Further moves to risk aversion overnight as Middle East tensions continued to rise amid choppy trade on Wall Street as concerns over corporate profits and the direction of the Fed weighed on traders. The USD regained some safe haven status but is also choppy against the majors with Euro bouncing back after almost hitting a weekly low while the Australian dollar continues to float sideways around the 63 cent level after absorbing the stronger than expected employment print yesterday.
US bond markets saw further rising of yields on the long end of the curve with new decade plus highs as 10 year Treasuries pushed further above the 4.9% level, while oil prices spiked again as Brent crude pushed above the $93USD per barrel level. Gold remained untouched by USD strength with another strong lift, this time exceeding the $1970USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets dropped back sharply with the Shanghai Composite down 1.7% to close at 3005 points while in Hong Kong the Hang Seng Index was in a similar boat, off by 2.5% to 17291 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 faced similar falls in a wide risk off move with the Nikkei 225 closing nearly 1.9% lower at 31430 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 another big move lower on the open so any hope of stability returning in today’s session is disappearing:
Australian stocks were unable to escape the selling with the ASX200 closing 1.3% lower at 6981 points, finally cracking through support at 7000.
With declines across the risk complex, SPI futures are indicating at least a 0.6% drop on the open this morning with the 7000 point level now proving short term resistance at the end of a volatile trading week. The daily chart is not looking optimistic here with medium term price action continuing to move sideways at best, with a breakdown brewing:
European markets remain unable to shake off the bad finish to last week with further losses across the continent with the Eurostoxx 50 Index losing more than 0.3% to finish at 4090 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 eventually had losses across the board with the Dow off nearly 0.8%, while the NASDAQ was the biggest loser, off by 1% as the S&P500 took the middle road losing 0.9% to finish at 4278 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 before this selloff. Short term momentum remains in oversold territory as price action breaks down and pushes to a new two week low:
Currency markets again whipsawed overnight, responding to Fed Chair Powell’s comments, with King Dollar not going full safe haven as Euro regained strength to almost push back above the 1.06 handle.
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. I warned that this was 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 and so far support has held here:
The USDJPY pair was able to hold onto its breakout above the 149 level but failed to build further, not yet 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 had a strong bounce following yesterday’s unemployment print but failed to hold on to those gains later in the session, dragged back to the 63 handle early this morning.
The weekend gap open caused a small flurry of activity but thee Pacific Peso remains under medium and long term pressure with price action just not being translated into anything sustainable as the four hourly chart shows momentum returning to neutral settings:
Oil markets shook off recently volatility and surged again overnight, not just holding on to their big spikes on Friday but pushing further higher with Brent crude breaking through the $93USD 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 another new monthly high at the $1970USD per ounce.
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 $1970 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!