Stock markets took a deep breath last night, with European shares slipping only slightly while Wall Street stumbled but did not turn into outright selling like previous sessions. Is this the calm before the next storm or a possible bottom brewing? Bond yields continued to bounce back with the 10 year Treasury heading back up to the 1.8% level while currency markets calmed down somewhat as USD remained strong against all the undollars, including commodity currencies like Aussie and Loonie. Commodity markets remain extremely volatile (nickel!) with WTI and Brent crude oil up nearly 4% again, the latter pushing up towards the $130USD per barrel level while gold soared above the $2000USD per ounce level.
Bitcoin is moderating somewhat, getting directionless in the short term with price floating around the $38K level with the four hourly chart showing momentum remaining negative but not yet oversold. This still suggests 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 took a big dive with the Shanghai Composite closing more than 2% lower at 3293 points while the Hang Seng Index was unable to hold on, losing more than 1.3% to close at 20705 points. Price action on the daily chart remains grim indeed, with a five year low but I contend there is a growing possibility of a bounceback brewing here as this market catches its breath despite local COVID problems dominating:
Japanese stock markets also sold off sharply with the Nikkei 225 down more than 1.7% to 24790 points. The daily chart shows another big gap down here as Japanese traders fully price in the oil price shock impact on the domestic economy, but the continued reversal in Yen should be providing some dampeners that have not yet come to pass. This is not a pretty chart anyway you look at it:
Australian stocks were unable to hold on despite energy prices buoying that sector previously with the ASX200 finishing some 0.8% lower to crack below the 7000 point level, closing at 6980 points. SPI futures are up a handful of points, with the fall in the Aussie dollar overnight possibly helping stave off wider selling 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:
European shares had a mild reprieve overnight, with some peripheral bourses actually putting in positive sessions, while the Eurostoxx 50 index only slipped some 0.2% lower at 3505 points, with the daily chart showing post close futures indicating more buying support building. Price action has been 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 with the NASDAQ pulling back 0.3% while the S&P500 did worst, losing 0.8% to finish at 4170 points. 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 are losing some volatility as all eyes go to commodities with Euro floating along overnight, unable to breakout substantially above the 1.09 handle after possibly finding a bottom here earlier in the week. . The four hourly chart shows some consolidation here but it might be shortlived even as momentum reverts back to neutral, if still negative settings, short of a big change in the Ukrainian conflict:
The USDJPY pair continued to climb out of its latest reversal, surpassing the mid 115 level but not able to clear the previous weekly highs that have contained this ranging pair for sometime now. Yen safe haven buying is still likely to return here on bad news, so watch for another selloff and a return to weekly support at the 114.50 level if the 116 handle can’t be cleared:
The Australian dollar continued to deflate overnight despite the epic rise in commodities as the USD gained strength. This takes it back to the previous week’s intrasession high which should act as support here, but if it fails, breaks the multi week breakout pattern that had been building here:
Oil markets continue to float higher with Brent crude finishing at the $128USD per barrel level with yet another volatile session as the US ban on Russian oil is confirmed. As I continue to warn, this trend is WAY overextended and in a runaway pattern, completely beholden to macro news and catalysts as the previous daily candle normally spelling doom ahead, although the $100USD level may become strong support going forward:
Gold had another big ride overnight, bursting through the $2000USD per ounce level to finish at $2050 in an out of control blow up trend. Daily momentum is at extremely overbought levels as this trend gets ahead of itself so I’m watching for a potential pullback that could be quite sharp on any good news, but for now, nothing is standing in the way of gold (and a lot other commodities):
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!