By Chris Becker
Wait one on that “all systems go for the bull market” or is just a dip? Probably just a dip. Yep its a dip. Bets on a quicker than expected rate rise from the Fed pulled the rug out from markets overnight with US stocks falling and dragging European issues down as well. The real winner is the USD which soared against everything, which at least should give Japanese stocks a tailwind today against the minor and probably short lived risk off mood.
Looking at Asia’s session yesterday, where the Shanghai Composite closed down 0.5%, taking back yesterdays gains to be at 3230 points. The 2016 high at 3300 points may be a bridge too far for this very speculative market with no new daily high since last week. Watch the low moving average here for a proper breakdown:
Japanese stocks are going great guns as everyone is selling off Yen against USD, providing a big tailwind. The Nikkei closed up nearly 1% higher to finish at 19,564 points. Futures are suggesting a modest open today as the weaker Yen offsets the US stock selloff:
The ASX200 finally had a decent session, closing up over 1.2% or 7 points to be at 5776 points, still a little below the 5800 point resistance zone but beginning to claw back the recent retracement. SPI futures are suggesting a mild pullback this morning back below resistance and possibly as low as yesterday’s open/intraweek support just above 5700:
On to Europe, where stocks were heading for a new high but retraced in the last hours, the German DAX move illustrative by dropping a few points to finish just above my target of 12000 points. The 2015 high at 12400 is not far away but given the US dip we could see a minor retracement to the trendline here:
US stocks had the rug pulled on an obvious too far, too fast momentum spillover, with the S&P500 losing 0.6% to finish just above 2380 points. As the four hourly chart shows, this hasn’t broken support and indeed if it does the near term target is closeby at around 2368 or so before the BTFD step in again:
On to currencies, where all the action was overnight! The USD is killing everything else as hot money moves into the higher rate possibilities that continue to firm. Pound Sterling continues its breakdown remaining below the 1.23 handle overnight and to the early February low and support on the daily chart. The key area to watch is at 1.2240, but this is looking a little overdone here:
The Euro was the biggest mover, falling straight down to the 1.05 handle as the EZ wide CPI print came in as expected. The union currency is right on support here so a further breakdown would presage a wider move to parity:
Yen is selling off in a clear straight line on the USDJPY pair, moving up to the 114.50 level where its finding a slight pause late in the session. The next level to watch is 115.3 which is the daily rolling ATR resistance level:
The Aussie dollar slumped through the support level I indicated yesterday in Macro Afternoon at 76.40 providing an excellent payday overnight for short sellers (hello, I’m taking the rest of the day off!) The next target is obvious too – long held resistance and now support at 75 cents even:
Oil is starting to slip here with a mild selloff as USD surges. The WTI contract fell below the $53USD per barrel level and this time was pushed below its low moving average on the daily chart. The next level to watch is ATR rolling support at $51.50 or so:
And to gold, which like the other undollar’s is selling off in the face of a resurging USD, fulfilling my expectations of a full retracement down to at least $1242 here, actually hitting a weekly low at $1235 or so. Where to for now? Its obvious that $1200 could come under threat here if the interest rate rise bets continue to rise:
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)
BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe
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!