Treasury bond yields continue to rise in the wake of the great-but OMG taper could be coming sooner – NFP print on Friday night with Wall Street and European stocks hesitating, not helped by the opposite of progress (aka Congress) in getting an infrastructure spending package done in the US. Risk currencies continue to flounder about, with the Australian dollar, Euro and gold pushed lower while commodity markets continue to rollover with oil down another 2% for a more than 10% drop in over a week.
Bitcoin keeps the crypto dream alive, after gapping well above the $40K level on the Monday morning open, it accelerated above the $45K level overnight as FOMO rears its ugly head again. As I said yesterday, can it now get back to the previous highs near $60K after the recent bottoming action?
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite jumped out of the gate, closing 1% higher to 3494 points while the Hang Seng Index finally put in a positive session, up 0.4% to 26284 points. The daily chart remains poised here as a potential bottom is still somewhat forming, but the inability to break above the high moving average is the signal everyone is watching for, requiring a substantial breakout above the 26700 point level to call this rout over:
Meanwhile Japanese stocks were closed due to yet another holiday with the Nikkei 225 expected to start a bit sluggish post-Olympics start to the trading week. There is still a possibility of a breakout here here above the descending triangle pattern but I remain cautious even though Yen safe haven buying has abated:
Australian stocks put in yet another scratch session with the ASX200 treading water at 7538 points. SPI futures are up nearly 0.4% with daily momentum pushing into extremely overbought readings as the daily chart looks very good in the medium term regardless. Support is quite firm here at the 7300 point level:
European markets were very hesitant as they start the trading week post the NFP print, digesting tapering and COVID concerns with the German DAX taking back the meagre 0.1% it gained on Friday night to close at 15745 points. While price action continues to build well above previous daily ATR support at the 15300 point level and momentum is nicely overbought, more upside still requires a break of the previous weekly highs which hasn’t happened yet despite a very weak Euro:
Wall Street was unsettled again this maybe in response to the stalled infrastructure stimulus, the concerns over Fed tapering and the rise of the Desantis COVID variant in the South. The headline Dow took back its Friday night gains while the NASDAQ pushed a smidgen higher, the S&P500 put in a scratch session to finish at 4432 points. The four hourly chart is showing some overhead resistance building at the 4430 point level but momentum remains well overbought and short term support at the 4420 point level is firming yet again:
Currency markets continue to show higher volatility with Euro moving below the mid 1.17’s to surpass the previous weekly low (solid black horizontal line) as the USD remains strong in the wake of the NFP print. A short term mean reversion swing has not yet shown itself so the selling is likely to continue:
The USDJPY pair extended its gains but only in a meek fashion as it remains well supported above the 110 handle after making a new weekly high, filling the gap from the last two weeks of downwards price action. Four hourly momentum was getting into extreme overbought mode with a very small pullback now turning back into another round of Yen selling with support firming at the 109.80 level at least:
The Australian dollar was pushed lower as well overnight heading towards the previous weekly lows at just above the 73 level as the commodity rout starts to spread. As I’ve been saying for awhile the medium term price pattern is still bearish with the inability to break through the 74 cent resistance level and this print may solidify this move going forward so watch for any move below the 73 handle to lock in that medium term view for the rest of the calendar year:
Oil prices are puling back sharply again with a 2% drop overnight in both WTI and Brent crude, the latter closing below the key $70USD per barrel level. The retest of the previous lows at the $68 level is well in play here as momentum gets oversold:
Gold’s deflation continues following the flash crash that started the week as it fails to make any new session high, falling down to the $1730USD per ounce level overnight. This could see the next month of trading push it even lower to the March lows around the $1660 level:
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!