Risk markets took another breath overnight with the ECB going a bit more hawkisk than expected in its latest meeting with European shares pulling back, USD resurging (helped by a stronger than anticipated core inflation print) and most tellingly, bond yields selling off again with the 10 year Treasury heading through the 2% level. The fallout from Russia’s cutoff from the rest of the world is still impacting commodity and currency markets although the Aussie remains elevated while the reversal in oil prices continued after their huge ramp up with both Brent and WTI crude down nearly 2%, while gold lifted slightly to get back just below the $2000USD per ounce level.
Bitcoin fell back sharply overnight after floating high and consolidating at the $42K level before retracing right down to four hourly ATR support where it finished this morning at just belowt he $40K level. As I said yesterday, this had the hallmarks of a bull trap:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares had some mild success with the Shanghai Composite closing up 1.2% to 3296 points even while the Hang Seng Index eventually caught up, lifting 1.2% to close at 20890 points. Price action on the daily chart still looks poor at best, with the five year low intact as the possibility of a bounceback not really brewing here. While the recent daily candle shows the potential of a bottoming action, its nowhere near confirmed as we require a big bullish engulfing candle next:
Japanese stock markets put in a stonking session, with the Nikkei 225 closing nearly 4% higher at 25690 points. The daily futures chart was showing a bullish engulfing candle brewing on the possibility of a bottom, but futures don’t look so promising given overnight action with the potential to finish the week around the 25000 point level, as daily momentum remains oversold and not in its favour:
Australian stocks had a solid run with the ASX200 finishing 1.1% higher to get back above the 7100 point level, closing at 7130 points. SPI futures are down at least 50 points or upwards of 1% so this recovery may falter as we head into the end of the trading week, with the Aussie dollar not pulling back as expected despite lower commodity markets. 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 returned to the sellside overnight following their previous mammoth rallies with the Eurostoxx 50 index losing 3% to finish at 3651 points. The daily chart shows an obvious bottoming opportunity but as I warned previously, this could be a dead cat bounce and requires a solid close above the former support, now staunch resistance at the 4040 point area before this swing turns around:
Wall Street also sold off but again in smaller terms with the NASDAQ finishing 1% lower while the S&P500 lost just over 0.5% to finish at 4254 points. This keeps price action contained here below four hourly and daily overhead ATR resistance and follows my contention that this bounce is not yet enough to get the market fully out of trouble. The proper target here is resistance at the weekly highs around the 4400 point level, which is still a long way to go – watch oil markets for the catalyst, IMO:
Currency markets remain volatile and in the wake of slightly hawkish ECB it was surprising to see Euro invert below the 1.10 handle, but then again, no good news from the Ukrainian invasion is keeping a lid on risk taking here. The four hourly chart was showing consolidation that I expected to be shortlived and here we are, but again keep stops loose here on any rumors/news coming out of any diplomatic solution in Ukraine:
The USDJPY pair continued to push slightly higher, breaching the 116 level overnight and making another new daily high. 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 but for now, momentum remains nicely overbought although overhead price action does look a bit squeezy:
The Australian dollar had a small lift higher throughout all the sessions, able to stave off the volatility from the ECB meeting and US core inflation prints as commodity prices remained strong. Price remains well bid above the low moving average and support at the mid 72 level is firming here for another stab at the 74 handle next:
Oil markets are in a flux after the huge reversals previously as OPEC+ ramps up production with Brent crude losing another 2% to finish below the $110USD per barrel level with another volatile session. I’ve been warning for sometime now that this trend is WAY overextended and in a runaway pattern, completely beholden to macro news and catalysts as the previous daily candle was spelling doom ahead, and here we are. Its not over though by a long shot as the $100USD level should remain strong support going forward:
Not the same fate for gold overnight, with a small lift and lots of internal buying support as it continues to consolidate back below the $2000USD per ounce level. Price should be around the $1950 level instead as shown by that lower trendline, which is where this could end up today or tomorrow as daily momentum inverts from its extremely overbought levels:
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!