Stocks remain in sell mode with Fed officials still pushing for more rate rises to combat inflation even if a recession occurs. This kept hands on sell buttons overnight with the USD remaining strong against most of the major currency pairs. Euro still wants to stay above parity but its having a hard time of it while the Australian dollar sharply inverted below the 69 cent level. Bond markets saw more increases in yields with 10 year Treasuries pushing to a two month high above the 3.1% level while interest rate futures remain solidly predicting a 65bps rise at the next Fed meeting. Crude oil had another slip up with Brent crude down nearly 4% to the $95USD per barrel level while gold also fell back to the $1710USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where mainland Chinese share markets took a hit with the latest manufacturing PMI print with the Shanghai Composite down 0.8% to 3202 points while the Hang Seng Index was able to put in a scratch session closing at 19954 points as it struggles to get back above the 20,000 point level again. The daily chart remains 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. Look for a clear breakout above the 20000 point level as a point of action, but futures are indicating yet another reversal:
Japanese stock markets have failed to bounce back with the Nikkei 225 closing 0.3% lower at 28091 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 continues to dive into negative territory so it remains to be seen if this level can be defended in the sessions ahead with futures in line with the falls on Wall Street overnight:
Australian stocks have managed to almost eke out a scratch session with the ASX200 closing just 0.1% lower but still remaining below the 7000 level, finishing at 6986 points. SPI futures are down more than 1% as the sour risk sentiment catches up with the falls on Wall Street, as commodity prices made further falls overnight. The daily chart shows this rollover is starting to gather pace as price is poorly defended at the trailing ATR support level after heading below the psychologically important 7000 point level, as the much lower Australian dollar is not proving supportive as yet:
European stocks all finished in the red again, as risk sentiment soured further with the Eurostoxx 50 index finished 1.2% lower at 3517 points. The daily chart shows price action crashing below trailing ATR support here, making for a very sharp inversion as daily momentum goes into oversold mode. As I warned last week, Euro’s track towards parity maybe too risk averse for some here, so watch for further session lows with the June lows at 3300 level possibly the target:
Wall Street kept on selling although interestingly NASDAQ was the best off, down only 0.5% while the S&P500 fell nearly 0.8% to continue its falls below the 4000 point level at 3955 points. The four hourly chart shows no attempt at stopping this onslaught as the 4000 point level is taken out. Momentum remains deeply oversold so watch for more downside pressure:
Currency markets remain volatile with the US Dollar Index nominally unchanged mainly because Euro continues to defended the parity level again with internal buying support building. The magical 1.00 level may prove out of reach even as four hourly momentum remains technically positive and there remains a low probability of a swing play on oversold positions. I still remain very cautious that parity has now turned into permanent resistance:
The USDJPY pair remained elevated with a small lift higher, keeping up with its new weekly high well above the 138 handle and pushing just above the 139 level as no defensive 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, this time slammed back down below the 69 handle after having another failed attempt at breaking out above short term resistance at the 69.50 level, thwarted as short term momentum couldn’t get back into positive territory. 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 have flopped here after a failed breakout as Brent crude lost another 3% to be pushed below the $95USD per barrel level. Daily momentum was transitioning from a swing play to something more series as price action breaks the upper trendline, but this no longer looks like a minor setback, as trailing resistance at the $106 proves too far away:
Gold remains in a perilous state here and flopped below the previous Friday night lows to almost threaten the $1700USD per ounce level in another selloff overnight. The four hourly chart shows a lot of internal volatility that has translated into into a clear negative direction as price action cannot get back above the high moving average, with four hourly momentum remaining steadfast oversold. This could put pressure next on the $1700 level:
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!