Share markets moved from fragility to fear as selling dominated Wall Street overnight in the wake of continuing concerns over Ukraine and more hawkish comments from Fed officials. The USD index bounced back, up more than 0.2% with the Aussie falling back from its recent highs while the bond market saw the 10 year Treasury yield pull back below 2% level with interest rate futures firming a possible 50 bps rise by the Fed next month. Commodity markets were mixed, but mainly negative with oil prices losing a little more ground while gold came back strongly to almost breach the $1900USD per ounce level.
Bitcoin was unable to turn its very mild lift higher into any substantial, reversing sharply overnight to drop down to the $41K level and making a key new daily low in the process. I’ve been saying for awhile that volatility has been very low compared to real currencies as daily momentum remained possible, but without a clearance of the recent daily highs above $45K we could see another leg down shortly:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were mixed with the Shanghai Composite up only a handful of points to 3468 while the Hang Seng Index put in a modest gain, up only 0.3% to 24792 points. Price action on the daily chart continues to look jumbled with the 25000 point level still proving too strong as resistance as daily momentum tries to pick up again but I remain wary of that double top bearish pattern which has not yet been negated. Watch the low moving average on the daily chart which must hold here:
Japanese stock markets also pulled back with the Nikkei 225 dropping 0.8% to close at 27232 points. Futures are suggesting a much lower start on the open despite support building at around the 27000 point level with the daily chart indicating a possible compete rollover is building after momentum failed to push past positive line. A return to the January lows remains the dominant direction:
Australian stocks were able to lift right at the end of the session, but only just as the ASX200 finished 0.1% higher at 7296 points. SPI futures are down over 1% with the daily chart showing how fragile this melt up rally has been as the drop in iron ore prices won’t help either as price action failed to substantially clear above the previous weekly/monthly support levels. Daily momentum has not been positive since this reflation trade started, with the signs of a rollover coming to the fore again as risk sentiment sours:
European shares weren’t able to gain any confidence throughout the session with the Eurostoxx 50 index pulling back around 0.6%, now taking back all the gains of the previous sessions, finishing at 4113 points. The surge towards the 4300 point level has evaporated here as markets remain distrustful of Russia’s moves in Ukraine, while price retraces back to what should be strong support at the 4000 point level with the series of lower daily highs not looking good:
Wall Street turned the European lack of confidence into a straight out romp, with all three bourses losing 2% or so, with the NASDAQ leading the way, finishing 2.8% lower while the S&P500 lost 2.2% to finish at 4380 points. The four hourly chart still shows how that solid bounce off support at the 4350 point level stalled out with no positive momentum throughout, indicating a swing play was only underway. This move takes it almost back to the start of the week lows with the possibility of further falls as risk takes everything off the table for the weekend:
Currency markets reduced in volatility somewhat overnight as the USD strengthened slightly on the back of Fed member Bullard’s hawkish comments. The Euro was well contained as it failed in its push up back up to the 1.14 handle, as price action remains somewhat near but not exceeding the previous Friday night lows. As I said yesterday, for this nascent trend to continue, it must punch through above trailing ATR resistance at the 1.14 handle proper or we could get another retracement below and that still holds:
The USDJPY pair continued its run down as the bearish rising wedge pattern on the four hourly chart turns into a new intrasession weekly low as the anchor point near the mid 115 level is swept away as Yen safe haven buying is not yet over. Momentum is well oversold now, perhaps a little too much that could cool off into the last session of the week, but I remain very cautious here as this pattern looks ripe for more downside as the 115 handle is breached:
The Australian dollar stalled out again, unable to punch through the 72 handle overnight, but holding on for the 24 hour period despite the lack of positive risk sentiment as iron ore price volatility again spiked as more Chinese measures pulled the commodity down. The four hourly chart shows this trend losing momentum as it inverts its overbought settings, so watch for a potential short term retracement here to finish the trading week:
Oil markets continue to moderate somewhat with Brent crude lifting only slightly overnight to finish just above the $93USD per barrel level, holding on to its near decade high and remaining on trend. The next target at $100USD per barrel could still be in contention, even though this trend has only modest momentum now, so watch the low moving average on the daily chart for signs of any profit taking:
Gold surged again overnight, pushing right up to the $1900USD per ounce level, again exceeding its October 2021 highs (top black horizontal line) for a substantial breakout. The overdue pullback was short lived as daily momentum remained overbought, although its getting way ahead of itself again here. This should solidify over the coming sessions:
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!