By Chris Becker
Risk sentiment is as petulant as a six year old boy cooped up doing homeschooling for the third week in a row, having a tantrum overnight as Federal Reserve officials continued to explain their monetary stimulus program to a market that just wants more and more. The USD firmed against everything except Yen as markets await the return of Japanese traders after a long mid week holiday. Commodities are also just as mixed as oil snaps back after a firm swing rally higher, while industrials rose slightly and gold slipped back below the key $1700USD per ounce level.
Looking at Asian share markets from yesterday where Chinese markets came back after a very long weekend, with the Shanghai Composite gapping down to start before recovering to be up 0.6% to 2878 points, while the Hang Seng Index continued its bounceback to be up over 1% at 24137 points, bouncing off the recent daily lows at 23400 points. This keeps the bears away at least with firm support at the 23400 point level fairly obvious now but is not yet setting up for a breakout:
Japanese share markets were closed but open today with the daily futures chart of the Nikkei 225 not very telling as price seems to be anchored below the 20000 point level. We’ll have to wait and see with Yen buying dominating in the last few days and the overall risk complex still quite schizophrenic:
The ASX200 had a more ebullient day with a 1.6% surge higher, closing at 5407 points, making another dent from its losses on Friday. SPI futures are down nearly 1% in response to yet another wobbly night on Wall Street with yet another market having a sideways at best daily pattern. I still contend overhead resistance at the 5550 level remains too strong to beat:
European markets were unable to continue the recent good mood, pricing in the recent German court decision on the ECB, with the German DAX closing 1.1% lower at 10606 points. The daily chart looks weak although daily momentum remains positive, I’m watching for a failure to get back above the high moving average tonight as a sign that there’s still little upside opportunity in the short term:
Wall Street was mixed across the board with the NASDAQ pushing 0.5% higher while the Dow and broader S&P500 finished off by more than 0.7%, the latter closing at 2848 points. The daily chart shows price trying to get back above the lower trendline but trailing ATR resistance at the 3000 point level grows ever stronger, so watch for a potential break below the recent daily lows:
Onto currency markets where volatility around USD is still all about Euro with the union currency continuing in its slump as it fell below the 1.08 handle for a two week low overnight. As I said previously the medium term downtrend reasserts itself and now I’m watching for a return to the late April lows at the mid 1.07s next:
The USDJPY pair is falling sharply on the safe haven bid despite the lack of Yen trading in Asia locally, now falling below ATR support to be just above the 106 level. Momentum readings were pointing to the USD weakness here but today’s action could be telling as Japanese traders return to their desks:
The Australian dollar has lost all momentum after its Monday morning gap snapback, now in full retracement mode to move solidly back below the 64 handle overnight. The currency finally caught up to the fall in commodity prices, now watch for a retest of the weekly low here at 63.70:
Oil volatility continues but this time has swung back on sentiment with all of the previous gains taken back as both WTI and Brent crude slipped, the latter falling back below the $30USD per barrel level. This may yet keep my swing trade idea intact as former trailing ATR resistance area at around $30 was the uncle point, but we could still see a wild swing up to former yearly low nearer $35:
Finally to gold, while consolidation continues around the $1700USD per ounce level, it was unable to make a new session high overnight to slip below, closing at $1687USD per ounce. The daily chart was morphing into a rectangle pattern with support at ca. $1680 and resistance near $1730 at the respective lows and highs, but as I’ve been warning for some time now, a retracement down to daily ATR support or previous resistance at $1650 would not be surprising. Watch the daily lows here:
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!