Wall Street stumbled again overnight following the big selloff in the previous session with European shares also heading lower with falls across the risk complex in reaction to the hawkish mood in the FOMC minutes. The USD gained even more strength against the currency majors, Euro pushed down to the 1.07 handle while the Australian dollar made a new weekly low, breaking below the 68 cent level. The commodity complex saw oil prices falter with Brent crude losing more ground to close at the $80USD per barrel level while gold is still in a depressed funk, slumping down to the $1820USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets are pulling back with the Shanghai Composite down 0.4% to 3291 points while the Hang Seng is off just 0.5%, now at 20423 points. The daily chart is showing this rollover accelerating with price action continuing well below previous ATR support as momentum remains in oversold territory. Watch now for support at the 20000 point level to come under pressure:
Japanese stock markets were in a proper retreat with the Nikkei 225 closing 1.4% lower at 27109 points. After topping out at the 27500 point level, a rollover is now in effect as price action plays catch up to other risk markets. Daily momentum has reverted out of overbought mode and had been suggesting a slide back below the low moving average next with support fading into nothing. Futures are indicating a larger pullback on the open with a further break below:
Australian stocks have again failed to gain traction with the ASX200 closing 0.3% lower to remain well below the 7400 point level at 7314 points. SPI futures are down at least 0.3% but could stabilise a little here despite the falls on Wall Street overnight. The daily chart is still showing a clear rollover after being unable to take out 7500 points, with a retracement below ATR support at the 7200 point level firming as daily momentum continues its revert from being overbought to negative status:
European markets all pulled back again with the Eurostoxx 50 Index closing more than 0.2% lower at 4242 points, with a view to reversing the recent new weekly high. Futures are indicating a larger pullback developing with the trend above the 4000 point level now coming under real pressure as daily momentum reverts from overbought mode. The 4000 point level remains the key psychological resistance level that has now turned into support going forward, with no close below the low moving average keeping this intact for now:
Wall Street was lacking confidence throughout the session with the NASDAQ able to hold to a minor 0.1% loss while the S&P500 lost over 0.3% to cross below the key 4000 point support level, closing at 3984 points. The four hourly chart shows price action breaking straight through the previous two weekly lows and setting course for a full correction as Fed fears furrow the brows of traders. Former ATR support at the 4100 point area is now a key area of resistance and I’m looking for a potential further selloff tonight:
Currency markets continue to rally in favour of the US given the hawkish nature of the FOMC minutes released late last night with Euro popping straight down to the 1.06 handle after holding on mid week below the 1.07 level. The four hourly chart had been showing a clear downtrend in recent weeks with a failure to make any new highs with short term momentum now very oversold and heading lower although watch for a potential swing back up to the mid 1.06 level before another downturn:
The USDJPY pair continues to slide sideways with a strong bullish bias with no new session lows on the four hourly chart, holding just below the 135 level after respecting trailing ATR support. Internal strength has always been following the recent weekly uptrend and while resistance had been building at the 135 handle this is now under stress again. Short term momentum is now back into overbought status and should support more upside here:
The Australian dollar was unable to make any traction yesterday with a volatile downside session overnight continuing this rollover, breaking through the 68 level just before the Sydney open. This weak overall price action comes after a weak response to last week’s unemployment numbers that has not yet challenged interest rate expectations and I’m still watching for a further pullback or even new weekly lows next:
Oil markets had failed to follow through on their recent bounce from the Russian cutbacks with Brent crude now continuing its own rollover to well below the $81USD per barrel level with another lower daily session. Daily momentum has sharply inverted into the negative zone and never went near overbought in this recent surge, with price action also failing to beat the $88 highs from January. This spells more downside, possibly testing the January lows at $80 or so:
Gold remains depressed despite a pause in selling mid week before falling below the recent lows overnight, closing at the $1825USD per ounce level. This continued negative price action has not yet inverted despite short term momentum indicating a possibility of a swing trade building with overheard resistance too hard to beat and the daily chart still indicating more downside below. I’m watching for a continued rollover and a test of last week’s low at the $1820 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!