A big retraction in Treasury yields overnight on the back of a disappointing US ISM Manufacturing print saw Wall Street give pause while commodities sold off sharply. Currency markets were little changed again, with WTI and Brent crude falling more than 3% while gold prices remained just above the $1800USD per ounce level.
Bitcoin has been able to only just hold on to its breakout gains after pushing through resistance at the $40K level on Friday night and holding over the weekend. The four hourly chart however shows a series of lower lows since the Monday morning gap with price nearing trailing ATR support which needs to be respected before any further leg higher:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite shot out of the gates with a big surge to start the week, up nearly 2% to 3464 points while the Hang Seng Index is up just over 1% to take back half of Friday’s losses, currently at 26235 points. The daily chart remains poised here as a potential bottom continues to form with a series of higher lows not yet confirmed by a substantial breakout above the 26700 point level:
Meanwhile Japanese stocks are also loving the start of the trading week/month, with the Nikkei 225 closing 1.8% higher at 27783 points. Futures are flat however so this could be shortlived with the overall daily chart remaining in a bearish mood and with COVID breakouts accelerating at Tokyo, the good news is hard to find here unless price breaks well above the key 28000 point level at the high moving average:
Australian stocks did really well starting the trading week in a boisterous mood, with the ASX200 lifting over 1.3% to surge well above the 7400 points level, almost closing at 7500 points. SPI futures are down 20 points or so in response to the lacklustre mood on Wall Street but daily momentum remains nicely overbought and the daily chart still looks bullish here in the medium term:
European markets charged ahead on the back of the risk-on mood here in Asia with some solid sessions until Wall Street and the ISM print came online. The German DAX was the worst off, finishing almost dead flat at 15568 points after almost making a new daily high mid-session. While price action remains above previous daily ATR support at the 15300 point level momentum is still at a neutral/negative setting as price action remains listless – not much to report here until we see a proper breakout confirmed:
Wall Street was pushed around by the ISM print despite some more corporate earnings surprises with the NASDAQ putting in a scratch session as the S&P500 finished nearly 10 points lower to remain below the 4400 point level. The four hourly chart has formed a solid rectangle pattern that has continued from last week with a tight band of support and resistance at the 4360 and 4420 point levels respectively. Notably, short term momentum has switched to nearly oversold so this could be a harbinger for a breakdown soon:
Currency markets were relatively calm around the ISM print with USD mixed against the majors. Euro was unable to advance on its Friday night high but at least still respected the previous lows at the mid 1.18 level. The four hourly chart is showing momentum revert from its overbought phase into a still positive setting, but the question remains can price be supported here if Treasury yields continue to fall:
The USDJPY pair was less fortunate, breaking down below the previous session lows to make a new weekly low at the 109.30 level. The four hourly chart continues to look like the bearish Nikkei 225 and my warning of watching the 109.40 level for signs of capitulation is coming to fruition here, with the 109 handle the next target down:
The Australian dollar was unable to clear its stuck mood here yet again despite the weaker USD as it remains depressed at the mid 73 level. The overall price pattern is morphing into a bearish continuation with momentum still negative in the short term and ready to go lower towards the 73 handle proper:
Oil had the big move overnight with the ISM survey surprising to the downside with 3% falls on both WTI and Brent crude contracts, the latter finishing just above the $73USD per barrel level. The daily candle is a worrisome bearish engulfing candle but did not close below the low moving average so this may be a one off, but as I’ve been warning this bounceback from the recent lows was a little anemic to call it a proper rally so watch for another potential close below the $73 level:
Gold found more buying support however, bouncing off short term ATR trailing support and the precious $1800USD per ounce level but not yet making any new daily highs. Daily momentum remains nominally positive so there is potential for another crack higher but overall this market remains in a bear phase until the $1850 level can be breached:
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!