Everything is awesome for stock markets at least as the FOMC meeting came and went with the expected taper in QE purchases by the Fed confirmed. This sent Wall Street to new record highs, while the USD lost ground against almost everything but gold. The bond market responded calmly with 10 year Treasury lifting towards the 1.6% zone after anchoring more towards the 1.5% level in recent weeks, with the September 2022 hike still priced in. Commodity markets were all over the place with a big move down in oil prices, off by nearly 3% on the WTI and Brent markers, while copper and gold both lost over 1%, the latter flummoxed again and unable to climb back above the $1800USD per ounce level.
Bitcoin’s rebound above the previous record high (solid black horizontal line) stalled out yesterday with a wild oscillation during the FOMC meeting that saw it dip below the $60K level briefly before almost returning to where it started. This sort of volatility is indicative of a lack of directional stability although the four hourly chart is putting in a possible inverse head and shoulders pattern here with the $63K level as the obvious breakout point:
Looking at share markets in Asia from yesterday’s session, where Chinese shares fell back again with the Shanghai Composite slipping 0.2%, closing at 3493 points while the Hang Seng Index was down nearly 1% before recovering for only a 0.3% loss, closing at 25024 points. Price action continues to show a return to the dominant downtrend, although daily momentum is not yet negative, a close below the 25000 point level will be confirmation of more downside to come:
Japanese markets are also facing headwinds with the Nikkei 225 losing nearly 0.5% to close at 29520 points, not helped by the falling USDJPY pair. Futures are indicaitng a reversal in line with very positive risk sentiment overnight and a slightly lower Yen, so watch for a follow through close above the previous daily highs level to seal the deal and a possible return to the former highs above 30000 points:
Australian stocks were the standout however with the ASX200 rallying nearly 1% to take back all of the previous losses to almost get back above the 7400 point level. SPI futures are up nearly 0.5% or just over 30 points as we see another attempt at breaching that natural resistance zone with daily momentum positive, but not yet overbought despite a desire to return to the former highs in August, as short term support builds strongly here:
European markets are on different tracks with the FTSE and peripheral markets pulling back while the uber bullish German DAX actually had a pause, closing where it started at 15959 points. The daily chart continues to show a runaway trend after recently clearing trailing ATR resistance with momentum readings solidly into the overbought zone, suggesting a return to the 16000 point level very soon:
Wall Street loved the taper with green across the board, the NASDAQ up 1% and the S&P500 finishing 0.6% higher at 4660 points for another record high. The four hourly chart shows the market leaping higher ever again, building well above the 4600 point level with no risk whatsover ahead!
Currency market volatility came back slightly overnight on the FOMC meeting and the very good ISM services print with Euro breaking out of a very tight trading range to just pip above the 1.16 handle as overall USD strength against the majors dwindled. The point of control at this level is likely to strengthen from here as short term momentum readings stabilize, but I’m watching for another close above the high moving average before getting excited for any upside run:
The USDJPY pair continues to bounce around with a small breakout overnight, as the overall weaker USD but higher risk on attitude played out with a stillborn result, finishing right on the 114 handle this morning. This keeps it in the middle of 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 recently hammered following the RBA meeting but put in a solid bullish engulfing candle last night on the Taper Trade, pushed back above the mid 74 level as a result. Whether or not this will translate to more gains is dependent on more commodity upside and any bounce in iron ore which has not yet come to pass. As I noted yesterday, the Pacific Peso was extremely oversold so there remains a slim chance of a small bounceback:
WTI and Brent crude futures flopped on the Fed taper moves after a series of mild sessions, with the latter pushed straight down to support at the $81USD per barrel level. My contention of a rounding top bearish pattern is coming to the fore here as that buildup of a lack of new daily highs before the Fed meeting last night now supporting a move down to trailing ATR daily supproat the $79 level next:
Game over for gold as it failed yet again to clear that key $1800USD per ounce level, making a new daily low and breaking the nascent uptrend on the back of the Fed Taper overnight, closing at $1771. This puts the nail in for a return to the August/September lows just above the $1700USD per ounce level, watch for another close below the low moving average here to confirm:
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!