By Chris Becker
There’s a lot to digest from overnight markets including China and India border disputes, rising infection rates and case loads of COVID-19 in the US South, plus a swathe of economic data and Fed Chair Powell’s testimony to Congress. Coupled with the ridiculous surge in Asian stocks yesterday, it all ended up with solid green sessions across Wall Street but not at the same magnitude, and risk currencies fell back despite a commensurate lift in commodity prices.
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed 1.4% higher at 2931 points, while the Hang Seng Index finished over 2.4% higher at 24344 points. Price has bounced back somewhere near the highs of the previous wide channel that traded throughout April and May with daily momentum pointing to more upside:
Japanese share markets were the best in the region of course, with the Nikkei 225 taking back all of Monday’s losses and then some to finish nearly 5% higher to 22582 points. Obvious daily ATR support at the 21500 point level will provide a continued launching point for the second wave (sic) of this bear market rally, but requires a break above the high moving average before calling it:
The ASX200 had a very solid upday, gapping more than 2% higher and then advancing throughout the session with only 2 stocks in the entire index having a decline, eventually closing 3.8% higher at 5942 points. SPI futures are up a modest 30 points or so, so expect a breakout above 6000 points but a possible resistance zone at 6080 coming into play:
European markets joined in on the party with rises across the board, the German DAX representative of all, closing 3.4% higher to 12315 points, and again getting out of the red on a year to year basis. Solid support at the 12000 point level should continue to provide a good uncle point to get back on this relief rally, but again there is resistance above at the recent daily highs:
Wall Street had an interesting session, coupled to Fed Chair Powell’s testimony, the S&P500 closed 1.9% higher to 3124 points as it sold off going into the close. This interestingly keeps it just below short term ATR resistance and notably, does not translate into positive momentum just yet – so the V-return is not yet complete:
Onto currency markets which had a mixed result following the risk taking on stocks and the release of US economic data, plus the big lift in the ZEW survey in Europe. This caused the Euro to fall over after its recent bounceback, heading back to its start of week level at the mid 1.12’s in a move that looks over before it started. Four hourly momentum is negative, but not quite oversold and is setting up for a flop below the 1.12 handle proper:
The USDJPY pair however remained depressed below short term resistance at the 107.60 level, again unable to gain any traction. The straight line inversion trade back down to the May lows may rejoin again soon if ATR resistance is not broken through, so watch for a rollover as momentum remains negative:
The Australian dollar had a similar session to the Euro, unable to break through short term resistance at the 70 level and thus breaking backdown below the 69 handle, but not quite the start of week level. A stronger USD meme is pushing the Pacific Peso around again and has failed to make a new daily and weekly high for awhile now, with conditions ready for a breakdown:
Oil prices continue to comeback solidly with Brent futures lifting through the $40USD per barrel level, with previous resistance at $35 now providing very solid support. Price is ready to go back to overbought readings on the daily momentum chart so we could see a retest of the previous breakout highs above $42 shortly:
And, finally to gold which finished the night just below the $1730USD per ounce level again in another staid, boring session. The bounce off daily ATR support has stalled here with the series of lower daily highs weighing on the market. Any medium term long position requires a confirmation of a push through the $1750 level for a proper breakout to a new monthly/yearly high, so watch momentum readings 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!