By Chris Becker
Even though Wall Street was closed for the Labor Day weekend, last night saw some volatility on equity markets with big gains across Europe, despite some disappointing economic prints including industrial production and consumer sentiment. The resumption of Brexit negotiations also failed to fire, although Pound Sterling dropped sharply on comments from Boris Johnson. Weaker demand saw oil futures drop to a monthly low while gold and silver slipped slightly on lower volumes.
Looking at share markets in Asia from yesterday where in mainland China the the Shanghai Composite closed nearly 2% lower at 3292 points while in Hong Kong the Hang Seng Index was off 0.5% to finish at 24482 points. This small dip could turn into a wider breakdown as price heads well below the low moving average and daily momentum goes sharply negative, but note how no new intrasession lows are being made with buying support evident – just – on the daily chart:
Japanese stock markets are doing about the same with the Nikkei 225 finishing 0.5% lower at 23089 points. Futures are very flat the moment, but as above, no new intrasession low as support just below the 23000 point level remaining sturdy as the low moving average remains flat:
The ASX200 was the standout, gaining nearly 0.3% in a vain attempt to plug Friday’s big loss, starting the week at 5944 points. SPI futures are up nearly 30 points for a potentially even better open this morning. The key level to watch remains new resistance at the 6000 point level that must be broken soon or as the daily chart below shows, its not far from cracking lower:
European markets came back from last week’s selloff with a big one day reversal, perhaps a good precursor for Wall Street reopen tonight. The German DAX clawed back its Friday losses to finish 2% higher to be above the 13000 point level again. The daily futures chart shows support at the 12900 point level remaining quite firm, with this uptrend channel still intact with daily momentum positive – no bearish signs yet:
Wall Street had the night off with S&P futures indicating a swing higher on the open in tonight’s session as the quite oversold market sees the algo BTFD crowd step in:
The four hourly chart of the NASDAQ shows a similar if muted pattern to that of above, with not a full confirmation of a swing here yet with Friday nights resistance at the 11570 level needed to be breached to get back in:
Currency markets were relatively calm with USD still firming against most of the majors, particularly Pound Sterling but also Euro as it deflated back towards the 1.18 handle proper. The four hourly chart suggest a break below that level coming soon as momentum continues to flat line, so we should see a test of the previous weekly lows at the 1.1770 level soon:
The USDJPY pair was very stable throughout the session, again settling where it started the week at just above the 106 level where the price pattern is continuing to morph into a continuation instead of a short term top that I thought was forming here. The lack of buyers above the 106.30 level remains telling as is where I’m positioning for a potential breakout:
The Australian dollar was also dead flat from the lack of volume, trading in a very tight range but still in a deflating fashion as it wobbles below the 73 handle. As I said yesterday, this is not yet oversold and could continue lower but watch the previous breakout level from previous week at the 72.50 level as potential support firms:
Brent futures continued to fall with another 1.5% drop to another new monthly low, finishing right on the $42USD level, and significantly breaking trailing daily support. The follow through I was expecting has happened here, but watch for a potential fill when US traders return to their desks tonight: :
Gold continued to deflate but again, only in a minor fashion, finishing nearer weekly support at just below the $1930USD per ounce level. Price remains technically oversold on four hourly momentum but price is barely holding on above weekly support before it could sharply fall back to the monthly support level at $1910 or below 1900 very quickly.
Silver also remains poised with an ascending triangle pattern on the daily chart starting to wane as buyers desert, with a potential test here at the upper trend line below the $27USD per ounce level. There is significant resistance to overcome at the $28.30 level:
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!