Last night saw the risk mood remain buoyant as more US FDA approvals of vaccines and a series of flash PMI prints nearly confirming expectations that the Fed won’t taper as quickly as expected. Wall Street led by tech stocks rallied the hardest while the USD was sold off across the board with beleaguered commodity currencies putting in good returns. Oil saw a big 5% plus rally on the news while gold broke through the $1800USD per ounce barrier with copper prices also recovering in London.
Bitcoin broke out after consolidating around support at the $44K level and got through the $50K level overnight before receding slightly below this morning. Daily momentum is looking good here with the solid uncle point at the previous low moving average area on the daily chart still a good place to engage further longs from here, but be wary of that intrasession selling where $50K may turn out to be a natural resistance point again:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite took back its Friday losses, closing 1.4% higher to close at 3476 points while the Hang Seng Index was almost as bullish, up 1% to close at 25109 points. The daily chart still looks quite bearish after returning to the previous monthly low at 25000 points but yesterday’s session maybe the start of a double bottom pattern. However, momentum has not yet gone into swing long mode with price action still below the low moving average so early days yet:
Japanese stocks did even better with the Nikkei 225 finishing nearly 2% higher at 27494 points, after previously breaking through weekly support. This is a very solid bounce off the bottom of the previous descending triangle pattern as daily momentum got quite oversold but that series of intrasession buying – the long undertails on previous daily candles – had suggested support building at the 27000 point level. I remain cautious here but watch for a close above the high moving average as the next stage:
Australian stocks were the relative laggards in the region with the ASX200 only gaining 0.4% to start the week at 7489 points. SPI futures are up only a handful of points so there’s not as much vigour here locally in getting stocks moving, even though obvious support at the 7400 is still quite firm and should remain so this week:
European markets continued their decent positive sessions from last week with the German DAX finishing 0.3% higher at 15832 points. The daily chart is also showing a lot of intrasession volatility with support at the trailing ATR level around 15500 points still quite firm here but watch for a potential move below the low moving average as the series of lower daily highs suggest this isn’t over yet:
Wall Street had another strong session across the board, dominated by tech stocks with the NASDAQ gaining nearly 1.6% while the S&P500 lifted more than 0.8% to get back to its previous historic high at 4479 points. The four hourly chart shows how well the BTFD crowd works, bouncing off the 4360 weekly support level and then pushing it sky high as the FOMO trade takes it well above the 4400 psychological level and back to the record high trend. Don’t fight the Fed:
Currency markets are still providing some excellent volatility with the strength in USD inverted as Euro continues its bounce off its previous weekly low to close well above the 1.17 handle, starting the week with a nearly completed swing trade. Momentum readings were showing a classic swing play here, oscillating from oversold and back into nominally negative and now they are neutral with price hanging just below trailing ATR resistance at the mid 1.17 level, so watch for a continuation play above that area:
The USDJPY pair was unable to gain traction overnight, after previously cruising into a flat finish just below the 110 handle on Friday, it ended up where it started as the weaker USD, not stronger Yen sent it lower. Four hourly momentum remains nominally in the positive zone but other correlations are weighing against it, so look for a push below the low moving average here on the four hourly chart as the medium term downtrend is still playing out:
The Australian dollar is finally finding some upside life with a nice swing play up through the 72 handle overnight after previously making a new daily/weekly/monthly low. It remains to be seen if this is the start of clawback rally like in US stocks or gold or whether the 70 cent level remains the longer term play as iron ore troubles are still yet to be ironed (sic) out:
Oil is played its own volatility card with aplomb as it rallies over 5% overnight on the back of good economic news that isn’t so good that its bad. Brent crude jumped right back to the previous support level at just below the $69USD per barrel level, taking back the last week’s losses. What’s important now is a second close above previous support here so it doesn’t turn into resistance and this becomes a bull trap:
Gold zoomed higher overnight on the back of USD weakness with a strong breakout above all of last week’s price action and the key $1800USD per ounce level, confirming its new uptrend. Now fully filling its steep losses below that level, resistance has been pushed aside and the shiny metal is ready to lift higher with the mid July $1830 highs the next target:
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!