Friday night saw yet another mixed finish on Wall Street with sentiment continuing to sour risk appetite with the latest US home sales data overshadowed by yet more taper talk from a variety of Fed officials. The USD bounced slightly while Treasury yields ranged sideways in a very cautious mood. Commodity prices were all over the place with oil bouncing back, copper selling off alongside iron ore while gold is holding on with another new daily and weekly high as it makes its way to the $1900USD per ounce level.
Bitcoin sold off throughout Friday and looks set to gap down come Monday morning trading as the heat continues to fall out of all of the crypto’s, the latest being Chinese intransigence. That solid lower black line at $30K is where it started the year and where it could revisit very shortly:
Looking at share markets in Asia from Friday’s session, where the Shanghai Composite lead the falls in Chinese shares, finishing 0.5% lower to be back below the 3500 point level, while the Hang Seng Index was up earlier but ended up with a scratch session, unchanged at 28458 points. The daily chart is still positioning here for a bounce off the March lows but it still needs to clear at least the 29000 point level to turn into a proper new trend:
Japanese stocks were more upbeat, with the Nikkei 225 closing some 0.8% higher to 28317 points. Daily futures are looking a little promising but price action still speaks to more hesitation and lack of direction ahead, as this market remains in a very cautious state. I’m watching for another capitulation here below the 27400 point level if price can’t clear the high moving average:
The ASX200 was also unchanged, finishing only 0.1% higher to remain just above the 7000 point level at 7030 points. SPI futures are down a handful of points due to the hesitation on Wall Street as the daily chart morphs into a rounding top, the only salvation being very strong support just below the 6900 point level:
European markets saw a co-ordinated lift across the continent to try to finish the week on a high note with the German DAX lifting nearly 0.5% higher at 15437 points, filling in its midweek losses. Sentiment and price action are still oscillating way too wildly here to get excited about positions either way until key support or resistance is broken:
Wall Street tried to bounce back on good economic news but taper talk and more selloff of tech stocks saw a weak finish, the NASDAQ off 0.5% while the broader S&P500 basically finished with a scratch session at 4155 points. Price action on the daily chart is slowly turning into a bearish head and shoulders pattern with several necklines to be worried about in the sessions ahead, especially with resistance at the 4170 point level proving too tough to beat so far:
Currency markets were moved around by the Fed taper talk with USD firming against the majors as Euro was pushed back to its intrasession low just below the 1.22 handle on Friday night. The four hourly chart shows price unable to clear resistance at the 1.2240 level and thus abandoned to fall back to ATR support at the mid 1.21 level instead. This could prove telling as momentum moves into neutral mode, watch for that support line to come under pressure as we start the trading week:
The USDJPY pair again had a short term reprieve from its selloff with a small bounce up toward the 109 handle, pushing above former ATR support at the 108.70 level but still finished with a new weekly low. Four hourly momentum is indicating a possible swing trade here if price can maintain above the high moving average but there is considerable resistance at the 109.20 level to overcome which makes for a low risk/reward proposition:
The Australian dollar was slammed back the hardest on Friday night against USD, closing the week out almost at the previous weekly low just above the 77 handle. Resistance had been building all week first at the 78.20 area, and then at 77.80 or so, pending doom for the Pacific Peso even as commodity prices continue to lift. As I said in my notes last week, I’m watching for a return to last week’s low and for a potential capitulation below the 77 cent level proper:
Oil prices were pushed higher on Friday night but it maybe too late for the sweet black tea with Brent crude pushing back above the $66USD per barrel level in a modest bounce. The overall price pattern seems to be confirming the double bearish top that has formed on the daily chart, but this could be negated if price is able to get back above the $67 level as quickly as possible:
Gold can’t be stopped despite a stronger USD which is a great sign, with a new daily and weekly high to finish at the $1880USD per ounce level on Friday night I still contend it has a lot of legs to continue up to the November 2020 highs at the $1960 level, with a clear uncle point at the low moving average to add to positions:
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!