The latest US GDP estimate came in firmer than expected and coupled with Fed member Kaplan gunning for a taper, this sent risk sentiment into reverse mode with Wall Street selling off after its snapback rally. Commodity currencies like the Australian dollar were unable to sustain their own bounceback despite a big rise in iron ore prices in China, while Treasury bond yields were range traded which should provide a more clearer signal. Oil stalled alongside gold, while Bitcoin snapped back to its previous weekly low as it proved completely unable to get through the $50K level, retracing down to trailing ATR resistance on the four hourly chart:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite fell over 1%, closing just above the 3500 point level while the Hang Seng Index did the same, down 1.1% to finish at 25415 points. The daily chart has failed in forming a bullish short term double bottom pattern, with price unable to clear its own high moving average or go anywhere near trailing ATR resistance above the 26000 point level. Look for more downside here as this dead cat rolls over:
Japanese stocks were also in hesitation mode, with the Nikkei 225 unable to extend on its recent breakout, finishing dead flat at 27742 points. The daily pattern is similar to Chinese stocks, with a very solid bounce off the bottom of the previous descending triangle pattern but this move has not been strong enough to clear ATR trailing resistance, let alone the previous daily highs above the 28000 point area. With daily momentum still nominally negative a rollover back to the 27000 support area is imminent:
Australian stocks were unable to escape the selloff, not helped by the disastrous NSW COVID breakout with the ASX200 losing 0.5% to fall below the 7500 point level. SPI futures are down another 10 points in response to the falls on Wall Street overnight but the daily chart is broadcasting a greater dip is likely to eventuate, as price has been unable to clear its own high moving average here with ATR support at the 7360 point level the target:
European markets were this time moving in the same direction together with all bourses dropping half a percent or so across the continent. The German DAX pulled back to finish 0.4% lower at 15793 points with the daily chart showing hesitation turning into outright selling with the failure in making any new daily highs or clearing of the high moving average above, indicating short term resistance is firming into medium term at the 16000 point level. While there has been some evidence of intrasession buying support (note the long tails under the recent daily candles) this may not be enough to stave off a wider dip:
Wall Street fell back even harder of the hawkish Fed commentary with the NASDAQ down 0.6% while the S&P500 finished 0.5% lower at 4470 points. The four hourly chart is perhaps showing a delayed bearish rising wedge pattern as the key 4500 point target has turned into resistance as sentiment inverts. A true dip could be underway if we close the week out substantially below four hourly ATR support here:
Currency markets are seeing only a small rollover in USD weakness as Euro stalled out overnight, eventually settling at the mid 1.17 level for almost no change. As I said yesterday, this swing trade could well turn into something more substantial with the previous weekly high at the 1.18 handle the first upside target to reach, but watch the low moving average to possibly come under stress here:
The USDJPY pair was unable to maintain its push above the 110 handle overnight, even though it settled there this morning, not helped by a short term blip of Yen safe haven buying. There is still a bearish triple top pattern forming here from last week’s price action, with four hourly momentum now rolling over, so again watch the low moving average for more downside pressure:
The Australian dollar was thwarted the most, with its clawback rally reversing after it failed to reach the 73 handle mid week despite some solid momentum behind. Still a fair bit off filing last week’s selloff, and not yet providing a proper signal for longer term positions. Watch for ATR support at the 72 level to come under pressure next despite the big rally in iron ore in China yesterday:
Oil price finally took a breather overnight, with Brent stalling out here just above the $71USD per barrel level. This keeps it just below the key overhead trailing ATR resistance level on the daily chart and well below the previous daily highs in late July/early August, so watch for daily momentum that needs to exceed this neutral setting for more upside:
Gold whipsawed around but not above the key $1800USD per ounce level overnight on the back of the Fed tapering missives, still running out of momentum as it retraces back to four hourly support at the $1790 level. While previous resistance has been pushed aside, the question still remains if it can 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!