The long awaited but ultimately weaker than expected core US inflation print overnight saw a reversal in the rise in Treasury bond yields and strong USD post last week’s US unemployment data with the “undollars” rebounding from their weekly/monthly lows, including gold, while Wall Street and European stocks got a jumpstart due to taper expectations dropping. Commodities saw a jump as well with oil up more than 1%, and iron ore spiking 3% with the Aussie dollar taken along for some sweet relief.
Bitcoin keeps edging higher, pushing above the $46K level overnight as its breakout from the sub $30K bottom in July continues. Watch for the $47K level to come under pressure as the next natural resistance level as daily price action is hitting this hard:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite was listless most of the session, ending with a scratch session at 3534 points while the Hang Seng Index was equally unchanged, unable to build on its positive start to the week by only lifting 0.2% to finish at 26660 points. The daily chart is very slowly building a potential bottom here but it still requires a break above the high moving average at the 26700 point level to call this rout over:
Japanese stocks however were the biggest movers with the Nikkei 225 breaking out with a solid 0.6% move higher up to 28070 points. The possibility of a breakout has turned into a reality here as price shoots above the descending triangle pattern setup, gaining momentum but not quite there yet to call this anything but a swing move higher as support at the 27300 point level looks very solid for now:
Australian stocks edged along with another positive session, the ASX200 closing 0.3% higher at 7584 points. SPI futures are up only 10 points or so, as overnight action may not be translated locally due to a rise in the Australian dollar. Even so, daily momentum readings remain well overbought and the daily chart looks very good in the medium term with support very firm here at the 7300 point level:
European markets enjoyed the German and then US inflation prints with most stocks rising across the continent as the German DAX played catchup, lifting 0.3% to finish at 15826 points. Price has finally reached above the previous weekly highs after finding solid buying support at the 15400 point level with momentum getting into a clear overbought mode so we should see a rally forthwith:
Wall Street was again uncoordinated situation in the wake of the inflation print, with only tech stocks the dampener as the S&P500 pushed 0.25% higher for another record high, closing at 4447 points. The four hourly chart was showing overhead resistance building at the 4430 point level but this was pushed aside as momentum remains overbought and short term support at the 4420 point level remaining firm, as we start another leg up in this completely sustainable and not dangerous at all rally!
Currency markets reversed direction swiftly in the wake of the inflation print overnight with Euro bouncing off the 1.17 handle after making a new four monthly low with a short term mean reversion swing in play here. Notably, price has not yet gotten above the previous weekly low (solid black horizontal line) nor trailing ATR resistance, so this may not have any legs at all:
The USDJPY pair pulled back to medium and short term support well above the 110 handle after recently making a new weekly high, edging back to the weekly downtrend line (upper sloping black line). Four hourly momentum was getting into extreme overbought mode anyway so this move takes a bit of heat out of this reflation rally – but watch for any retracement below four hourly ATR support at the 110.20 level:
The Australian dollar was one of a few undollars that bounced back sharply on the US inflation print, able to the break through the mid 73s against USD after previously looking like heading below the previous weekly lows at just above the 73 level. The medium term price pattern is still bearish with the inability to break through the 74 cent resistance level a key factor, so this bounce is likely to be short lived:
Oil prices continued their own refill play with a 1% plus rise overnight in both WTI and Brent crude, the latter able to build above the $71USD per barrel level. The retest of the previous lows at the $68 level is still in play here but its notable that the first stage of a double bottom pattern has been created on the daily chart, so watch for more support to form here if price closes above its own daily high moving average:
Gold’s deflation has been filled temporarily with a relatively large surge overnight after failing all week to make any new session highs, lifting up above the $1751USD per ounce level overnight. This could begin to recover some of the steep losses below the $1800 level but would require a lot more than one day of price action, so watch for a close at least above the pre flash crash support at the $1760 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!