A return to risk aversion overnight as Middle East tensions continued to rise with Wall Street pulling back sharply while the USD regained some safe haven status. The USD Index lifted nearly 1% with Euro almost back at a weekly low while the Australian dollar reversed its small float back above the 63 cent level.
US bond markets saw further rising of yields across the curve with new decade plus highs as 10 year Treasuries lifted through the 4.9% level, while oil prices extend their minor gains as Brent crude pushed above the $91USD per barrel level. Gold remained untouched by USD strength with another strong lift, this time exceeding the $1940USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets failed to stabilise after a mid week reprieve with the Shanghai Composite losing some 0.8% at 3058 points while in Hong Kong the Hang Seng Index was unable to put in another positive session, closing 0.2% lower at 17732 points.
The daily chart is still showing a significant downtrend that has gone below the May/June lows with the 19000 point support level a distant memory as medium term price action stays well below the dominant downtrend (sloping higher black line) following the previous month long consolidation. Daily momentum readings had gotten out of oversold mode but this bounce did not become a breakout, so my caution about it turning into a dead cat bounce is coming to fruition here:
Japanese stock markets were unable to climb back slightly from the previous session losses with the Nikkei 225 closing nearly dead flat at 32042 points.
Trailing ATR daily resistance was coming under threat in a very fast bounceback and while daily momentum retraced back from oversold settings as price action is following Chinese markets with a typical dead cat bounce pattern forming here. Futures are indicating a broad loss on the open so any hope of stability returning in today’s session is disappearing:
Australian stocks were the best in the region with a small edge higher with the ASX200 closing up 0.3% to 7077 points.
With declines across the risk complex, SPI futures are indicating at least a 1% drop on the open this morning with the 7000 point level still under pressure to prove its either strong short term resistance or support once again. The daily chart is not looking optimistic here with medium term price action continuing to move sideways at best, with a failed breakout brewing:
European markets remain unable to shake off the bad finish to last week with broad losses across the continent with the Eurostoxx 50 Index losing more than 1% to finish at 4105 points.
The daily chart still shows an overall decline with weekly support at 4100 points barely defended, as weekly resistance firms at the 4300 point resistance level. There were signs this bounce was running out of steam as daily momentum remained neutral at best, with a return to oversold settings now setting up further downside:
Wall Street had losses across the board with the Dow off nearly 1%, while the NASDAQ was the biggest loser, off by 1.6% as the S&P500 took the middle road losing 1.3% to finish at 4314 points.
The four hourly chart showed support building at the 4340 point area with upside resistance still quite firm at last week’s high at the 4430 level. Short term momentum is now back into oversold territory as price action breaks the previous Friday night session low, spelling downside ahead:
Currency markets whipsawed back into a stronger USD overnight, with King Dollar pushing back on the safe haven bid with more Fedspeak about holding interest rates high helping. Euro was immediately pushed back below the mid 1.05 level with this recent bullish short term move finished.
In the medium term its apparent on the four hourly chart that the union currency is failing to break above short/medium term resistance at the 1.06 handle and while short term momentum was well overbought price action had started to bunch up and pause in preparation for the CPI print, falling sharply on its release. This is likely to result in further losses back to the previous weekly lows around the 1.04 mid area if the 1.05 handle is not defended tonight:
The USDJPY pair was able to hold onto its breakout above the 149 level and then building further, almost breaking through the 150 handle to push for a new weekly high after a recent successful test and rejection of last week’s low at the mid 148 level.
Four hourly momentum shows a return to overbought settings as it sets up for another attempt at getting through the 150 level soon:
The Australian dollar was unable to escape relegation overnight, with another stall near short term resistance at the 64 handle turning into a selloff almost back to the 63 level, taking almost all of its small uptrend since the weekend gap open.
The Pacific Peso remains under medium and long term pressure with this slow climb out evident of weak support as the four hourly chart shows momentum returning to neutral settings:
Oil markets were somewhat volatile overnight but managed to hold on to their big spikes on Friday with a small gain for Brent crude which eventually finished just above the $91USD per barrel level.
After almost reaching $100 in mid September, price was looking to return to the August levels around the $85 area where a point of control had been established before the recent breakout. Daily momentum is now above positive sessions with support clearly firming at those August levels so we could see a retest of the September highs at $94 plus soon:
Gold remains the best undollar with another surge overnight despite the USD lifting against most of the major undollars, with a continued breakout above the $1900USD per ounce level, making a new monthly high.
The four hourly chart was showing a very steady uptrend since the previous weekend gap higher as momentum remained positive in the short term. This new breakout puts in a new monthly high with daily momentum now looking overbought and ripe for a pullback back to retest the $1900 level again, but so far no change as it builds above the $1940 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!