The risk mood overnight was definitely bearish although the usual BTFD crowd stepped in at the last moment to rescue Wall Street from posting a nominal loss, with the latest initial weekly jobless claims coming in better than expected. The volatility in currency markets outweighed stocks with USD continuing its gains against undollars with Pound Sterling cracking to an almost year low while bond yields fell slightly before settling in a stable fashion. Commodity markets remain in turmoil with oil prices putting in another low as Brent and WTI crude fell nearly 2% again, while copper fell to a five month low and iron ore took a deep dive falling nearly 14% to a nine month low. Here comes the Aussie recession?
Bitcoin had a solid move higher overnight as it consolidated around support at the $44K level but is still finding resistance overhead at just below the $48K level. Daily momentum is still nominally positive but short term support must hold at the $42K level/low moving average area:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite rebounded after a pre-lunch selloff but still finished 0.5% lower for the day at 3465 points while the Hang Seng Index sold off much more sharply, down more than 2% as buyers abandoned the bourse, closing at 25316 points. The daily chart looks more and more perilous as price rolls over and is returning to the previous monthly low at 25000 points or so. Daily momentum remains negative so watch for more downside again here:
Japanese stocks couldn’t escape the carnage either with the Nikkei 225 finishing 1.1% lower at 27285 points. This takes it back to the bottom of the previous descending triangle pattern with daily momentum still quite negative and futures indicating a possibility of holding here, but support at the 27300 level must hold or we will get a complete inversion:
Australian stocks were the relative best performers in the region, with the ASX200 only losing 0.5%, but still finishing at a new weekly low at 7464 points. SPI futures are up 30 points or nearly 0.5% so we should see some support building here as we finish the trading week and as the Aussie dollar is crushed lower, but the 7400 point level must hold:
European markets suffered some big drops all over the continent with high volatility in Euro not helping with 1-2% losses across the board, although futures have filled in some gaps as Wall Street rallied thereafter. Nevertheless the German DAX finished 1.2% lower at 15765 points with the daily chart showing a lot of intrasession downside volatility that is extremely telling as this exhausted rally looks over, even despite a much lower Euro:
Wall Street had the most interesting session in the wake of the weekly initial jobless claims with an initial sharp selloff extending this week’s losses before a very late fill that saw both the NASDAQ and the S&P500 put in nominal positive closes, but only just – the latter finishing only 0.1% higher at 4405 points. The four hourly chart shows price headed straight down to the 4360 weekly support level (from late July) before a little bounce kept it alive at the 4400 psychological level. However, price is not yet above the high moving average nor is momentum ready to swing into play here either so we could get a rollover later tonight:
Currency markets remain the most volatile as USD is still strong in the face of tapering as initial jobless claims and the cycle itself seem to be firming with the Euro putting in another weekly low to be pushed well below the 1.17 handle overnight. Momentum readings remain oversold to thus add to short positions here as we again test medium term downtrend lows:
The USDJPY pair however had a big snapback in the wake of the release, moving over 50 pips lower before recovering, mainly on the falls in European shares and wobbly Wall Street as Yen safe haven buying increased slightly. Four hourly momentum remains nominally in the negative zone so my suggestion yesterday this rally maybe over soon will be confirmed if we get a solid close below trailing ATR support at the 109.40 level:
The Australian dollar is having a cracker of a week, down nearly 200 pips and seemingly heading lower, pushed down again for another daily/weekly/monthly low. Where this stops as iron ore continues to dive deeper is anyone’s guess, with the 70 handle the most likely next pause:
Oil prices were flushed away again after cracking through daily support in the previous session with Brent crude falling nearly 2% to finish at the mid $66USD 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 just below the $1780USD per ounce level but failing again to make a new daily high. While this move has almost recovered the steep losses below the $1800 level, resistance is building 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!