Volatility is raising is ugly (or beautiful) head again with risk markets wildly oscillating overnight as the latest FOMC minutes point to a possible change in the tapering of grand old stimulus measures in the months ahead. The USD surged back into action against the major currencies, while Wall Street dived down over 1% before a mild recovery at the end of the session. Treasury yields have jumped higher while commodity prices all fell back sharply, with oil off by more than 3%, only gold holding on to its recent gains.
The crypto world is dumping left right and center, with Bitcoin now losing 50% since – let me check, oh last week – hitting the $30K level overnight before rebounding to just over $38K this morning. Happy birthday to the ground!
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was down all session, playing catchup to the other risk off assets, eventually finishing 0.5% lower at 3510 points, while the Hang Seng Index is having a holiday. It will interesting to see if it can make any headway on its return given the volatility and while the daily chart looks promising as it bounces off the March lows is still needs to clear at least the 29000 point level to turn into a proper new trend:
Japanese stocks have flopped again, the Nikkei 225 down 1.2% to close at 28044 points. Daily futures are looking volatility with an inside trading range that speaks to more hesitation and lack of direction ahead, as this market is still in a deep hole. I’m watching for another capitulation here below the 27400 point level:
The ASX200 was the worst affected across Asia, almost losing 2% by selling off most of the day, closing at the 6931 point level. SPI futures are pointing to a steady open however, but don’t discount the possibility of more downside given the falls in iron ore overnight and the lack of overall confidence that has been building for some time here. As I said before, the daily chart and price action are still suggesting a possible topping action here if the 7100 point barrier is not breached soon:
European markets sold off immediately going into the open and stayed down the whole session with only post close futures pointing to a fill trade coming in tonight, but its not looking pretty whenever you have even a cursory look at the daily charts. The German DAX closed nearly 1.8% lower at 15113 points with a mild lift in futures thereafter alongside the tepid Wall Street recovery. Sentiment is still oscillating too wildly here with resistance overhead clearly turning into an inflection point:
Wall Street joined the sell train and fell fast throughout the session with only a very late recovery helping stem the tide down to the recent lows. The NASDAQ even finished with a scratch session while the broader S&P500 fell back 0.3% to finish at 4115 points. Price action on the four hourly chart shows very heavy resistance at the top of the trend channel at the 4170 point level with a return below the 4100 zone still pointing to a follow through here to last week’s lows at just above the 4000 point level:
Currency markets flipped as a result of the tapering FOMC talkfest with the Euro pulling back to its pre-Tuesday breakout level but still just above last week’s intrasession high at 1.2170 or so. This is not that unexpected given the overbought nature of the previous move but watch for a follow through nascent ATR support on the four hourly chart at the 1.2150 mid level:
The USDJPY pair was finally able to stave off its selloff as it bounced off the 109 handle and ATR support at the 108.70 level overnight. Four hourly momentum is now more neutral and while this is a solid bullish engulfing candle signal, still requires a second positive candle throughout today’s session above the 109.30 level to get things moving:
The Australian dollar was pushed back more than others due to the falls in commodity prices let alone the FOMC talk with a return to last week’s lows just above the 77 handle overnight. The four hourly chart clearly shows resistance above at the 78.20 area is far too strong with the mid week try failing, so watch for a potential capitulation below the 77 cent level proper:
Oil prices were flummoxed overnight, with Brent crude falling over 3% after presaging these falls with some very wide intrasession volatility, eventually finishing just below the $67USD per barrel level. Daily resistance had been building here at the $70 level that corresponding to the March highs so caution was warranted that a double bearish top pattern was forming. Watch for another close below the low moving average at the $67 level that must be supported:
Gold stopped in its track overnight with a wide trading range but finished without a new daily high, even though all the other majors fell back to the USD, which should be a good sign to extend these gains. This advance above the psychologically important $1800USD per ounce level now has a lot of legs to continue up to the November 2020 highs at the $1960 level:
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!