Wall Street put in another record high, with European stocks dragged along for the ride in the wake of some solid start of week economic prints but risk currencies fell back as the USD gained some strength. Leading up to this weeks FOMC meeting is seeing continued bond market ructions with the 10 year Treasury falling back to the 1.5% level as pricing indicates a Sept 2022 hike, while commodity markets were again quite mixed, with oil and gold relatively stable, industrial metals losing more ground, and iron ore whalloped yet again.
Bitcoin’s tepid start to the week has finally accelerated with a solid move above the previous record high (solid black horizontal line) to exceed the $63K level since early last week. This could translate into another run and fill back to the actual record high so watch for this level to become a point of control ahead:
Looking at share markets in Asia from yesterday’s session, where Chinese shares were mixed again with mainland stocks pulling back strongly, as the Shanghai Composite retreats more than 1% to close just above 35000 points while the Hang Seng Index was up nearly 0.3% as it tried to pull back from its rollover from last week, instead finishing 0.2% lower at 25099 points. Price action continues to show a complete rollover, as the solid level of resistance at the key 26000 points level at the previous September highs remains well out of reach. Further downside rollover is likely, returning to the dominant downtrend, but daily momentum is not yet negative so watch for a close below the 25000 point level next as confirmation:
Japanese markets also pulled back a little from their very sharp positive reaction to the weekend election with the Nikkei 225 losing nearly 0.5% to close at 29520 points. Overhead trailing ATR resistance at 29300 points is still a reminder that this one off move needs a following through, so while daily momentum is clearly positive now, its not yet overbought and indicating a new uptrend, so watch for a follow through close above this level to seal the deal and a possible return to the former highs above 30000 points:
Australian stocks fell back throughout the session, with the ASX200 falling 0.6% to take back all of the previous gains and remaining well below the 7400 point level, closing at 7324 points. SPI futures are up nearly 1% or 70 points as we see another attempt at breaching that natural resistance zone, with the much lower Australian dollar overnight helping with a tailwind trade. While daily momentum is now positive its not yet overbought indicating that the previous uptrend is short term in stature only, despite a desire to return to the former highs in August:
European markets again diverged in fortune with Spanish shares down nearly 1% while the German DAX lifted nearly 1% higher, closing at 15954 points. The daily chart is now showing a runaway trend here after clearing trailing ATR resistance as momentum readings are now solidly into the overbought zone, suggesting a return to the 16000 point level – but is it too fast:
Wall Street again put in more new record highs, with the NASDAQ up 0.4%, as the daily chart shows a clear breakout above the previous record highs:
While the S&P500 also finished 0.4% higher at 4630 points for its own new record high. The four hourly chart shows the market pushing higher ever again, building above the 4600 point level as we head into the FOMC meeting this week:
Currency market volatility reduced overnight due to lack of economic release catalysts with Euro suffering a small push back below the 1.16 handle as a result of overall USD strength against the majors. The point of control at this level maybe weakening as short term momentum readings stabilize in the negative zone so I’m watching for another close below the low moving average for a possible return to the Friday night lows:
The USDJPY pair is bouncing around like a two year old with yet another swing play overnight, after a big drop during the Asian session yesterday, the stronger USD and better result on Wall Street saw risk taking increase and safe haven buying decrease. This keeps it on a fairly wide trading range between the 113.40 and 114.40 level for the last two weeks, so only playing breakouts above/below those levels make sense for now:
The Australian dollar was hammered overnight following the weak tones from the RBA meeting yesterday, pushed down towards the 74 handle in a strong selloff. The lack of punch through overhead resistance before the RBA meeting was quite evident and the rollover below the 75 level and short term momentum inverting set this up nicely. Extremely oversold now, there is the slim chance of a small pickup today:
WTI and Brent crude futures remain somewhat poised here with another mild session overnight with the latter pushed down slightly to the $84USD per barrel level. There is still the potential for rounding top pattern here with a lack of new daily highs adding to that theory, but support is quite firm at the $81 level:
Gold still can’t clear that key $1800USD per ounce level even as short term sentiment still builds into a bullish case for gold, with daily momentum still in the positive zone but price action remains muted with a close at the $1787 level for a new daily low. The big problem remains the actual resistance level at $1830 or so that needs proper clearance first – watch for continued support here at the $1780 level that must hold for another chance to zoom higher:
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!