Risk is back as oversold stock markets regained confidence overnight, helped along by ECB’s Lagarde’s comments about changing policy settings too soon. The Dow leapt nearly 2% while European bourses all had solid sessions, which should translate into a reversal of sentiment here in Asia. With some mild falls in USD, commodity prices came back as well, as oil jumped nearly 2% while precious metals saw a mild uplift.
Bitcoin continued its selloff in the wake of China’s crackdown on miners, with another near 10% drop overnight sending it down to the $31K level. Momentum remains strongly oversold and ripe for more downside as price goes below previous weekly support:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite continued its stall with no real direction, finishing a handful of points higher at 3529 points, while the Hang Seng Index was hit hard on the open, closing 1% lower at 28489 points. Price action is still suggesting more downside as the moving average band continues to point down, but ATR daily support at just above the 28000 point level is holding here for now:
Japanese stocks had the biggest falls, with the Nikkei 225 slammed nearly 3.5% lower or 1000 points lower to 27955 points. Daily futures are suggesting a reversal alongside Wall Street on the open but this has really cracked confidence across the market with heavy resistance ahead at the 29000 point level and remaining potential for a return to the May lows at 27000 points:
Australian stocks had a torrid start to the trading week with the ASX200 closing nearly 2% lower on the back of lower bank stocks at 7235 points. SPI futures are up over 90 points or 1.2% as the BTFD crowd supports Wall Street overnight. Momentum readings are still inverting with a clear break of the low moving average but the possible bounce off trailing ATR support at 7150 points could hold the market in place for now:
European markets came back strongly on the Lagarde comments and then on the rebound on Wall Street with the German DAX gaining 1% to reclaim some of its Friday night falls, finishing at 15603 points. Daily ATR support was briefly touched in the selloff and should be the pivot point going forward for this rebound to continue, but resistance is very strong overhead at the 15700 point level:
Wall Street found its mojo again despite even more hawkish Fed comments overnight as selling exhaustion led to short covering with Dow leading the way, up nearly 1.8% while the NASDAQ took back only 0.7% while the broader S&P500 regained all of the Friday losses to finish 1.4% higher at 4244 points. Price action on the four hourly chart shows a classic bounce but only up to the intrasession high on Friday so while its exciting for day traders, this is not yet a clear return to form and could rollover as momentum remains neutral at best:
Currency markets show a more modest bounce with the USD pulling back from its uber-strength of late with Euro bouncing back to just above the 1.19 handle overnight in a fairly staid swing reversal off a very oversold position. As I mentioned yesterday, while all timeframes indicate massive oversold moves this is irrelevant when currency makes a drastic shift in sentiment, so this could still rollover again and continue down to the 1.17 handle easily:
The USDJPY pair bounced back after some sharp Yen safe haven buying early in yesterday’s session, with a move back above the 110 handle that takes it back to Friday night’s starting point. Another confused chart that should be pointing to more upside but there is some point of control action going around the 110 handle here that could spark some more volatility so I’m wary of an upside position just yet:
The Australian dollar finally found some life, but only just with a small swing lift back above the 75 handle after losing nearly 300 pips last trading week. This still keeps it well below the March lows and completes a huge bearish head and shoulders pattern that could have more downside if we don’t see another strong close above the high moving average on the four hourly chart today:
Oil has finished its retracement with another bullish move higher overnight on the back of a weaker USD, with Brent crude pushing well above the $74USD per barrel level in a 2% plus leap. Price was always supported at the low daily average level just above $72, as this sort of retracement was to be expected as price action was looking a little toppy on its way up to the 2018 high at $83:
Gold was the worst hit last week as the inflationary hedge failed miserably, and its had the weakest comeback too, climbing a few dollars to close at the $1783USD per ounce level overnight. As I asked last week, how far will this fall now that the Fed has rate hikes in sight? At a glance, the April lows at $1670 are not far away:
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!