Last night saw a misstep in equity markets as the latest German CPI print shooting lower than expected, firmly into deflation territory on weaker demand, coupled with uncertainty over the next US fiscal stimulus package. The USD retreated as well with the Dollar Index down nearly 0.5% as Euro and Aussie dollar bounced back sharply while Brent oil fell 4% on demand concerns.
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed only 0.2% higher to 3224 points while in Hong Kong the Hang Seng Index sold off sharply at the close, finishing nearly 0.9% lower at 23275 points. The previous session had seemingly arrested a fairly sharp decline but notably, price remained well below the August lows at 24000 points. I remain cautious here for a continued swing play until we see a second positive session:
Japanese stock markets were mixed, although the Nikkei 225 was able to close 0.2% higher at 23564 points despite a minor breakout in the USDJPY pair, it was up much higher earlier in the session. The bullish breakout on the daily chart has been thwarted again with strong resistance at the 23300 level support with futures suggesting a staid start this morning, watch for short term support to hold at the 23000 point level this morning:
The ASX200 had an odd session, up nearly 0.5% and almost through the 6000 point at the open, before selling off throughout the day to close with a scratch session at 5952 points. SPI futures are down just under 50 points on the back of the falls on Wall Street, so again we’re likely to see the 6000 point level remain as short term resistance with a retracement back to the 5850 point level as this swing play runs out of puff:
European markets stumbled through the German CPI print with the FTSE finishing 0.5% lower while the German DAX also retreated, down 0.3% to 12825 points. Daily price action had been a clear bullish engulfing candle, as price bounced off ATR daily support at the 12400 level but this hesitation is quite telling. I’m watching for a follow through above the 12900 point level before calling this swing play over:
Wall Street’s rebound stalled out with the Dow and the S&P500 both finishing 0.5% lower, the latter at 3335 points, still above the key psychological 3300 point level. The four hourly chart shows hesitation in getting above the previous breakdown point from early September with the former weekly highs (solid upper black horizontal line) at the 3400 point level still looking too far away. Watch out for a sharp reversion below the 3300 point level:
The weaker USD is turning currency markets around with Euro continuing its strong bounce off the weekly low, almost taking back half of last week’s losses to be well above the 1.07 level. This shows how strong the 1.06 candle has been on the daily and weekly timeframes which could see this long swing trade given more upside room although it has a short term acceleration that’s a little unsustainable:
The USDJPY pair was looking to stall out here following the weak USD meme but has been able to float ever so higher to be slightly above the last Friday finishing levels above the mid 105 zone. Momentum remains nicely overbought so watch the high moving average for a potential attempt at the 106 handle next:
The Australian dollar is again following Euro in direction although not magnitude as it lifted through the 71 handle overnight, just getting into positive momentum territory. This expected rebound may stall out again as it approaches the mid 71 level before another leg down:
Oil futures were swamped overnight despite a solid consumer confidence print with a big retracement of almost 4% on Brent markers pushing price back to the last week’s low just above the $41USD level. The daily and four hourly chart still hadn’t shown a break above trailing ATR resistance so the recent upturn was a swing play only, with the low moving average broken here and ready to selloff further if weekly support evaporates:
Gold and silver moved in lockstep with each other again overnight, with the latter up through $24USD per ounce while the former almost broke above the $1900USD per ounce level. This is all about a temporarily weaker USD going into tonight’s GDP and tomorrow’s inflation print so don’t get carried away just yet as the weekly and daily charts still exhibit a classic breakdown pattern that outweighs this move:
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!