Stock markets were unsteady overnight as Putin pushed his forces into Ukraine while sanctions were announced by most of Europe and the US in response, with volatility on energy markets spiking as German cancelled the Nord Stream 2 gas pipeline. The USD index was almost unchanged, as Euro and Pound Sterling range traded while Yen safe haven buying abated and the Australian dollar gained on the commodity price lift, lifting above the 72 handle. US bond markets reopened with the 10 year Treasury yield rising again up towards the 2% level while Brent crude oil almost touched $100USD per barrel as copper and gold fell back, the latter retracing below the $1900USD per ounce level.
Bitcoin was able to stabilise a little overnight, remaining nearer its start of year position at just above the $38K level, but its not looking good for the digital gold wannabe. The daily chart does not look promising with a further retracement down to the $32K overshot lows from early January possible:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares fell sharply going into the close with the Shanghai Composite losing 1% to 3457 points while the Hang Seng Index had a shocker, losing nearly 2.8% to 23520 points. Price action on the daily chart shows a massive retracement here taking price well below the previous support level at 24000 points as momentum moves into oversold mode. This short term setup could resolve in a quick bounceback on short covering here as volatility remains very high:
Japanese stock markets also lost their cool with the Nikkei 225 finishing 1.7% lower to close at 26449 points. Futures are suggesting a small bounce back on the open as the USDJPY pair finally found its footing overnight, but price does seem to want to be anchored at the January lows where the previous level of support at around the 27000 point level perhaps turning into resistance instead:
Australian stocks didn’t escape the carnage with the ASX200 losing 1% to finish at 7161 points. SPI futures are down about half a percent so far, with the daily chart still showing a relatively fragile setup as this melt up rally finds considerable resistance overhead at the previous weekly/monthly support levels. Daily momentum also has not been positive since this reflation trade started, with the signs of a rollover confirmed if price closes below the low moving average again here:
European shares had a very mixed session as Putin kept everyone on their toes again, with intrasession volatility increasing. The Eurostoxx 50 index eventually finished a handful of points down for a scratch session, but the daily chart shows how weekly ATR support at the 4000 point level is possibly firming as a bottom here (buy the invasion, sell the news?) with daily momentum extremely oversold:
Wall Street however returned from its long weekend holiday to play catchup, with the S&P500 finishing 1% lower at 4300 points even. The four hourly chart shows price bunching up at possible support at the 4250 level, which must hold or it sets up a long term bearish reversal pattern that is matched by the NASDAQ. I’m watching for any bounceback above the high moving average at the 4350 point level:
Currency markets remain volatile while the USD index is again giving mixed signals, with Euro-land currencies still directionless. Euro is hovering at its previous weekly lows around the 1.13 handle, with a very mild bounceback overnight. If that high moving average on the four hourly chart isn’t cleared soon however, there is the potential to fall back even further to the mid 1.12 level here as safe haven buying accelerates:
The USDJPY pair also managed to find some sunshine with a blip up to the 115 handle overnight after sliding down the start of the week following its Friday deflationary trade, as Yen safe haven buying stopped for a little while, reflecting other possible bottoms on risk markets. Momentum has inverted from its oversold status and pushed higher but not yet positive as trailing ATR resistance overhead is not yet cleared. This could be very short lived:
The Australian dollar is more than keeping its ground now, building on the rise in commodity prices with a proper push through the 72 handle overnight, with the four hourly chart showing a series of higher highs that is finally making a dent on overhead ATR resistance. The rise in oil and iron ore prices is giving more momentum to the Aussie but can it push through here and hold on to a new weekly high?
Oil markets continue to spike up again on war concerns with Brent crude lifting up towards the $100USD per barrel level, before retracing for a small pullback just above the $96 level instead. Price remains at a near decade high and remaining well on trend and the next target at $100USD per barrel is still in contention, given the NordStream 2 cancellation and war still not resolved in Ukraine as sanctions come next. As does volatility so be careful here:
Gold is being a little more contained now after recently pushing through the $1900USD per ounce level, pulling back slightly as it remains above its October 2021 highs (top black horizontal line) despite daily and weekly momentum being considerably overbought and unsustainable. I’m watching for a possible retracement back down to the $1870 level on good news in Ukraine, but this may not eventuate as Putin moves his chess pieces around:
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!