Overnight share markets again returned to downward volatility despite Fed Chair Powell repeating his hawkish position and the nominally good economic news out of Europe and the USA. All eyes remain on the Ukrainian war and its impact, particularly oil prices which are suggesting economic contraction is likely. Bond yields ranged traded, a little off their recent highs while currency markets saw a mild lift in USD strength although Euro remains somewhat weak for obvious reasons as commodity currencies like the Aussie dollar had solid sessions. Commodity markets saw more upside volatility as Brent almost hit the $120USD per barrel level before retracing more than 1% while copper and gold lifted alongside iron ore which continues to spike.
Bitcoin is slowly deflating after its breakout paused at the former weekly high at the $44K level overnight. The four hourly chart showed price matching but not exceeding the early February highs (upper black horizontal line) as momentum retraces back down to neutral settings with four hourly ATR support at the $41K needing to be defended as we head into weekend trade:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares pulled back slightly with the Shanghai Composite closing a few points lower at 3481 points while the Hang Seng Index finally putting in an up session, closing nearly 0.5% higher to 22467 points. Price action on the weekly chart shows it now falling below the 2020 lows (lower horizontal line) with the growing possibility of more downside, as monthly support at the 22600 point level evaporates. Weekly momentum is oversold and broadcasting further falls despite these one off rallies:
Japanese stock markets also put in a solid bounceback with the Nikkei 225 closing up 0.7% to 26577 points. Futures are suggesting a full retracement of those gains on the open however, with price action here still definitely contained, as the daily chart remains a poor long opportunity in the short and medium term. Price remains anchored at or below the January lows:
Australian stocks continued their bounce from the previous session with the ASX200 managing to build above the 7100 point level, closing nearly 0.5% higher at 7151 points. SPI futures however are down about 1% on overnight downward volatility on European markets again, so we’re likely to close the week just above the 7000 point level which has proven as solid short term support. As I’ve been saying for awhile now, there is still considerable resistance overhead at the previous weekly/monthly support levels so watch daily momentum that needs to get back into the positive zone soon:
European shares had yet another volatile session session, again moving to the downside as the Ukrainian war shows no sign of abating. The Eurostoxx 50 index eventually finished more than 2% lower, taking back its recent gains to finish at 3741 points, with the daily futures chart showing not much potential as Wall Street moved in a similar direction. Price action remains in a near freefall and could go further below as this conflict continues, with the potential to correct down to the former 3300 point level that stood as support midway through 2020:
Wall Street tried vainly to bounce back but had no luck, particularly with the NASDAQ losing more than 1.5% while the S&P500 stumbled to finish 0.5% lower at 4363 points. The four hourly chart is still looking promising as that V-shaped bottom pattern is not yet failed, with the neckline at the 4400 point zone still firming as a probable breakout point:
Currency markets are calming down somewhat although they continue to oscillate around the recent weekly highs and lows with USD strengthening slightly again, all due to Euro heading down to the 1.10 handle. The union currency remains under a lot of pressure here with price still away from the high moving average on the four hourly chart, so watch for another potential rollover on more risk off moves:
The USDJPY pair predictably turned back from the mid 115 zone yet again, doing another leg down in the swing play oscillation between the low 114’s and mid 115 level that has lasted for several weeks now, with no discernible medium term direction:
The Australian dollar remains on a tear, pushing through the 73 handle overnight to build on its breakout above last week’s intrasession high. Volatility continues to reign here as commodity prices go nuts, but any solid move above the 73 handle could be part of a multi week breakout pattern, with momentum nicely placed here to keep things moving higher:
Oil markets are looking very toppy indeed with a failed breakout towards the $120USD per barrel level thwarted with profit taking as this trend gets WAY overextended. However, wars have a way of turning technical pictures upside down and that’s what we’re seeing here so be cautious and watch that low moving average on the daily chart that continues to provide a good uncle point:
Gold had another mild ride overnight with a small push higher after a well overdue pullback, finishing at the $1936USD per ounce level with the trend up to the $2000USD per ounce level still intact. Daily momentum remains positive and price action is contained nicely within the moving average band but watch for any overshoots below the low moving average as a potential topping sign:
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!