With the absence of US traders due to the Labor Day long weekend, it was left to the nervous mob in Europe to hit the sell button as energy prices soared following the Ruzzian cut off of natural gas to the continent. The USD was up slightly mainly against Euro as Yen remains at all time lows event though this isn’t helping domestic Japanese stocks. US bond markets were closed but other markets are indicating more rising of yields as traders await the slew of central bank meetings this week, starting off with the RBA today. Crude oil had a bounce back with Brent crude up nearly 2% to get back to the $95USD per barrel level while gold tried to climb off the $1700USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where Chinese share markets were treading water to start with before the Shanghai Composite moved some 0.4% higher to finish at 3199 points while the Hang Seng Index continued to fall, down 1.1% at 19225 points as it fails to get back above the 20,000 point level. The daily chart remains quite volatile with overhead resistance and daily momentum readings still pushing a bearish narrative here. The moving average channel is turning over as price tests the May lows and fails to find internal buying support:
Japanese stock markets were trying to stabilise again, with the Nikkei 225 closing with a scratch session down 0.1% at 27650 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 with oversold readings now not helping, alongside a very weak Yen as well. Futures continue to suggest more selloffs as the trading week continues:
Australian stocks were the odd one out, with the ASX200 closing 0.3% higher at 6852 points. SPI futures are up a handful of points due to a lack of a lead from Wall Street as rising commodity prices are helping in the short term. The daily chart shows the rollover pausing just below previous trailing ATR support at the 6900 point level as price action remains well off the psychologically important 7000 point level, with traders awaiting today’s RBA meeting:
European stocks all fell on the continent with only the FTSE putting in a positive return as the next Tory bullshit artist was given the gong as the next post-Brexit PM, as risk sentiment continued to sour due to the burgeoning energy crisis. The Eurostoxx 50 index finished 1.5% lower at 3490 points with the daily chart showing the weekend gap down in pre-futures trade half filled in but price action still below previous trailing ATR support. Indeed, price seems to want to head back to the June lows at 3300 level with daily momentum still in negative mode:
Wall Street was closed for the Labor Day holiday with futures suggesting that both the NASDAQ and S&P500 will open flat or slightly lower tonight where the latter is still struggling to get back to the 4000 point level. The daily chart shows a clear downtrend that has wiped out half of the recent relief rally but is trying to bottom out here as daily momentum reverts out of the oversold zone but still remains highly negative:
Currency markets remain solidly on the side of the USD as the fallout from the European energy crisis and subsequent recession concerns kept Euro contained below parity, holding just above the 99 level after cracking below intrasession. I still contend that parity has now turned into permanent resistance, with the potential to break below the 99 level now rising as support is tested:
The USDJPY pair remained on its upward trend albeit with another slight pause, building on its new weekly high that extends above the 140 handle in a one way move as no defensive Yen buying amid the selloff in stocks eventuates. Four hourly momentum has retraced slightly from nominally overbought conditions, so with a stronger USD this should turn into a tailwind for domestic Japanese stocks, but that has not eventuated as risk correlation rises:
The Australian dollar had a less interesting session at last, still contained below the 68 handle but not making any new session lows as commodity prices come back slightly. Resistance is just too strong at all the previous levels with the mid 68 level now becoming the latest hurdle that can’t be beat. The recent weekly lows are still an anchor here for the Pacific Peso, so watch for the 68 handle to be tested with the RBA meeting later today likely to provide a false breakout opportunity:
Oil markets continue to flop around and even with the European energy crisis they can’t seem to find a proper bid with Brent crude lifting only slightly up to the $95USD per barrel level overnight. Daily momentum had been transitioning from a swing play to a potential relief rally as price action broke the upper trendline, but this was thwarted last week as price action returned to the recent weekly lows. Watch for any break below the $92 level as trailing medium term resistance at the $106 level proves too far away:
Gold remains in a perilous state here and is trying to bounce back after going briefly below the $1700USD per ounce level on Friday night but is coming up against short term resistance at the $1712 level. The four hourly chart shows price action wavering here with price action not able to punch through as short term momentum tries to get into a positive mode. This has all the hallmarks of another dead cat bounce:
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!