Risk markets recovered some of their nerve after the overreaction on Friday to the new COVID variant breakout, despite Asian share markets still falling on Monday. A higher than expected German CPI print and US pending home sales data also helped risk spirits. European shares and Wall Street lifted more than 1% while bond markets also pulled back slightly, with the 10 year Treasury yield lifting back above the 1.5% level. The USD recovered some lost ground as well, particularly against Yen and Euro while the Australian dollar remains depressed just above the 71 cent level. Oil regained more than 3% while copper came back 1%, gold still can’t get back above the $1800USD per ounce level.
Bitcoin jumped out the gate on the Asian open and then was able to turn that gap higher into something a bit more substantial, lifting through the $58K level overnight. The daily chart still looks bearish as daily support at the $59K level remains under threat, but short term moves are looking to push through that level this week as momentum moves further into the positive zone:
Looking at share markets in Asia from yesterday’s session, where nerves are still rattled as Chinese shares sold off with the Shanghai Composite down 0.2% to 3562 points while the Hang Seng Index closed 1% lower at 23852 points. There is large potential here for a follow through as the daily chart looks bad to say the least, pushing price down to the September lows which spells ominous as all levels of internal buying support are broken. However this sort of volatility begets more volatility – we could see a violent swing to the upside here on positive news about Omicron:
Japanese markets will want another holiday soon, with the Nikkei 225 closing 1.6% lower to 28283 points. Futures are indicating some stability on the open, with a 1% plus gain likely on the back of overnight markets calming down plus a lower Yen which had provided a massive headwind on the weekly open. Still, not a good looking chart here with the potential to rollover once more to go back below the key 28000 point level:
Australian stocks couldn’t escape the carnage with the ASX200 closing 0.5% lower at 7239 points. SPI futures are up more than 0.5% in response to the rebound on overnight markets, with a drawdown to the 7100 point level staved off for now. ATR trailing daily support at the 7320 point level needs to be respected here or we could see a rollover to the next level of monthly support at 7100 points indeed:
European markets tried valiantly to get back some of their Friday night losses but the response was mild at best with the German DAX the worst, only putting in a 0.2% gain while the rest of the continent did nearly 1% or so. The DAX finished at 15280 points after being higher than 15400 points at one stage with the daily chart still not showing much evidence of substantial buying support. This new leg down on the COVID catalyst still has the potential to swing wildly higher on any positive news:
Wall Street had a similar response but had a slightly better follow through with the NASDAQ gaining nearly 2% while the S&P500 put on 1.3% to finish at 4655 points. The four hourly chart shows price action pushing up through the low moving average and then the high, suggesting a proper swing long trade is underway, having cleared previous support at the 4630 point level. The next level is trailing ATR resistance at the 4670 point area and a positive or at least neural momentum setting:
Currency market volatility reduced somewhat following the overreaction on Friday night, with Euro consolidating against USD by returning below the 1.13 handle and making no moves thereafter. While the four hourly chart looks nominally bullish with positive momentum, the overall downtrend still is in play, so I’m wary of the potential of a follow through here at all in the wake of the new COVID scare:
The USDJPY pair remains in an interesting position however, with the run to safety via Yen haven buying still somewhat evident as price oscillated around the mid 113 level overnight, still looking fragile as of this morning. Price action remains contained within the four hourly moving average band and while momentum has swung back from being extremely oversold, this may not yet be over with a dead cat bounce condition tripped here:
The Australian dollar kept on keeping selling overnight with some mild consolidation above the 71 handle but no evidence of a swing higher or change in direction. Short and medium term momentum remains quite oversold, commodity prices are not recovering that well and there’s been no substantial change in USD strength or the tapering and inflation coming down the line:
Oil rallied at first on across both Brent and WTI crude futures, the former up nearly 6% to the $75USD per barrel level before it was shunted back to just below the $73USD level for a 3% gain. Volatility is still quite high but this bounceback is looking over before it started with the former monthly resistance level at $77 still the area to watch, as last night’s move proved not enough to abate some very negative momentum:
Gold is back to its recent lows with the inability to get out of its funk clearly illustrated on the four hourly chart below, finishing at the $1783 level as resistance continues to firm at $1800USD per ounce. While other markets have recovered somewhat from the new COVID variant news, the latest Fed speeches continue to put gold back in its place. Momentum remains negative in the short term as support at the $1790 level seems to be dissipating, early signs of another rollover:
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!