Tech stocks took a terrific pounding overnight with the NASDAQ falling over 3%, dragging the rest of the risk complex down with it as the bond market continues its implosion post the FOMC meeting. 10 year Treasury yields shot higher overnight, straight through the 1.70% level, pulling all other sovereign bonds higher including Aussies (now approaching 2%) while the USD came back stronger against everything with commodities falling sharply as oil followed tech stocks and gold was put in its place again.
Bitcoin tried to breakout above $60K again but was thwarted, heading back to the high $57’s overnight in what could be setting up for another downleg to the $54K level on exhaustion:
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed 0.5% higher at 3459 points while the Hang Seng Index did even much better, finishing up 1.3% to 29405 points after a series of tepid sessions. The daily chart shows a clear rectangle of tight support and resistance that needs to be cleared soon, with a definite bearish bias on momentum and price action readings with a pullback expected today due to the falls on Wall Street:
Japanese markets also lifted strongly with the Nikkei 225 closing 1% higher at 30216 points. Futures don’t look so good though with the daily candle indicating a lot of selling on the open despite price clearly building back above the trendline from the December lows. Again, watch USDJPY for any safe haven Yen buying that may provide a headwind in getting back to 30000 points:
The ASX200 was again the worst in the region, as good unemployment news equates to bad risk appetites, falling over 0.7% to 6745 points. SPI futures are indicating yet another poor start this morning, down over 40 points so we could see this trading week finish on a real sour note, taking the market below 6700 points and wiping out all of this years nominal gains so far:
European markets were again unified, green across the board and across the channel with the German DAX again the strongest, lifting over 1.2% to 14775 points, extending gains well past previous resistance at the 14000 point level for a new record high. Momentum readings remain overbought with price pushing aside local resistance at the 14500 point level, nominally setting up for more price gains although futures are indicating a pullback as this recent candle does look way overextended:
It all came apart on Wall Street overnight with the NASDAQ off by 3%, pulling the S&P500 down with it, finishing 1.5% lower at 3915 points. The four hourly chart showed price wanting to push through the previous February high, but my contention of resistance building here has come to pass with a rollover below trailing ATR support and the start of trading week price level could see the 3900 support zone breached later tonight. Watch out below:
Currency markets are gaining in volatility alongside bond markets – never mind stocks – with Euro round tripped again overnight after being pushed up towards the 1.20 handle post the FOMC meeting its now back where it started the week, hovering above the 1.19 level instead. As I said yesterday, waiting for a follow through above the 1.20 handle was prudent and we could now see a flop below 1.19 to the start of month lows as USD gains strength:
The USDJPY pair oscillated around a point of control at the 109 handle proper with no new session highs starting to weigh on price action. The catalyst for a double top pattern would be falls below the 108.30 level, so watch for any further downside below the 108.70 ATR support level:
The Australian dollar was the biggest mover against the Fed, and now its the biggest loser as commodity prices flip to the downside, again putting in a near 100 pip move lower despite the white hot unemployment print yesterday. This takes it back like other currencies to its start of week position and sets up for more downside if the 77.30 ATR support level is not defended:
Oil prices are no longer pulling back but selling off sharply with WTI and Brent crude off by more than 3% in line with tech stocks overnight, the latter pushed well below the $63USD per barrel level in a clear bearish sign. The 2019 highs at the $74 level are definitely off the table now, watch for ATR daily support and psychological support at $60 thereafter to come under strain as traders reverse their positions:
Gold can’t catch a break and after doing better in its bounceback with some meaningful gains its been pushed lower overnight in the wake of the stronger USD, managing to close at the $1739USD per ounce level. I still contend this short term bounce is likely just a short covering move that is likely to hit very strong resistance at the $1770 level, with the longer term chart signalling the next downside target at the 2019 pre-breakout highs around $1500:
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!