It was almost going to be the worst January ever for Wall Street but a late bounceback that turned into a 2-3% across the board surge staved off the bears. The latest PCE saw a fall in trimmed mean inflation rate, which gave some impetus to bond buying that saw Treasury yields fall back while a solid earnings report from Apple gave even more upside potential. Not so much in currency markets with the USD remaining extremely strong against all the risk currencies, although Euro stabilised, Aussie and Kiwi made new and very important lows through key support levels that could see accelerate selling on the open. Gold remains under the pump as well, remaining well below the key $1800USD per ounce support level as other commodity markets remain robust but took a breather a both Brent and WTI crude held on at near decade highs.
Bitcoin was essentially unchanged for the week but it’s in nowhere near recovery mode following its previous big selloff and remains stuck here at around the $38K level. The daily chart shows a potential bottom at the $32K level but with this bear market in full swing, this could be swept aside very quickly:
Looking at share markets in Asia from Friday’s session, where mainland Chinese shares went backwards into the close with the Shanghai Composite down nearly 1%, closing at 3361 points, while the Hang Seng Index added to its woes, down 1.1% to finish at 23550 points. The previous breakout above the 24000 point level has proven to be a sniff in the wind and not sustainable at all with momentum now switching to negative settings as price has failed to remain supported at all the key short term levels here. A return to the previous monthly lows below 23000 points is firming:
Japanese markets went on a comeback rally though with the Nikkei 225 closing 2% higher at 26717 points. Futures remain extremely uncertain here as the downtrend is still quite evident from the 29000 point high as momentum readings remain extremely oversold as price action retreats to the 2021 yearly lows. Volatility is not yet over but short positions may begin to unwind here quickly:
Australian stocks caught a break on short covering with the ASX200 closing 2.2% lower to just finish below the 7000 point level at 6988 points. SPI futures are down several points despite the big rise on Wall Street on Friday night and even a much lower Australian dollar may not give enough support here. The daily chart was exhibiting a classic deceleration pattern before Friday’s surge so that could carry through the weekend, but momentum remains extremely oversold, with high volatility not helping in determining direction:
European shares faltered in their bounceback with modest selling throughout the continent, as the Eurostoxx 50 index finished 1% lower at 4136 points. Futures saw a mild bounceback following the surge on Wall Street as confidence returned somewhat, as those long tails of daily intrasession buying do suggest a bottom is possibly forming here. Momentum remains oversold however and we need see a lift above the 4200 point level before getting excited:
Wall Street had a massive night on Friday, starting out slow but then picking up pace before surge right at the close with the NASDAQ putting in a stonking 3% gain while the S&P500 finished more than 2.4% higher at 4431 points. The daily chart showed price bouncing along at key support at the 4260 point level before this rally but notably it hasn’t yet cleared the former intrasession highs so we must be cautious before calling this bottom over. I’m looking for a proper breakout above the 4540 line instead, while treating this as a swing position only so far, with the end of month window dressing and more earning surprises possibly catching bulls out in a trap on Monday night:
Currency markets did not go into reverse mode on Friday night despite the change in risk sentiment with all majors still under pressure from a very strong USD. Euro didn’t make a new session low but remains under the pump here just above the 1.11 handle after previously taking out multi week support with the four hourly chart shows momentum still oversold. There is the case to be made for some selling exhaustion setting in here at the mid 1.11 level so watch for a potential breakout up to trailing ATR resistance at the 1.12 handle proper:
The USDJPY pair is possibly showing signs of topping out here after a bearish rising wedge pattern saw a last ditch effort to climb past the mid 115 barrier before consolidating just above the 115 handle proper on Friday night. Momentum has cooled down considerably from its very high reading but watch for any selling below the 115 level at the low moving average on the four hourly chart on risk sentiment souring once more:
The Australian dollar remains one of several risk currencies under the most pressure and slumped yet again on Friday night, pushed below the 70 handle before a late and meek fightback saw it finish the week just a pip or two under that key level. This sets up the right hand shoulder of a huge head and shoulders pattern on the weekly chart that will spell doom for the RBA as it slowly wakes up to the idea of a much much lower domestic currency in the face of global inflationary pressures – short term this could be more oversold than at first glance so watch for a potential breakout above the 70.40 area:
Oil markets remain strong on the trifecta of strong USD, Ukraine/Russia crisis and OPEC+ staying the course but there was some overhead buying hesitation on Friday night with Brent pushed down from the $90USD per barrel level to actually close with a new daily low, just below the $89 level instead. Daily price action via candle analysis is again suggesting a potential top as momentum readings pullback from what was overbought territory even as price remains supported above the previous highs at the highest horizontal black line. The next target at $100USD per barrel maybe a step to far, so watch for any profit taking below the $85 level:
Gold continues to fall fast in the wake of the too strong USD, with the shiny metal remaining well below the key $1800USD per ounce level and finishing at $1792 for the week, shedding more than $50 since the Fed meeting. This keeps it well below the daily trendline from the December lows where we’re likely to see a full retracement down to $1760 or so after a small amount of consolidation here due to oversold momentum:
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!