Stocks remain in sell mode as the effects of Fed Chairman Powell comments on fighting inflation lingered throughout the risk complex. The USD was down ever so slightly as Euro again diced with parity as the Australian dollar bounced back but still remains below the 69 cent level. Bond markets saw some minor increases in yields with 10 year Treasuries back above the 3.1% level while interest rate futures remain solidly predicting a 65bps rise at the next Fed meeting. Crude oil had large gains with Brent crude up more than 3% to the $102USD per barrel level while gold tried to clawback its recent losses but is still below the $1740USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where Chinese share markets were basically flat with the Shanghai Composite up slightly at 3240 points while the Hang Seng Index was the best market in the region, only down 0.7% as it retreated below the 20,000 point level again. The daily chart is getting quite volatile with overhead resistance and daily momentum readings not painting a very clear picture at all. The moving average channel is not providing any directional ability here as price action bounces off the May lows but can this be sustained again given the volatility on Wall Street. Look for a clear breakout above the 20000 point level as a point of action:
Japanese stock markets lost a lot of ground despite the lower Yen with the Nikkei 225 closing more than 2.5% lower at 27878 points. The daily chart is showing a considerable dip below the trailing ATR support level at the 28000 point area which had been firm since the breakout in early August. Daily momentum has dived into negative territory so it remains to be seen if this level can be defended in the sessions ahead:
Australian stocks started the week with a bloody nose, as the ASX200 closed nearly 2% lower to retrace well below the 7000 level, finishing at 6965 points. SPI futures are up 0.2% despite the continued falls on Wall Street, so this is likely due to higher commodity prices overnight. The daily chart shows this rollover is still contained as price is defended at the trailing ATR support level despite heading below the psychologically important 7000 point level, as the much lower Australian dollar may prove somewhat supportive:
European stocks all finished in the red again, with the German DAX reflective of all continental bourses, falling 0.7% as the Eurostoxx 50 index finished 0.9% lower at 3570 points. The daily chart shows price action still well below trailing ATR support here, making for a very sharp inversion as daily momentum goes negative. As I warned last week, Euro’s track towards parity maybe too risk averse for some here, so watch for further session lows:
Wall Street kept on selling after one of its worst days this year (so far!) following the Fed’s fight on inflation, with the NASDAQ losing another 1% while the S&P500 slipped down another 0.7% to finish just above the 4000 point level at 4030 points. The four hourly chart shows a brief attempt at shoring up at the 4000 point level but its anemic at best. There could be steeper falls to come as traders re-assess the “temporary” higher rate situation:
Currency markets remain volatile with the US Dollar Index nominally off by 0.1% but intrasession volatility continued to spike with Euro pushing through the parity level again but without much internal buying support. The magical 1.00 level may prove out of reach even as four hourly momentum turns into overbought technically and there remains a low probability of a swing play on oversold positions above parity, it still looks quite contained here with the medium term view being one of consolidation. I still remain very cautious that parity has now turned into permanent resistance:
The USDJPY pair remained elevated but largely unchanged overnight, keeping up with its new weekly high well above the 138 handle and ready to tackle the 139 level next as no Yen buying eventuates. Four hourly momentum has retraced slightly from extreme to nominally overbought conditions, so with a stronger USD this could turn into a tailwind for domestic Japanese stocks, but wait for any response on Yen defensive buying here first:
The Australian dollar had another exciting session, surging back above the 69 handle but stabilising there this morning as short term momentum can’t get back into positive territory, despite high commodity prices overnight. The recent weekly lows are still an anchor here for the Pacific Peso, so watch for a further break down to the mid 68 level this week:
Oil markets are looking to breakout here with another solid session overnight that saw Brent crude lift more than 3% to get back above the $102USD per barrel level. The single daily candle is a bullish engulfing signal, so following price action that was almost below the pre-Russian invasion February lows and hovering below the downtrend line from the June highs, yet without making a new daily low, this could be the start of a new rally. Daily momentum is transitioning from a swing play to something more series as price action breaks the upper trendline:
Gold remains in a perilous state here and despite a single session surge at the start of the London session, the shiny metal is still at its Friday night low at the $1740USD per ounce level. The four hourly chart shows a lot of internal volatility here that is hard to discern, but watch for any attempt to get back above the $1750 level by a close or two above the high moving average first, although the lowside is still favoured by probability here:
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!