A drop in US weekly initial jobless claims kept risk markets elevated overnight, although commodity markets pulled back as the USD rose alongside Treasury bond yields. Wall Street eked out yet another record high as European stocks joined the party. Oil pulled back again on a private survey result, with both markers down 1% or so with iron ore taking back its 3% spike with yet another slump.
Bitcoin ran out of puff too, pushed back from resistance at the $46K level overnight as its breakout from the sub $30K bottom in July deflates slightly. As I said yesterday, the $47K level provided too much pressure to overcome so this pullback to trailing ATR support on the four hourly chart is not unexpected:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was again unable to gain traction throughout most of the session, closing 0.2% lower at 3524 points while the Hang Seng Index was put firmly in reverse, falling 0.5% to take out most of its recent gains, closing at 26517 points. The daily chart continues to somewhat build a potential bottom pattern but its really struggling to make headway, with a break above the high moving average at the 26700 point level still required to call this rout over:
Japanese stocks also pulled back, but only mildly with the Nikkei 225 losing just 0.2% to finish just below the 28000 point level. This breakout seems to be losing steam before it even starts as price remains above the descending triangle pattern setup, but daily momentum is not quite positive yet, so this is still just a swing move higher:
Australian stocks edged along with another positive session, the ASX200 closing 0.3% higher at 7584 points. SPI futures are up a very solid 30 points or so, with this surge likely to continue even as daily momentum readings remain well overbought and the daily chart looks very good in the medium term, with the low moving average a clear uncle point to lock in profits:
European markets are doing very well indeed as the German DAX surged strongly overnight after previously playing catchup, lifting 0.7% to finish at 15937 points. After breaking through key resistance at the previous weekly highs, there’s nothing holding it back with momentum in clear overbought mode although price action looks a tad stretched here in the very short term:
Wall Street was finally coordinated with tech stocks now in line with industrials as both the NASDAQ and S&P500 pushed 0.3% higher, the latter for yet another record high, closing at 4460 points. The four hourly chart shows a steady build up here as momentum remains overbought and short term support at the 4420 point level builds to the next level with price starting to get a little ahead of itself in this completely sustainable and not dangerous at all rally!
Currency markets returned to low volatility settings with Euro looking glum again after previously bouncing off the 1.17 handle. Its looking like rolling over here and getting back to its recent four monthly low as this short term mean reversion swing deflates into nothing. As I said yesterday, price had not gotten above the previous weekly low (solid black horizontal line) nor trailing ATR resistance, so down we go again:
The USDJPY pair is also sailing steady without much direction here, reverting back to medium and short term support well above the 110 handle and seemingly anchored at the weekly downtrend line (upper sloping black line). Four hourly momentum has reverted into a neutral bullish mode but watch for any retracement below four hourly ATR support at the 110.20 level:
The Australian dollar has given up all of its post US inflation print gains, unable to break above trailing resistance and now back down to its start of the week mark just above the 73 handle. The medium term price pattern is still bearish with the inability to break through the 74 cent resistance level a key factor, so watch for another rollover here:
Oil prices were unable to continue a refill play with a 1% drop overnight in both WTI and Brent crude overnight, the latter just scraping in to the $71USD per barrel level. The retest of the previous lows at the $68 level is still in play here but while the first stage of a double bottom pattern has been created on the daily chart, price has yet to close above its own daily high moving average:
Gold’s deflation has been filled temporarily with a steady session overnight remaining just above the $1750USD per ounce level. This could begin to recover some of the steep losses below the $1800 level but would require a lot more than one day of price action, so watch for a close at least above the pre flash crash support at the $1760 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!