to the downside against USD this time as a commodity proxy as it crunched through the 64 cent level amid the risk off mood.
During June the Pacific Peso hadn’t been able to take advantage of any USD weakness with momentum barely in the positive zone but that has changed in recent weeks with price action finally getting out of the mid 66 cent level that acted as a point of control. This still looks very weak with medium term support still broken as we await the RBA’s next step which is likely to be pushing on a string:
Oil markets are continuing to fall back on recession concerns which are overriding real world war brewing in the Middle East with Brent crude breaking below the May lows at the $77USD per barrel level overnight, almost falling through $74USD per barrel.
After breaking out above the $83 level last month, price action had stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Daily ATR support had been broken with short term momentum still in oversold mode but watch for a potential follow through on this reversal as this swings into higher volatility:
Gold was trying to remain on trend as it absorbed this risk-wide volatility and held on until late last night as it crashed through the $2400USD per ounce level after failing to clear key resistance at the $2450 level on Friday night.
While it was the biggest casualty of the reaction to the recent US jobs report, the shiny metal was able to clock up some gains before this reversal, almost hitting the $2500USD per ounce level. The longer term support at the $2300 level remains key and while this looks like a good opportunity to buy the dip there is the potential for more downside here as short term support evaporates:
