Share markets rebounded following positive risk sentiment on the potential of war in Ukraine abating for another day with European markets rebounding 2% with Wall Street following in kind. A slew of economic data that didn’t surprise helped as well with US PPI relatively high while the closely watched German ZEW survey came in slightly lower and UK GDP and unemployment firm. The USD index retreated from its start of week position, down 0.4% while the bond market again saw the 10 year Treasury yield remain above the 2% level with interest rate futures continuing to price in a possible 50 bps rise by the Fed next month. Commodity markets took a beating on the positive news with oil losing major ground, with Brent down nearly 4%, while gold also lost nearly 1% and iron ore slumped over 7% on Chinese price controls.
Bitcoin is slowly lifting after going nowhere in the last week, pushing up towards the $44K level overnight after being anchored here at the $42K level. This has been a remarkably low level of volatility compared to real currencies as daily momentum picks up, staving off the potential for a rollover. Watch for a clearance of the recent daily highs above $45K:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares lifted going into the close with the Shanghai Composite eventually finishing 0.5% higher at 3446 points while the Hang Seng Index remains in reverse mode, down 0.8% to 24335 points. Price action on the daily chart is looking jumbled at best with the 25000 point level proving too strong as resistance as daily momentum remains neutral at best, although we could see a kick up higher today on the inversion of risk sentiment overnight, I’m still wary of that double top bearish pattern forming again:
Japanese stock markets also lost a lot of ground with the Nikkei 225 down 0.7% to close at 26865 points. The daily chart had closed a bull trap here but support has built once again at just below the 27000 point level with overnight futures pointing to a bounce this morning. Any further upside must clear short term resistance at the 28000 point level and turn momentum positive or a return to the January lows remains the dominant direction:
Australian stocks caught up to the risk off crowd with the ASX200 finishing 0.5% lower at 7206 points. SPI futures however are looking to invert that and more completely, firming up nearly 1% on the Wall Street rebound with price action likely to clear above the previous weekly/monthly support levels. While daily momentum has not been positive since this reflation trade started, the signs of a rollover are abating here as earnings season ramps up:
European shares rebounded in unison with the Eurostoxx 50 index taking back the Monday night losses to be up nearly 2%, finishing at 4143 points. We could see a violent fill in and a surge towards the 4300 point level if Putin pulls back further, as price bounces of quite strong support at the 4000 point level but is still contained below resistance at the 4250 point level:
Wall Street had an equally wild ride overnight all three bourses punching back with tech stocks leading the way, the NASDAQ up more than 2.5% while the S&P500 finished 1.5% higher at 4469 points. The four hourly chart shows a solid bounce off of support at the 4350 point level and a clearance above the high moving average, but not yet positive momentum, indicating only a swing play is underway so far. While price is above the previous “bottom” highs at the 4440 level (mid black horizontal line), again this may not be enough to get back to the previous highs:
Currency markets had another volatile night but this time King Dollar was in retreat, alongside gold as Euro bounced back – rather meekly actually – to get back above the 1.13 handle as economic news outweighed concerns over the Ukraine crisis. Price must stay above that level as there’s daylight below here as the four hourly trailing ATR support level taken out on Friday has not been filled again, with the potential to retrace well down to the 1.11 level or lower if things heat up:
The USDJPY pair inched higher but was unable to make a substantial new session high, still anchored somewhat near the mid 115 level and above four hourly ATR support as Yen safe haven buying abated briefly. Notably, momentum remains neutral at best and price is contained with the wide band of moving average lows and highs so this is hard to discern direction next, but any risk off moves will see more Yen buying so watch for a retracement below the mid 115 level again:
The Australian dollar had a similar blip higher, getting back to the mid 71 level as it too bounced above its recent support zone at the 71 handle near the previous weekly highs. The four hourly chart is now showing a series of slightly higher lows as momentum returns to more neutral settings, but this is very early days so far, so watch for another retracement and a potential selloff below the 71 level :
Oil markets really love the war drums and when they stop beating, the selling starts afresh. Brent crude lost nearly 4% to finish just above the $93USD per barrel level overnight, still holding on to its near decade high. The next target at $100USD per barrel was considered a step to far, as this recent breakout was overextended in the short term, but it could be just the first target if Ukraine falls into conflagration. Momentum remains considerably overbought:
Gold was the lone undollar that was bucking the trend but this all reversed overnight, as the shiny metal was sold off to finish just above the $1850USD per ounce level after attaining a new weekly and monthly high, actually exceeding its October 2021 highs (top black horizontal line). This was an overdue pullback, taking the extreme wind out of its sails, but ATR support on the four hourly chart remains intact as does positive momentum, so watch for this level to be defended from here:
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!wrong on your position, so cry uncle and get out!