A lack of events on the economic calendar but the potential for further US fiscal stimulus kept sentiment high overnight with new record highs on Wall Street. The USD remained weak against most of the majors with small gains in gold and silver while US Treasury yields almost made a new yearly high near the 1.20% level before retracing as commodities remained strongly bid, especially oil which made another post COVID high on both the WTI and Brent marker.
Bitcoin was all in the news however with news that Tesla (!) bought a substantial amount, sending the crypto currency to new record highs above the $44K level. Support had been slowly building at the $36K level with a clear breakout above the former false high, with technicals still supporting this market:
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed 1% higher, surging back above the 3500 point barrier to finish at 3532 points while in Hong Kong the Hang Seng Index only put on 0.1% to close at 29380 points. This rebound is slowly losing momentum here after a temporary stall with price not yet able to get above the high moving average on the daily chart, so this still needs to make a solid new daily high to get going:
Japanese markets are leading the way again with big gains with the Nikkei 225 accelerating more than 2% higher to 29388 points. Daily ATR support is picking up with medium term support at the 28000 point level firming as price breaches the previous nominal high just below 29000 points as this bull market accelerates:
The ASX200 had a solid session to start the week, up over 0.5% to close at 6880 points. SPI futures are down just over 10 points which indicates that resistance is still building around these levels so I still contend we could see a rejection here and a trading range through the week:
Green across the board in Europe and the UK although its only modest rises with the German DAX putting in a scratch session to remain just above the 14000 point barrier. Price needs to remain above that level as it still has not exceeded the former highs in early January which will be natural resistance going forward:
Wall Street however couldn’t be held back, making new record highs again with the NASDAQ up nearly 1% while the S&P500 finished above the 3900 point level, up 0.7% to 3915 points. The four hourly chart shows the clearance of the former January highs in this reflation trade which still suggests more upside as daily momentum is also nicely overbought and ready to go further::
Currency markets remained aligned with the weaker USD meme without any economic catalysts to move them with the attempting to clear the mid range of the 1.20 handle after its surge on Friday night. It still wait and see mode here as momentum slowly picks up to see if further USD weak stimulus is on the cards:
The USDJPY breakout has finally rolled over with a move towards the 105 handle but not below, although trailing ATR support on the four hourly level was broken yet momentum is still nominally positive. This could be a topping motion for the pair but the risk on attitude is keeping the Yen buyers away from now – watch for any further session lows and a proper break of the 105 handle:
The Australian dollar followed through on its big surge and got back above the 77 handle in the process last night. The four hourly chart is showing continued strength in the Pacific Peso in the short term at least with momentum now severely overbought, and ripe for a small pullback at least despite the new weekly high. The next target above is the previous weekly highs above the 77.40 level:
Oil prices continued their breakout with Brent moving higher yet again, this time breaking through the $60USD per barrel level, to make another new daily high and climbing well above the pre-COVID level trading range. I maintain the upside target here could be as high as $70USD per barrel at the 2019 highs:
Gold is slowly coming back in line with other alternative currencies but is still in technical breakdown mode despite a move higher overnight through the $1830USD per ounce level in what I still think is only a short term respite. Momentum remains very oversold and while this could turn into a swing long play, watch for a failed break of the high moving average on the daily chart for signs of a capitulation:
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)
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!