Last night saw a surprise hold in intrest rate rises by the BOE, sending Pound Sterling into the gutter and pulling other undollars down with it as the bond market translated the dovish action in lower yields across almost everything. Wall Street can’t be held back as it made yet another record high with Asian shares expected to put in solid returns to end this trading week. Commodity markets were all over the place again with oil off another 1.5%, while copper and gold both rebounded although the latter was still unable to climb back above the $1800USD per ounce level, as iron ore prices continue to deflate below $100.
Bitcoin’s rebound above the previous record high (solid black horizontal line) continues to fade into nothing with another retracement overnight to the $61K level. 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, momentum is really lacking:
Looking at share markets in Asia from yesterday’s session, where Chinese shares rebounded despite property bond market troubles with the Shanghai Composite lifting more than 0.8% as it surged going into the close to finish at 3526 points while the Hang Seng Index did exactly the same, coasting along before a big surge at the finish to close at 25225 points. Despite another one day rally, price action continues to show a return to the dominant downtrend, and while daily momentum is not yet negative, a close below the 25000 point level will be confirmation of more downside to come:
Japanese markets were also in rebound mode with the Nikkei 225 putting on nearly 1% to close at 29794 points this time helped only a little by the USDJPY pair. Futures are indicating a possible small reversal but its likely that positive risk sentiment will shine through, despite a wavering Yen, so watch for a follow through close above the previous daily highs level to push towards the former highs above 30000 points as daily momentum gets nicely overbought:
Australian stocks had a solid session to get the ASX200 back above the 7400 point level, lifting nearly 0.5% to 7427 points, helped along by a lower Australian dollar. SPI futures are up nearly 20 points so we could see the former mid October highs cleared as daily momentum moves from positive to overbought, on the way to a return to the former highs in August, as short term support builds strongly here:
Green across the board for European markets even including the FTSE in the wake of the surprise BOE result with the uber bullish German DAX lifting more than 0.4% to close at 16029 points. The daily chart continues to show this runaway trend that has cleared the previous highs and moved past the critical 16000 point level, with daily momentum nicely overbought and a lower Euro helping with a tailwind here as support at the former ATR level around 15700 points firms:
Wall Street continues to love the taper even though the headline DOW retreated a few points the NASDAQ was up 0.8% and the S&P500 finished 0.4% higher at 4680 points, both for another record high level. The daily chart shows the market leaping higher again, in what looks like an unsustainable move, but of course don’t fight the Fed!
Currency market volatility continued overnight on the back of the BOE meeting this time with a sharp fall in bond yields sending USD up against almost everything, with Pound Sterling suffering the most for a new monthly low just below the 1.35 handle. Euro fell in sympathy but did not take out its recent weekly low, sent down to the mid 1.15 level as buyers abandon the union currency, which will only help European stocks in the short term. Watch for a capitulation below last Friday’s lows at the 1.1520 level:
The USDJPY pair continues to bounce around with a small breakdown overnight, unable to clear resistance at the start of week trading level just above the 114 handle, briefly touching the intrasession weekly low this morning. This again 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 significant breakouts above/below those levels makes any sense:
The Australian dollar fell below the 74 handle overnight, confirming the widening triangle pattern on the four hourly chart to the downside after a whiplash post RBA/FOMC trading range.The slim chance of a small bounceback due to oversold technical conditions has come and gone so look for more downside below this level to end the trading week on a new low:
WTI and Brent crude futures continued their run off as buyers deserted commodities, with the latter closing below the $81USD per barrel level after a mid-session rally failed to eventuate. My contention of a rounding top bearish pattern continues to have weight here, supporting a continued move down to trailing ATR daily support the $79 level next:
Gold is not yet in the doldrums with a divergent rally overnight despite all other undollar assets falling, even putting in a new daily high to finish at the $1791USD per ounce level. This fills in and even a little more of its post Fed Taper slump and arrests the decline and break of the downward trend. I still contend we’re more likely to return to the August/September lows just above the $1700USD per ounce level, so 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!