The US Federal Reserve has indicated that it wants to turn the taps off/stop filling the punchbowl/buying every asset in sight “sometime this year” in its latest minutes realised overnight and of course, rational economic perfect markets lost their collective shit. Wall Street fell across the board while the USD continued its gains against undollars except gold while bond yields fell slightly. Commodity markets remain in turmoil with oil prices putting in a new weekly low as Brent and WTI crude snapped back again, while copper fell for a third day in a row.
Bitcoin had another pause overnight as it comes up against resistance at the $48K level and continues to consolidate around $44K. Daily momentum is waning and suggesting a possible test of short term support here which must hold at the $42K level/low moving average area:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite bounced back to finish 1.1% higher at 3485 points while the Hang Seng Index followed along, but only lifting about half that or 0.55% to close at 25887 points. The daily chart is still looking perilous with the lack of a breakout above the high moving average at the 26700 point level leaving buyers on the wayside as price rolls over and wants to return to the previous monthly low at 25000 points or so. Daily momentum remains negative so watch for a potential rollover again here:
Japanese stocks were also in reverse mode with the Nikkei 225 taking back its previous gains to lift nearly 0.6% to close at 27585 points. This is not enough however to stave off a return to the bottom of the previous descending triangle pattern with daily momentum still quite negative and futures indicating more downside as Wall Street fully rolls over, with support at the 27300 level the key area to watch here for complete inversion:
Australian stocks were the major drag in the region due to BHP but also CSL with the ASX200 falling 0.1% to finish at 7502 points. SPI futures are down at least 50 points or 0.7% so we are likely to see an inversion here below trailing ATR support even as the Aussie dollar is crushed lower. Watch for today’s numberwang (I mean unemployment from the ABS, not COVID incompetency from NSW) to provide a potential catalyst this morning:
European markets were all over the place with peripheral bourses jumping higher while the FTSE put in a scratch session, French stocks dumped and the German DAX eking out a small gain to finish 0.3% higher at 15965 points. The daily chart smacks of exhaustion so watch for the low moving average to remain supported with the much lower Euro still helping risk taking here:
Wall Street continued selling off in the wake of the FOMC minutes with the NASDAQ off by 0.9% again as the S&P500 fell exactly 1% to close at 4400 points. The daily chart shows yet another dip that will go down to the daily trailing ATR support level and then filled in by the BTFD crowd forthwith, unless language from the Fed changes substantially this time:
Currency markets remain the most volatile as USD is still strong in the face of tapering and other geopolitical risks with the Euro flashing through its own high moving average on the four hourly chart to almost get back to the mid 1.17’s before smacked back down to the 1.17 handle once more. Momentum readings remain oversold to thus add to short positions here as we again test medium term downtrend lows:
The USDJPY pair had another brief rally overnight due to USD strength with Yen safe haven buying alongside bonds easing off somewhat. This almost saw it crack through the 110 handle but as four hourly momentum remains in the negative zone this snapback rally maybe over soon:
The Australian dollar is selling off nicely as it failed to make any traction whatsoever overnight, pushed down again for another daily/weekly/monthly low. I did mention the possibility for some consolidation around the mid 72 level as momentum has gotten ahead of itself but price action on the four hourly candles shows no support at all, so keeping uncle points at around the 73 handle remains probably overcautious:
Oil prices were flushed away due to the latest Fed minutes and EIA report with production outshining demand with Brent crude falling nearly 2% at just above the $67USD per barrel level. The retest of the previous lows at the $68 level has been played out here for a new monthly low price, with this breakdown putting in play a new move even lower to $60 or so:
Gold is bravely holding on as the USD gathers strength with another steady session overnight keeping the shiny metal above the $1780USD per ounce level but failing to make a new daily high. While this move has almost recovered the steep losses below the $1800 level, it is now obviously coming up against resistance here as momentum starts to wane on the four hourly chart, so watch for a potential breakdown soon:
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!