By Chris Becker
Stocks shot out of the gate on the European open last night, and technically price charts are exhibiting breakouts across the risk complex, but sentiment remains complicated at the US earnings season gets underway. Risk was pushed higher on bullish vaccine news, not anything substantial like the slowing of US consumer spending or the epic rise of coronavirus cases in the US . Oil prices finished 2% higher while gold hung on above $1800USD per ounce, while the scam on Twitter hasn’t had that much of an effect on Bitcoin as yet…
Looking at share markets in Asia from yesterday where the selling was confined to Chyna, where the Shanghai Composite is down nearly 1.5% to 3361 points while in Hong Kong the Hang Seng Index eventually eked out a scratch session to close right on 25481 points. The daily chart shows price remaining just above the previous series of highs at the 25200 points level, indicating that while there’s no upside here yet, the bears are not in charge:
Japanese stocks came back strongly after the previous stumble, with the Nikkei 225 surging over 1.5% higher to close at 22945 points. Futures are lifting higher into another breakout position towards the 23000 point level as momentum picks up strongly on the daily chart. The target for this move is the early June highs, not far away:
The ASX200 gapped higher at the open and stayed above 6000 points throughout the session, closing some 1.9% higher to 6052 points. SPI futures are up around 20 points, with the daily chart indicating a probable breakout and an echoing of other moves on equity markets as momentum remains clearly positive:
European markets rose sharply at the open, with broad finishes across the continent as the German DAX closed 1.8% higher to 12930 points, although it retracing a small amount later in futures thereafter as Wall Street ended a bit sour. The daily chart continues to show a steady uptrend from the early June lows and a retest of the 12900 high as expected, almost matching the previous early June highs in what looks like a blowoff trade:
Wall Street had wide ranging sessions again, but the big three bourses all finished well into positive space with the broader S&P500 up nearly 1% to 3226 points. The daily chart shows how price is matching the previous highs, but not exceeding them and a wider view of the chart shows this as a substantial resistance level to get past. Support remains strong at the 3100 point level, so failing a surprise on earnings, with momentum already cooked, this should leap higher:
Again watch NASDAQ as the harbinger of the shorts – the four hourly chart still showing a break of the rising wedge pattern and a struggle to maintain support here:
Currency markets continued to enjoy the volatility with Pound Sterling swinging back up through the 1.26 handle before losing it again, while Euro was unable to advance to a new high to settle just above the 1.14 handle here this morning. As I said previously, this has been a swift swing higher, bouncing off the low edge of the trend channel and now nicely overbought and ready for more longs to pile in, but watch momentum rolling over here and the low moving average to possible come under threat as we go into more economic data at the end of the week:
The USDJPY pair was unable to bounceback again, falling sharply through the 107 handle after rejecting former trailing ATR support as momentum inverted to negative here on the four hourly chart. I said yesterday I was concerned about a sharp reversal down and here we are, so watch the lower timeframes in Asian trade for signs of any rebound here:
The Australian dollar followed stocks again with a swing through the 70 handle that stuck with price obviously above to clear resistance overhead which could become strong support in the days ahead. However, momentum is notably overcooked and ready to flop below so watch the risk correlations with other assets, particularly commodities:
Oil prices regained somewhat overnight with Brent futures closing nearly 1% higher to the $43.60USD per barrel level, finally making a new daily high. Daily momentum is slowly picking up here again, with price finding support but I still contend it requires a burst through the $44 mark to get going:
Gold is still finding its legs after a worrying few sessions, and was unable to advance past any intrasession highs overnight, stabilizing at the $1810USD per ounce level. The next test is matching and then exceeding the $1815 level as the trend gets back on a more sustainable path:
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!