By Chris Becker
Wall Street reversed course – again – overnight with the latest ECB meeting adding to the volatility as Euro swung wildly on the lack of concern about the currency itself, as all other policy measures were left unchanged. US jobless data disappointed with new and continuing claims climbing against expectations, and Congress (the opposite of Progress) was unable to make a deal on continued stimulus measures. Pound Sterling cratered on another stepback on Brexit talks with more volatility expected as the EU continues to remain firm.
Looking at share markets in Asia from yesterday where Chinese stocks were about to put in scratch sessions, but sold off towards the close with both the Shanghai Composite and Hang Seng Index falling 0.6%, the latter down to 24313 points. This dip is slowly turning into a wider breakdown as daily momentum remains sharply negative, where the August lows at 24000 points coming up fast as the support level that must hold:
Japanese stock markets were the best performers with the Nikkei 225 rising nearly 0.9% to 23235 points. Futures however are indicating a likely fallback to the 23000 point support level as it remains the anchor point in the short term. Watch daily momentum which could turn negative but its steady as she goes so far:
The ASX200 put in a solid session, closing 0.5% higher to 5908 points, but still quite shy of the 6000 point level. SPI futures of course are down nearly 80 points so we’re going to see a big selloff as confidence escapes the market, with trailing ATR support at the mid 5800 point level looking set to be broken today. This is a messy daily chart to say the least:
European markets were on tenterhooks pre and post ECB meeting with almost no change or mild selloffs the endgame, with the German DAX finishing just over 0.2% higher to remain above the 13000 point level, finishing at 13208 points. The daily chart shows support at the 12900 point level remaining firm, with this uptrend channel still intact with daily momentum positive – no bears here yet – but I can hear them scurrying around in the forest, taking a dump:
Wall Street had conniptions, solidly taking back its previous gains as this looks more and more like the final breath before another violent selloff. The NASDAQ lost over 2% while the S&P500 was down 1.8% to 3339 points. The four hourly chart shows the oversold condition that led to a swingback has reverted with trailing resistance unable to be cleared. Watch for signs of a return to the previous lows below 3300 points and a possible wider rout:
Currency markets moved out of calm mode to cocaine mode with a big surge in Euro before it was canned by the USD, pushing up to the 1.19 handle and then smashed down to the 1.18 level, or 200 pips range in a within 12 hours. The end result is basically no change since the start of the week, but medium term this looks bearish as USD remains king:
The USDJPY pair went nowhere instead, remaining just above the 106 level and still unable to make a new intraweek session high, remaining below trailing ATR resistance:
The Australian dollar had a solid breakout above the 73 handle and then gave this all up and reverted back to were it started yesterday, in line with other undollar assets. I warned yesterday that this was not yet a new rally with four hourly momentum still negative and no new intraweek price high so watch for a potential inversion back down to the mid 72s today:
Oil futures swung all over the place again, with Brent futures dropping back down below the $40USD level late in the session to almost make a new daily low. There are almost no buyers here so I can see a potential selloff further below here even though momentum is extremely oversold:
Gold continued to defy the USD and almost made a new daily high, but fell back alongside the other undollars after getting past the $1960USD per ounce level, settling at $1945 instead. This is just a swing play from the oversold nature of last week and requires defence here at the $1940USD per ounce level and then another surge above trailing daily resistance at $1950 or gold will continue to slide sideways:
Silver also remains poised here on the daily chart with a small tick higher overnight towards the $27USD per ounce level, as it too bounces off weekly support. There is still significant resistance to overcome at the $28.30 level, but overall the medium term picture looks promising:
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!