Wall Street rebounded overnight as the Gamestop short squeeze eased off and sights were set on silver instead. The USD gained more strength against most of the majors with Euro falling the sharply on poor German retail sales numbers. The US ISM PMI slid back slightly but is still in a strong expansive mode and US stocks lept on this good news, alongside oil futures. Today’s RBA meeting may provide a catalyst for both Aussie stocks and the dollar, with the potential for an extension of the QE program.
Bitcoin settled back after its massive surge late last week, gapping lower as usual after the weekend gap to settle just below the $34K level. As I suggested that surge could be nothing more than a false breakout, so watch for any capitulation below the $33K level:
Looking at share markets in Asia from yesterday’s session where the Shanghai Composite closed 0.6% higher, able to just get back above 3500 points, while in Hong Kong the Hang Seng Index zoomed 2.1% higher to 28892 points. This rebound is trying desperately to stop a normal pullback turning into a rout with price nominally above former daily trailing ATR support and daily momentum not yet negative. Price needs to stabilise here and make a new daily high above 29000 points soon:
Japanese markets also rebounded with the Nikkei 225 finishing 1.5% higher at 28091 points. A similar chart to above although daily ATR support at the 27500 point level has yet to be breached. A steady session today will calm nerves going forward, but watch for signs of internal selling:
The ASX200 was able to pop back above the 6600 point level, rising 0.8% to close at 6663 points. SPI futures are up slightly with the daily chart showing a lot of buying support below, but watch today’s RBA meeting for a possible leg up with more stimulus:
European markets gapped slightly lower at the open, but then rallied throughout the session, with most putting in 1% or so gains, the German DAX finishing 1.4% higher to 13632 points. Another market poised at its daily ATR support level which needs to be watched carefully before enacting hedges or selloffs:
Wall Street moved solidly higher across the board with the NASDAQ leading the charge (and volatility) to close more than 2% higher while the S&P500 lifted 1.6% to close at 3773 points. The four hourly chart shows an attempt to get back to the post election trendline, but momentum is not yet positive and nor is the previous false breakout high at the 3800 point level under threat yet:
Currency markets are moving strongly towards USD again with Euro dropping sharply on the German retail sales print, breaking through four hourly support at the 1.21 handle and then matching its previous weekly low at the mid 1.20’s. As I mentioned yesterday, the big amount of intrasession selling with a lack of momentum was pointing to another quick rollover and here we are:
The USDJPY breakout continues with another daily/weekly higher and almost getting through the 105 handle after solidly pushing aside medium term resistance at the 104 level last week. The four hourly chart shows momentum continuing at high overbought levels but price remains firm around the high moving average and not yet under threat, despite the need for more Yen safe haven buying:
The Australian dollar is still flopping around and rolling over like a dead fish, with a gap at the weekend open pushing down towards the 76 handle that was confirmed overnight. Today’s RBA meeting will be key for the future direction of the Pacific Peso. I’m watching the intraweek low from last week at the 76 level proper as the uncle point:
Oil prices are coming back, with Brent moving 2% higher to get back above the $56USD per barrel level and finally making a new daily high that matches the previous highs. Price remains stalled just above the pre COVID February 2020 level (upper horizontal black line) with strong medium term support remaining firm even as momentum wanes, but I would contend this low volatility means higher volatility soon:
Gold caught a sniff of Reddit sweat with a gap higher that was mainly due to silver (see below) gapping higher, with a move towards the $1860USD per ounce level overnight. This firms the daily chart up a little with still potential for another breakout above $1875 or so to get back to the previous monthly highs at $1950 but as I’ve been saying for awhile, it all depends on short term support at $1830 holding:
Silver is the next target for short squeezing, but the mechanics behind it are a little different to over-extended naked shorts, although there is historical precedent in this arena for manipulation. Silver futures gapped well above the previous high at the $28USD per ounce level, briefly touched the $30 level before settling at $29 this morning. There’s a lot of upside potential here, alongside the potential to lose your shirt:
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!