A three month high in oil prices saw Wall Street pushed down alongside cautious European stocks overnight, as inflation – or even stagflation – concerns mount across the risk complex. The USD was up slightly against Euro as traders position for the ECB meeting tonight, while Yen dropped to a new 20 year low against King Dollar as the Australian dollar remains relatively depressed around the 72 cent level. Interest rate and bond markets saw a lifting of yields across the curve, with 10 year Treasuries back above the 3% level again. Commodity prices were dominated by lifting oil prices, with Brent crude pushing above the $123USD per barrel level while gold remains stuck at the $1850USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets were looking to put in scratch sessions before a late surge by the Shanghai Composite saw it close up 0.6% to 3263 points while the Hang Seng Index climbed over 2% to get back above the 22000 point level. The daily chart is showing price accelerating now after breaking above trailing daily ATR resistance at the 21000 point level with overbought daily momentum helping translate into greater highs with the March highs near the 23000 point level the next target:
Meanwhile Japanese stock markets are pushing forward again, with the Nikkei 225 index closing 1% higher at 28234 points. The daily chart of the Nikkei 225 is showing a strong move now to get back above the previous daily/weekly highs, with the March highs almost in sight. Daily momentum is also nicely overbought as a much weaker Yen helps lifts all boats here:
Australian stocks came back a little post the RBA rate hike pulava with the ASX200 almost gaining 0.4% to finish at 7121 points. SPI futures are down more than 70 points or 0.6% on the drop on Wall Street overnight, reflected in a big drop below the low moving average on the daily chart. The substantial resistance at the 7200 point level and sustained daily negative momentum readings continue to suggest downside as the economy rolls over and stocks price in more rate rises that will kill demand:
European stocks can’t find any buying support yet again with new session lows with the Eurostoxx 50 index finishing down by 0.5% at 3788 points, pulling back a bit further in post close futures. The daily chart picture was showing a better breakout condition here that has stalled above the trailing ATR resistance level and now creating some lower daily lows. This was going to translate into further upside but daily momentum as retraced below the previously overbought status, so watch for a breakdown below the low moving average:
Wall Street got back into negative territory as well with NASDAQ down over 0.7% while the S&P500 lost more than 1% to be pushed back down to the 4100 point level, finishing at 4115 points. The four hourly chart is still showing strong support at the 4100 point level that has held so far, but its quite clear now that equally firm resistance at the 4200 point level just can’t be pushed through after a third failed attempt, as four hourly momentum still indicates a lack of buying pressure:
Currency markets are vacilating against a perennially strong USD but not excessively so with Euro proving quite noisy as we head into the ECB meeting later tonight. The union currency dipped down to the trailing ATR support at the 1.07 handle, putting in a subsequent bounce overnight but failing to make a new session high for the week. The overall technical picture is still slowly turning into a rounding top pattern. Price action remains contained by resistance at the 2020 lows (upper horizontal black line), combined with four hourly momentum that refuses to strengthen beyond a modest neutral/positive setting, so watch for this rollover to gather pace and threaten last week’s lows at the 1.06 level:
The USDJPY pair is not even bothering with consolidation periods after another orgy of Yen selling pushed the pair up to a 20 year high, breaking the 134 level, now having moved over 700 pips in less than two weeks! Short term momentum might be slowly retracing from highly overbought levels and as I keep saying, while technically overdone, this is not translating into proper price action retracements. Still, using trailing ATR support here will lock in profits and indicate any turning of the tide:
The Australian dollar continues to deflate following the RBA meeting, despite higher commodity prices and a similar futures trajectory for further interest rate hikes with the Federal Reserve, but I’m sure traders know there’s only so high the former can go with raising rates. Last night saw it remained well contained below the 72 handle, as it looks to anchor itself nearer the previous resistance level at 71 cents (upper black horizontal line from last week). Short term momentum has switched solidly to negative so watch for a potential break below ATR trailing support:
Oil markets are really pushing higher with Brent lifting well above the $120USD per barrel level to create a new three monthly high and pushing forward with a new weekly trend. Daily momentum remains nicely overbought and price has been supported at the $115 area so this could add up to more upside and a return to the Ukrainian invasion highs at or above the $140 level:
Gold still can’t find enough buying support, again just bouncing around the $1850USD per ounce support level but yet to make a new daily low in this long drawn out process. I’ve been pointing to the lack of a new daily high for sometime now, as a sign that this bounce from the January lows around the $1800 level was not sustainable, but it still hasn’t turned into a rout which does indicate some buying support. However, the lack of positive daily momentum keeps this a low probability swing trade for now with trailing overhead ATR resistance not under any threat:
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!