Overnight saw stock markets return to some semblance of stability as Wall Street rallied but lost momentum at the close as US Treasuries sold off after the big bid earlier in the week. This may not yet be over as US recession fears and other macro concerns still loom that could turn this wide dip into a proper correction. Currency markets are seeing some stability as well with safe havens in minor retreats but the USD remains weak while the Australian dollar had an upside day due to the hold from the RBA.
10 year Treasury yields lifting more than 11 points to get back above the 3.9% level. Meanwhile oil prices remain under pressure due to Middle East volatility with Brent crude falling below the $77USD per barrel level. Gold prices were unable to get back above the $2400USD per ounce level again.
Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets began with minor losses but fought back as the session progressed as the Shanghai Composite finished 0.2% higher while the Hang Seng Index went the other way and lost 0.3% to close at 16647 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 saw huge upside volatility with the Nikkei 225 closing more than 10% higher back to 34517 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. Short term support subsequently broke on that retracement, and then the front fell off. Futures are indicating a steadier session today – is this the inevitable dead cat bounce:
Australian stocks had the modest of bounces with the ASX200 closing just 0.5% higher to 7692 points.
SPI futures are down around 0.2% despite the bounceback on Wall Street from overnight so we’re not likely to see anything exciting in today’s session. Former medium term support at the 7700 point level will remain under pressure here as trader’s absorb the RBA’s signalling of no punchbowl for the rest of 2024:
European markets stabilised but only just managed to put in positive returns across the continent, with the Eurostoxx 50 Index closing just 0.1% higher at 4575 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 able to bounce back across the whole complex but saw some late session selling to pare those gains back with the NASDAQ and the S&P500 gaining exactly 1%, the latter closing at 5240 points.
The four hourly chart illustrates this bounceback is still under short term resistance at the mid 5300 point level with momentum retracing from being overextended but nowhere near a positive reading yet. Watch out for more volatility here:
Currency markets are finally reducing in volatility as the run to safe havens like Yen and Swiss Franc abates but King Dollar is still on the ropes and commodity proxies like Aussie and Loonie continue to struggle. Euro pulled back as expected overnight after almost hitting the 1.10 level.
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 still be unsustainable however so watch for this minor retracement to possibly gain momentum if support doesn’t hold at the 1.09 level:
The USDJPY remains on a downwards pattern as the carry trade unwinds but some stability maybe settling in as it held at the 144 level overnight following the 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 holding up given the RBA signalling no rate cuts for the rest of 2024 at a minimum yesterday, holding just above the 65 cent level amid some runs away from King Dollar.
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 but we could see a slow resurgence here:
Oil markets are continuing to fall back on recession concerns which are overriding real world war brewing in the Middle East with Brent crude still below the May lows as it breaks below the $77USD per barrel level overnight.
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 but is still finding it tough to get back above the $2400USD per ounce level after failing to clear key resistance at the $2450 level last 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:
