Wall Street has started the trading week with a bit more confidence despite yet more talk of tapering and high inflation from Federal Reserve members overnight. The USD and Treasury yields pulled back slightly as stocks were bid across the board, even European bourses putting on better gains than expected after a tepid start here in Asia. Commodity prices were more positive with oil and copper surging, while gold hovered at its recent weekly high as iron ore continues to feel the heat of a price curb correction.
Bitcoin and other crypto’s are going through another shenanigan phase with yet another Elon tweet sending them higher overnight, Bitcoin now almost back to the $40K level for a 30% plus gain since the nadir only a few days ago. Technically, it needs to clear the $42K level from the intrasession high on Friday before calling this a bottom:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite lifted slightly, closing up 0.3% to almost get back above the 3500 point level, while the Hang Seng Index went the other way, down 0.2% to 28412 points. The daily chart continues to position itself here for a bounce off the March lows but resistance overhead at the 29000 point level is proving a little too hard to clear and turn this into a proper new trend:
Japanese stocks were somewhat upbeat, although the Nikkei 225 only closed 0.2% higher to 28364 points. Daily futures are looking a little promising with this small bounce continuing despite a lot of hesitation and lack of direction. So far, this remains a swing long short term play only as the medium term pattern points to a capitulation here below the 27400 point level:
The ASX200 also put in a mild finish, up only 0.2% but still advancing above the 7000 point level to close at 7045 points. SPI futures are up at least 20 points but we should see more upside here given the still low Aussie dollar, with the 7100 point level the area to beat to get out of this rounding top bearish pattern still forming on the daily chart:
European markets saw another co-ordinated lift across the continent with the German DAX having a rare market holiday, but futures are indicating a breakout on the open tonight. Sentiment is slowly moving to a more bullish phase and if actual price action shows a breakout through overhead resistance and the previous April high we should be in for another uptrend:
Wall Street was able to make the bounceback stick last night with tech stocks leading the charge, the NASDAQ up by more than 1.4% while the S&P500 advanced almost exactly 1% to finish just below the 4200 point barrier. Price action on the daily chart had been slowly turning into a bearish head and shoulders pattern but a closer look at the four hourly shows one neckline at the 4160 point level that has been steady resistance these last two weeks, and definitively cleared overnight. The next stage of confirmation is a return to the early May highs:
Currency markets continue to be moved around by Fed taper talk with USD pulling back slightly against the majors as Euro was pushed back above the 1.22 handle overnight with price action in a clear oscillation/trading range mode. The four hourly chart shows price unable to clear resistance at the 1.2240 level but still contained within ATR support at the mid 1.21 level as momentum stays in a neutral mode, watch for that support line to come under pressure as the trading week continues:
The USDJPY pair continues its selloff with that small bounce up toward the 109 handle thwarted yet again, pushed down below former ATR support at the 108.70 level where it finished this morning. Considerable resistance at the 109.20 level was not overcome as I warned so we’re back to watching momentum readings flop to the negative side for more downside:
The Australian dollar can’t find much momentum either despite the lower overall USD with a small blip up the mid 77 area overnight. Resistance has continued to build here, pushing ever lower – first at the 78.20 area, and then at 77.80 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 again overnight with Brent crude back above the $68USD per barrel level in a very solid bounce. The overall price pattern had been confirming the double bearish top that has formed on the daily chart, but this looks like being negated here as price is able to get back above the $67 level but it needs to clear $69 or $70 very soon:
Gold is slowing down after a very steady run above the $1800USD per ounce level, losing steam after making a new weekly and monthly high 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, but watch for the inevitable pullback on profit taking:
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!