Fear is gripping risk markets around the world as the fallout from higher oil and commodity prices is repricing economic growth everywhere with Wall Street playing catchup with some big falls overnight as it heads into correction territory. Bond yields bounced back after their NFP induced strengthening phase, with the 10 year Treasury heading back up to the 1.8% level with currency markets also putting in reversals as talks about a US ban on Russian oil saw the Aussie dollar turnover while Yen safe haven buying also reversed. Commodity markets are still extremely volatile with WTI and Brent crude oil up nearly 6% with the latter at the $125USD per barrel level while copper pulled back nearly 4% and gold finally headed above the $2000USD per ounce level.
Bitcoin continues to sell off, albeit a little milder overnight but still not seeing any buying or ramping occuring, despite some weird moves in other crypto markets. Price is edging below the $38K level with the four hourly chart showing momentum remaining quite negative and nearly oversold, indicating more downside is possible towards its previous monthly lows nearer the $36K level:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares are taking a dive with the Shanghai Composite closing more than 2% lower to 3372 points while the Hang Seng Index slumped another 3% to fall to 21057 points. Price action on the daily chart remains grim indeed, with not just the 2020 lows taken out but all the way back to a five year low! While there is growing possibility of more downside, this correction cannot continue at this pace without a volatile bounce somewhere (in the middle?) so watch for any move higher that could be a trap:
Japanese stock markets also sold off sharply with the Nikkei 225 down more than 3% to 25191 points. The daily chart shows the big gap down here quite plainly as Japanese traders fully price in the oil price shock impact on the domestic economy, but the reversal in Yen overnight may forestall wider selling on the open today. This is not a pretty chart anyway you look at it:
Australian stocks were again the best performers in the region, but its all relative as the ASX200 still managed to finish more than 1% lower, breaking below the 7100 point level to close at 7038 points. SPI futures are dead flat despite the volatility, well everywhere, with the flip in Aussie dollar overnight possibly helping as commodity markets remain extremely bid which will support energy and mining stocks for quite some time yet. 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 before considering any long opportunities:
Another night of selling (and shelling) in Europe with shares selling off again, but not as much as expected with the Eurostoxx 50 index finishing some 1.2% lower at 3512 points, with the weekly daily chart showing the intrasession volatility is still quite wide. Price action is in a near freefall with momentum extremely oversold which normally means a big bounce – dead cat or otherwise – is around the corner, but there is equal probability of more downside here too:
Wall Street did worse however on the oil sanctions news with the NASDAQ crashing nearly 4% while the S&P500 nearly lost 3% to finish just above the 4200 point level. This almost takes the market back to the previous lows with a correction play now underway, with daily momentum only just slightly oversold and ready to selloff even more sharply:
Currency markets remain highly volatile but at least Euro had no substantial change overnight, albeit still at extreme lows compared to just a few weeks ago with the union currency hovering at the mid 1.08 level. The four hourly chart shows some consolidation here but is maybe shortlived as momentum remains oversold and unwilling to bounce back anytime soon, short of a big change in the Ukrainian conflict:
The USDJPY pair changed directly sharply overnight on the possible US/Russian oil bans, taking itself back to the mid 115 level but not able to substantially beat short term resistance there. Yen safe haven buying is unlikely to stop here so watch for another selloff on any risk off news and a return to weekly support at the 114.50 level:
The Australian dollar was on a tear, pushing up through the 74 handle at the start of trading week before getting way ahead of itself and slumping down to just above the 73 level this morning on USD strength reversal. This still keeps it above the previous week’s intrasession high but as I warned yesterday, volatility continues to reign as commodity prices go nuts, with this move above the 73 handle still part of a multi week breakout pattern if it can hold above four hourly support:
Oil markets are going nuts with some epic intrasession volatility overnight that eventually saw Brent finish at the $123USD per barrel level but it almost hit the $140 level on the way! As I said previously, this trend is WAY overextended and in a runaway pattern, completely beholden to macro news and catalysts as this latest daily candle normally spelling doom ahead, although the $100USD level may become strong support going forward:
Gold had another big ride overnight, finishing at the $1997USD per ounce level after briefly touching the $2000USD per ounce. Daily momentum is now moving to extremely overbought levels as this trend gets ahead of itself so I’m watching for a potential pullback that could be quite sharp:
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!