Strong corporate earnings could not keep Wall Street elevated overnight, as the self induced selloff in Chinese tech issues turned into a bath of blood now spilling over and upsetting the mood in risk taking world. Treasury yields fell back to their recent lows while the USD was mixed everywhere, selling off mildly against Euro and Yen but surged against Yuan to a new monthly high. Commodities were also equally mixed with some intrasession volatility not mounting to any relative directional moves, with gold unable to get back above the key $1800USD per ounce level.
Bitcoin is holding to its stonking start of week gains, only losing a bit of ground after hitting the $40K level as it returned to the $38K level overnight. This should support more upside with trailing ATR resistance at $35K being heavily supported here although momentum is not quite back to the overbought stage for another legup yet:
Looking at share markets in Asia from yesterday’s session, where Chinese markets were hit hard from regulatory foot shooting yet again with the Shanghai Composite closing 2.5% lower to 3381 points while the Hang Seng Index was off by another 1000 points, down 4% to 25086 points as the self induced blood of bath continues for mainland Chinese tech and education stocks. The weekly chart here is illustrative with a wipeout of all of 2021 gains and down to the mid 2020 range with the 2008 bull market line (lower black line) under threat if this isn’t abated soon:
Japanese stocks are ignoring the risk off mood, with the Nikkei 225 closing nearly 0.5% higher at 27970 points. Futures however are suggesting selling is coming back with a vengeance however as the Chinese selloff spills over as daily momentum goes back to the oversold and sets up for a return to below the 27000 point level:
Australian stocks played catchup with the ASX200 making a solid move higher above the 7400 point level, by lifting 0.5% exactly. SPI futures are suggesting a pullback of at least half that result, down 30 points going into the open this morning. While momentum has moved higher into the overbought zone with new weekly highs, another daily high above the May highs is required to keep this going:
European markets were in unison this time with all major and minor bourses pulling back with the German DAX standing out by selling off by nearly 0.6% to finish at 15518 points. Price action remains above previous daily ATR support at the 15300 point level but momentum has switched back to a neutral/negative setting as this swing trade peters outs. Attempts at breaking through to get back to the previous weekly highs at the 15800 point level continue to fail:
Wall Street doubled down on the cautious mood caused by the Chinese cascade despite some huge earnings records from the major tech stocks overnight with the NASDAQ falling more than 1.2% while the S&P500 finished 0.5% lower to just above the 4400 point level. The four hourly chart shows price reverting back to trailing ATR support which has proven a good uncle point for the refill trade, but could spell a reversal if not filled in soon:
Currency markets were all over the place again with USD strength abating only really versus Euro which continued its rebound after being oversold for several weeks now. The union currency continued its lift through the 1.18 handle and then through overhanging ATR trailing resistance on the four hourly chart at the 1.1820 level, before retracing later in the session which suggests this is a short term move only:
The USDJPY pair continued its selloff, breaking through the 110 handle after hesitating around the previous resistance zone at the 110.30 level. The 110 handle should have been solid support in the short term but the Chinese selloff is spreading into volatility in Japanese risk taking as Yen safe haven buying increases:
The Australian dollar remains stuck here below trailing ATR resistance at the 74 level which could be indicating a bunch up of buying support ready to breakout, but today’s overdue inflation print could be a catalyst to get things moving. Watch for a break above the 74 level and a breakdown below the 73.30 level:
Oil prices moderated with tepid sessions for both WTI and Brent crude which remained just below the $74USD per barrel level as internal buying support keeps it above the previous daily ATR support level. There needs to be a substantive second close above the high moving average at $73 with a solid switch to positive momentum before calling this dip over:
Gold is slowly losing buying support here with another session held mainly below the $1800USD per ounce level overnight after it deflated all last week. Four hourly momentum is switching to oversold status and price action is setting up for a further breakdown here so watch out below for another leg down alongside other undollars:
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!