Yet again, risk markets set aside real risk concerns and continued lifting undollar assets across the board although notably tech stocks outperformed everything else. Commodity currencies like the Australian dollar continued their bounceback while Treasury bond yields lifted slightly although short term yields continue to fall. Oil saw another big rally, up nearly 4% while gold maintained its breakout above the $1800USD per ounce barrier.
Bitcoin is failing to make good on its own breakout however, stalling here just below the $50K level overnight despite some good daily momentum readings and very solid support below. As I said previously, 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 extended its gains, up 1% higher to close at 3514 points while the Hang Seng Index was even more boisterous, lifting over 2% to close at 25642 points. The daily chart has a bearish medium term pattern but this is firming up as a proper short term double bottom pattern. Momentum has now switched into swing long mode with price action breaking above the low moving average so the probability points to more upside today towards ATR trailing resistance:
Japanese stocks also did well, with the Nikkei 225 continuing its breakout to finish nearly 0.8% higher at 27732 points. This continues a very solid bounce off the bottom of the previous descending triangle pattern and confirmed quite firm support at the 27000 point level. I remain cautious here but watch for a second close above the high moving average as the next stage to take this up to ATR trailing resistance and the recent daily daily high above the 28000 point area:
Australian stocks were the relative laggards in the region again with the ASX200 only gaining 13 points or just over 0.1% to 7503 points. SPI futures are up nearly 20 points so there’s still 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 were moderately positive although peripheral bourses pulled back slightly, with the German DAX the best performer by finishing 0.3% higher to 15905 points. The daily chart is still showing some intrasession volatility and hesitation with support at the trailing ATR level around 15500 points remaining firm. However, I’m still watching for a potential move below the low moving average as the series of lower daily highs suggest this isn’t over yet:
Again, Wall Street’s positive mood was really dominated by tech stocks with the NASDAQ gaining 0.5% as the S&P500 eked out only a small push of 0.1% higher to finish at 4486 points. The four hourly chart shows buying exhaustion setting in with a classic bearish rising wedge pattern as resistance builds below the key 4500 point level. A clear technical picture to add caution to long positions, but always remember don’t fight the Fed :
Currency markets are still seeing a reversal in strength in USD as Euro continues its bounce off its previous weekly low to above the mid 1.17 level as this swing trade turns into something more substantial in the short term at least. Momentum readings are getting closed to overbought, indicative of a potential rally back to the 1.18 handle as trailing ATR resistance is taken out:
The USDJPY pair was again unable to gain traction overnight, making a new intrasession low for the week, as the short and medium term picture confirm a more bearish mood for USD at least. Four hourly momentum has been pushed into the negative zone with my expectations of a push below the low moving average fulfilled, watch for a breach of recent support at the 109.40 level:
The Australian dollar continues it clawback rally with a move to mid 72’s against USD overnight as momentum on the four hourly chart gets nicely overbought. This has been a sweet swing trade after a beautiful trade last week, but can it be sustained as iron ore troubles are not yet over:
Oil is doing its own thing with upside volatility still the way to go, following a 5% move with a near 4% move overnight as Brent crude levels out just above the $71USD per barrel level after jumping through the previous support level (lower black horizontal line). This second close above previous support has probably negated any chance of it turning into resistance but watch the $72 level next:
Gold remained above the key $1800USD per ounce level overnight, still confirming its new uptrend but not exactly setting the world of fire. While resistance has been pushed aside and the shiny metal is ready to lift higher, the question is can it make it back to the mid July $1830 highs as daily momentum is nowhere near overbought and ready for a proper rally:
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!