The Jackson Hole conference ended up being less hawkish than expected with Fed Chair Powell giving US stocks another lift higher with no announcement or talking about tapering Fed stimulus. This sent Wall Street to a new record high and the USD through the floor as commodity currencies like the Australian dollar were able to re-engage their previous bounceback rallies. Treasury yields fell back to new weekly lows while oil prices more than 2% and gold kept up through the $1800USD per ounce level. Bitcoin finished the week where it started at just below the $50K level but looks firm here on the daily chart with the low moving average providing solid short term support, although daily momentum is waning:
Looking at share markets in Asia from Friday’s session, where the Shanghai Composite bounced back, up nearly 0.5% to recoup half of its previous losses, closing at 3522 points while the Hang Seng Index retreated slightly, finishing 0.1% lower at 25407 points. The daily chart is continuing to fail to put in any sort of 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:
Japanese stocks had a decent retracement, with the Nikkei 225 falling 0.3% to reverse its breakout, finishing at 27642 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 yet been strong enough to clear ATR trailing resistance. Futures are indicating a better start this week, with daily momentum nominally positive but the 27000 support area remains an anchor point:
Australian stocks finished dead flat, capping off a topsy turvy week, with the ASX200 closing 0.1% lower at the 7488 point level. SPI futures are showing a possible positive start to the week with at least a 10 point advance in response to the rise on Wall Street with the daily chart still looking tenuous here in a tight band of resistance and support. Price needs to clear its own high moving average and remain well above ATR support at the 7360 point level:
European markets all had solid finishes to the trading week across the continent after a mid week dip, with the German DAX closing 0.4% higher at 15851 points, right where it started. The daily chart is still showing hesitation with the failure in making any new daily highs or clearing of the high moving average since early August, with resistance firming 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 however advanced twice as further with the NASDAQ leading the way with a 1.2% advance while the S&P500 finished 0.8% higher to finally trip the 4500 point level for yet another new record high. The daily chart shows prices twirling ever higher to freedom with very strong ATR support and momentum clearly overbought with the 5000 point level the new upside target here until the Fed taps the brakes:
Currency markets were seeing only a small rollover in USD weakness until the Jackson Hole conference which has now turned into a deadset rollover with Euro surging back to the previous weekly high at the 1.18 handle, finishing off a reflation rally for this week. The new trading week could see a small retracement or the next leg higher, dependent on actually surging above the 1.18 handle proper with momentum extremely overbought a clear swing short signal:
The USDJPY pair conversely was pushed lower, but not due to Yen safe haven buying, but there is still a bearish triple top pattern forming here from the previous price action. Notably, four hourly momentum has completely rolled over, so again watch the low moving average for more downside pressure:
The Australian dollar was able to shoot right through the 73 handle on Friday night after a mid week pause its own reflation rally. This almost completes the previous large downside week following falls in iron ore prices with the 73.80 level the next upside target. While the rally in iron ore price is helpful, the weaker USD on its own is likely to support the Pacific Peso this week:
Oil prices came back on Friday due to USD weakness, but it was transitory with Brent crude eventually closing at well above the $71USD per barrel level but unable to make a new daily high. 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 was much more successful with a very solid move above the key $1800USD per ounce level, re-engaging short and medium term momentum here as it bounced off of 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 needs to exceed overbought levels 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!