Last night saw Wall Street regain strength, particularly tech stocks, with the S&P500 putting in a new record high as concerns over the coming Fed taper dwindle once more. European and Asian markets were somewhat mixed, but are being dragged along for the ride with the USD keeping domestic currencies weak, with Euro dropping significantly on a poor German IFO survey. Commodity markets were still quite bullish as oil prices made another new high, while gold punched through the key $1800USD per ounce level and US Treasury yields pulled back towards the 1.6% level.
Bitcoin is flailing around after making a new record high last week and then losing it before the weekend, it is now playing catchup as it hovers around the previous high (solid black horizontal high) at the $63K level. Short term momentum is still negative and price remains below the Friday session highs so watch for any action below the low moving average for signs of a wider breakdown:
Looking at share markets in Asia from yesterday’s session, where the Chinese shares at first struggled to gain traction with the Shanghai Composite eventually pushing through the 3600 point level, closing 0.7% higher at 3616 points while the Hang Seng Index finished dead flat at 26150 points. Price action is slowing down its upside moves here in the past few sessions as it begins to hit a solid level of resistance at the key 26000 points level, equating to the previous September level. While daily momentum readings remain overbought, a new daily high matters more here:
Japanese markets pulled back strongly as Yen gained a lot of strength amid softer economic news with the Nikkei 225 closing 0.7% lower at 28600 points. The daily chart shows price poised here after a dead cat bounce that failed to get through trailing ATR resistance overhead at 29300 points, with daily momentum still negative:
Australian stocks had a good start to the trading week with the ASX200 closing well above the 7400 point level, up 0.3% to 7441 points. SPI futures are up nearly 20 points in response to the record highs on Wall Street, with daily momentum well into positive readings and turning this swing trade into something more sustainable as the 7400 level is cleared, we could see a return to the former highs in August:
Quite a mixed session for many European markets where the latest IFO survey and subsequent drop in Euro delivered oscillations in the core and peripheral bourses. The German DAX closed 0.3% higher at 15599 points with the daily chart showing a continued bounce off the key 15000 point level, although it remains a classic swing play only. Watch for a proper clearance of overhead trailing ATR resistance at the 15800 point level next:
Wall Street was able to punch through for yet more record highs with the NASDAQ taking back its Friday losses by gaining nearly 1% while the S&P500 eventually finished 0.5% higher at 4566 points. The four hourly chart shows a clear breakout here that has now exceeded the August highs as this rally re-engages to the upside in expectation of some very solid corporate earnings releases coming out this week:
Currency markets had mixed volatility across the majors with USD remaining firm against all but Yen and gold with Euro taking a big hit on the back of the poor German IFO survey. The four hourly chart of Euro had been building a potential double top pattern which was initially matched overnight but the IFO release saw it swatted back to the 1.16 handle, wiping out the last week of upside. The union currency is now teetering on edge here and could retrace all of its recent breakout if price isn’t supported at the 1.16 level proper:
The USDJPY pair had a relatively muted session, lifting up towards the 114 handle but unable to hold onto any gains and nearly returning back to the Friday lows. Short term momentum readings are no longer oversold but still negative with a series of lower highs indicating no buying pressure is evident yet. The key level to watch now is the mid 113 zone for signs of a proper follow through for a new weekly low:
The Australian dollar was nearly pushed lower, but a tight trading sessions is still giving bulls hope as commodity prices continue to spike higher with the Pacific Peso holding on just below the 75 handle proper. As I mentioned yesterday, traders will continue to watch short term momentum and support levels at the mid 74 level as price action remains muted:
WTI and Brent crude futures tried to lift higher, with the latter finishing above the $85USD per barrel level for a minor retracement. I remain concerned about divergent daily momentum readings that indicate a rounding top pattern is beginning to form, but overall price action is still very bullish and support firm here:
Following its wild ride on Friday night, gold has closed properly above the $1800USD per ounce level overnight for a new monthly high. Sentiment has shifted from muted to somewhat bullish for gold, with daily momentum now well into the positive zone, as the double bottom pattern at the $1730 level gives rise to a potential medium term uptrend:
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!