By Chris Becker
US stocks brushed aside the Watergate/Nixonian politico dramas in the US with “good” news on the oil front as DOE inventories declined, sending oil prices higher. This send material stocks higher, while tech stocks kept flying and other industrials lifted as a Fed president hinted that rate rises won’t be hastened as much as expected. Combined with a lower USD, this should bode well for Asian stocks today.
Yesterday in China the Shanghai Composite was steady going into the close, but a concerted selloff late in the session saw it close down nearly 1% longer to 3052 points as regulators continue to tighten the reins. The critical support level at 3100 may turn into strong resistance soon as this bear market rally is all but wiped out:
Japanese stocks had a modest session as their corporate earnings season gets under way with the Nikkei taking back it previous session losses to be up 0.3% but still just below the 20,000 point line. Futures are again pointing to a positive open today as Yen sold off overnight, but momentum is getting quite overcooked here:
The ASX200 closed 0.6% higher to finish at 5875 points, taking back all of yesterdays small dip and absorbing the Budget with aplomb. Most of the major banks were off slightly due to the Budget measures but this was offset by iron ore miners have another day in the sun, with Fortescue rising over 5% and near 2% rises for BHP and RIO. SPI futures are suggesting a slighter better open this morning but the banks could come under pressure due to the Budget measures announced last night:
On to Europe, where stocks were slightly mixed with a positive bent. The German DAX closed with a scratch session but lifted further in futures, almost reaching its previous high. If it’s not able to breach this level soon, the price pattern is setting up for a possible retracement to 12500 as momentum remains way overcooked:
The S&P500 is still struggling to gain traction and while it put on a few points for a paltry 0.1% rise overnight, this is not exactly setting things on fire with the short and medium term charts still travelling sideways. Without some substantive moves shortly, we could be setting up for some falls back to long held support at the 2377 to 2381 zone:
On to currencies, where the USD is coming off the boil a little against the majors with the four hourly chart of the Euro indicating a possible reversal is in the works. The bullish falling wedge pattern corresponds to support from last week at just below the 1.09 handle as price decelerates here:
Yen is back on its selling trend, with the USDJPY pair remaining above the 114 handle overnight. My target at 115 is still in sight here and nothing seems to be in its way – which makes me cautious:
The Aussie dollar remains well sold against all the majors and still well below the 74 handle proper against USD overnight after a brief uptick that had no follow through. Price briefly touched the previous low at 73.20 and could be retested again this morning:
Oil is coming back after last nights DOE inventory report wiped out most but not all short positions. The WTI contract lifted nearly 4% to be above the $47USD per barrel level overnight, pipping just above the low moving average, but not trailing ATR resistance. I still contend we’re about to see a full retracement to $37 to $40 very quickly if the $48-49 area is not filled soon:
And to gold which remains sick looking even as USD slows and interest rate rise bets slow down. Last night it fell again, settling back to $1218USD per ounce. Momentum remains negative and its own low moving average is far away, so $1200 remains my target:
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!