Covid concerns in the US and a poor retail sales print spooked markets overnight, already reeling from the Afghanistan collapse and weak data out of China. Wall Street finally had a sizeable dip instead of yet another record high but the real action is in currencies with the USD resurging against everything except defensive Yen, Swiss France and gold. Commodities remained under pressure as well with oil futures down 0.5%, copper slumping nearly 3% and iron ore continuing to tumble. Great time to buy BHP!
Bitcoin had another pause overnight after recently pushing through resistance at the $46K level, pulling back from the $48K level to consolidate around $44K. The daily chart and momentum readings are still suggesting further upside this week but watch support to hold at the $42K level/low moving average area which is slowly coming under pressure:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was one of the biggest losers down exactly 2% to close at 3444 points while the Hang Seng Index was close behind, down 1.6% at 25745 points. The daily chart is no longer showing a potential bottom pattern as the lack of a breakout above the high moving average at the 26700 point level clearly not evident as price rolls over:
Japanese stocks were also in retreat as the Nikkei 225 fell nearly 0.4% to close at 27424 points, almost matching its previous daily and weekly lows. Price wants to return to the bottom of the previous descending triangle pattern with daily momentum now rolling over, with support at the 27300 level now under fire and ready to crumble:
Australian stocks were not able to escape the selloff, with the ASX200 falling nearly 1% to finish at 7511 points. SPI futures are indicating a drop of at least 0.5% on the open, with the short term price pattern confirming the KC Signal (a rare inversion signal of my own design with low probability but high payoff). Watch for a further breakout below overbought momentum and ATR trailing support with market reaction to the BHP/WP merger possibly key:
European markets continue to pull back in unison, although the FTSE had a reprieve mainly due to the BHP/WP proposed merger, with the German DAX able to clawback its intrasession losses to finish flat at 15922 points. I had suggested that this small dip could be short lived and what this rally needs to catch its breath, but continue to watch for the low moving average to remain supported with the much lower Euro still helping here:
Wall Street however properly succumbed to the selloff with the NASDAQ off by 0.9% as the S&P500 fell 0.7% to close at 4448 points. The four hourly chart shows this snapback very clearly with price breaking through trailing ATR support with the BTFD crowd not stepping in this time. Momentum is finally back to something not off the charts but watch for support to build above the 4400 point level:
Currency markets remain the most volatile as USD regained superior strength against most of the undollars overnight, particularly commodity currencies. The Euro was pummeled back to its previous weekly low at just above the 1.17 handle in a very swift move that could continue later tonight with momentum in prime position to add to short positions here as we again test medium term downtrend lows:
The USDJPY pair had a brief rally overnight due to USD strength but Yen safe haven buying alongside bonds has not yet abated so this risk proxy will continue to suffer. Momentum remains in the negative zone but is setting up for a small snapback rally that may have legs back towards the 110 handle, but at high risk:
The Australian dollar is not being loved at all by anyone with another big selloff overnight with a push straight towards the 72 handle as commodity prices continue to crater and risk markets invert. As I said previously, this was a good time add to long term short positions/hedges with the possibility of a breakdown below the 73 handle firming and here we are – watch for some consolidation around the mid 72 level as momentum has gotten ahead of itself:
Oil prices remained poised here with yet another drop overnight as Brent crude fell 0.5% to finish right on the $69USD per barrel level. The retest of the previous lows at the $68 level remains in play here with price unable to close above its own daily high moving average so watch for a break below the previous daily lows (solid black horizontal line) next:
Gold was able to stave off the undollar selloff with a steady session overnight keeping the shiny metal above the $1780USD per ounce level. This move has almost recovered all of the steep losses below the $1800 level, but that is the key area that must be pushed aside or this will be a relief rally and nothing else as momentum starts to wane on the four hourly chart:
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!