By Chris Becker
Sentiment swings again with hope around new treatments for COVID-19 while the Fed held to its stimulating course in the FOMC meeting overnight as the first quarter GDP figures slumped as expected. Wall Street had priced this in and lifted strongly across the board with commodities also rallying as oil prices jumped more than 10% with gold returning above $1700USD per ounce.
Looking at Asian share markets from yesterday where the Shanghai Composite closed 0.4% higher at 282 points while the Hang Seng Index did the same, closing 0.3% higher to 24643 points, as daily price action almost breaks through overhead resistance that has been tested several times in previous weeks. Daily momentum has switched to a positive mood here with resistance overhead (short black line) at the 24600 point level obviously under threat with a soon to be weekly close above, ready for a breakout:
Japanese share markets were closed for yet another holiday but this didn’t stop more Yen buying. The daily chart is now in a strong position to breakout here, with futures indicating a big move higher on the open as resistance at the 20000-20200 area is likely to be broken soon:
The ASX200 was the standout, up 1.5% to finally put some runs on the ground, closing at 5393 points. SPI futures are up 2% so this looks like a solid return to the previous highs in late March, possibly new highs as a breakout builds:
European markets rallied across the continent despite a stronger Euro with the German DAX closing nearly 3% higher to 11107 points breaking well above the previous daily and weekly highs. As I said previously daily momentum was picking up and getting ready for a new breakout and here we are with a classic breakout pattern that needs to hold above this key resistance levels:
Wall Street re-engaged the buy buttons across the board with the NASDAQ playing catchup, soaring over 3.5% while the S&P500 finished 2.6% higher at 2939 points, finally breaking through its previous highs. The daily chart shows this market ready to roar ahead as it comes up against staunch trailing ATR resistance at the 3000 point level:
Onto currency markets where volatility around USD has not yet fully subsided with Euro getting back to a two week high after a previous fakeout breakdown, lifting almost through the 1.09 handle. The medium term downtrend is getting precarious here as USD weakens with the union currency ready for more upside here if it can close the week out at a new high:
The USDJPY pair remains depressed not helped by a lack of traders yesterday locally, with price reverting near its intraweek low overnight at the mid 106 level. Momentum readings are still oversold as the high moving average plays catchup, their is a potential for a swing higher but overall USD weakness will hold this pair back:
The Australian dollar continues its surge and looks very overdone here, remaining well above the 65 handle overnight, for yet another new weekly high. I said previously there is a possibility of a return to the former highs from mid February at 66.50 or so, but short term momentum is way overbought that should translate into a small reversion – normally:
Oil remains extremely volatile with WTI up 20% and Brent lifting nearly 11% to finish well above the $24USD per barrel level. The morning star daily candle is still indicating a possible bottom but this has not yet translated into a breakout above previous support now resistance at the $26 level as momentum remains strongly negative:
Finally to gold, which continues to consolidate here above the $1700USD per ounce level, steadying again overnight of finish at $1712USD per ounce. The daily chart continues to firm in the short term to catch up with the longer term technical picture which should keep advancing:
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!