The NASDAQ dragged Wall Street down overnight with a very unsteady start to the trading week across the major risk markets. It’s all about the bond and currency markets again, with 10 year Treasury yields again pushing higher, this time almost through the 1.4% level, while the USD continues to lose ground especially against commodity currencies like the Australian dollar which broke above the 79 handle. Oil prices surged with Brent up over 3% while copper jumped again to another new yearly high.
Having zoomed through the $56K level, moving more than 10% in less than two days, Bitcoin had some epic volatiltiy overnight just because of one Elon Musk tweet, crashing the crypto currency down to $48K before rebounding to the $55K level this morning – a 30% roundtrip! Everything is fine:
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite finished over 1.4% lower, closing at 3642 points while the Hang Seng Index tried to hold on, but eventually closed down 1% to 30319 points. The minor pullback to the 30000 point level is not yet finished with this price action a bearish engulfing candle that could topple over this overblown market. This level must act as support going forward:
Meanwhile Japanese markets continued to rebound, with the Nikkei 225 finishing 0.5% higher at 30156 points, but not yet making a new daily high since the break above the 30000 point level. Futures are pointing to a possible pullback given the stronger Yen, so we could see more heat come out of this market shortly, as a reversion to the mean is overdue:
The ASX200 continued to lose ground, falling almost 0.2% to 6780 points. SPI futures are mixed, given the jump in commodity prices, but the industrials/banks could push it over during the session, with a big break below the low moving average and the zooming Aussie dollar providing big headwinds for the market:
European markets had minor losses across the continent to start the week on a sour note as the German DAX wobbled again, falling 0.3% and still remaining below the 14000 point level again at 13950 points. Price just can’t back above that level as those former highs in early January continue to firm as strong resistance, so again watch that low moving average as the key area for signs of a rollover:
Wall Street was all over the place with the headline DOW putting on 0.1% while the NASDAQ fell over 2%, the broader S&P500 closed 0.6% lower at 3881 points. The four hourly chart shows a proper decline underway as price slips below the 3900 point level as the lack of new daily highs is really weighing on the market. I’m watching the previous lows at the 3850 level next to come under pressure:
Currency markets continued with the weaker USD dominating as the latest IFO survey from Germany got Euro moving above the 1.21 handle for a new weekly high. The bounce continues above former trailing ATR resistance with the 1.2150 level the key area to push through here for a new trend:
The USDJPY pair has turned its pullback into a proper reversal due to the overall USD weakness with a brief look below the 105 handle overnight. Momentum is now proper oversold and ready to add to the downside as Yen buyers keep stepping in with ATR support at the 105.30 level taken out, the next level below is the previous weekly low at 104.50:
The Australian dollar is rocketing ever higher on the commodity boom with USD weakness helping as well, again decisively breaking out to start the week above the 79 handle. Price is way overbought, almost off the charts so can it hold these new highs or twirl ever upward to freedom:
Oil prices came back with Brent crude pushing more than 3% higher to be back above the $64USD per barrel level overnight. This one-off move puts the trend back in focus but we need another new daily high above the previous high before getting too excited about revisiting the upside target at the $70USD per barrel at the 2019 highs:
Gold is finally finding some stability here, helped by the weaker USD as it swings back above the key $1800USD per ounce level, after bottoming out at the November low at $1775USD per ounce. Momentum is considerably oversold so there is the potential for a swing back higher, but there’s no medium term buyers here:
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!