It’s risk back on as the latest US industrial production print slightly missed expectations, but this was enough of a catalyst to get things moving again after nearly two weeks of uncertainty on Wall Street. Bond yields rose slightly while the USD fell back mainly against Yen as the other risk currencies still remain in caution mode with gold falling slightly below the key $1800USD per ounce level again. Meanwhile, oil saw a big boost on the back of the EIA inventory report while copper bounced nearly 2%, but its all eyes on iron ore which continues to collapse, down to a one year plus low – off by more than 50% since May.
Bitcoin kept pushing higher after its classic technical bounce off the monthly support level at the $43K area, getting above the $48K level overnight but stalling out this morning as it bangs up against short term resistance:
Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite had been oscillating around the 3650 point level all session, eventually finishing 0.1% lower at 3656 points while the Hang Seng Index continued its very sharp retracement, closing 1.8% lower at 25033 points. The daily chart continues to show price rolling over sharply as it matches the previous lows in late July and August, with the 25000 point level the key area to watch as the Evergrande catalyst rolls on:
Japanese stocks finally succumbed to a selloff with the Nikkei 225 down 0.5% to 30511 points, not helped by a much stronger Yen. The daily chart continues to show a very overextended rally with the 30000 point level very slowly turning into a resistance level, but again futures are indicating firm support on the open, despite that stronger Yen correlation. Long positions have held out here for more upside with price well above the high moving average, but deceleration is quite obvious now:
Australian stocks had the smallest falls, with the ASX200 only falling 0.3% to 7417 points. SPI futures are showing a probable 30 point jump on the open due to the reversal in risk sentiment, with ATR support that has been very solid at the 7360 point level still holding here but the combination of lower iron ore prices and slightly weaker Australian dollar is keeping things in check for now:
European markets all finished in the red with the German DAX down 0.7% to finish at 15616 points. The daily chart is still showing a bearish picture but notably ATR support at the 15500 point level has held since this latest dip with futures indicating a possible return to upside later tonight, although momentum is still somewhat oversold. The catalyst for long positions here is a substantial close above the high moving average at the 15800 point level but that is likely to depend on Wall Street following through on last night’s bounceback:
Wall Street finally bounced back across the board with the NASDAQ up 0.8% while the S&P500 also lifted the same, up 0.8% to 4480 points, following the undershooting inflation print. The four hourly chart shows a classic breakout above the downward trendline from last week’s false breakout that turned a minor cough into a semi-decent dip. The usual BTFD crowd has finally done its thing, showing us all that the 4400 point level is key support and an uncle point herein for further upside, once the 4500 point level is cleared however:
Currency markets reduced in volatility following the previous session US CPI print with minor roundtripping the order of the day. Euro remained slightly above the 1.18 level at the end of the session, but is looking a bit tired here, requiring a proper breakout above former ATR resistance at the 1.1830 level before some decent upside potential:
The USDJPY pair however remained under a lot of pressure, briefly touching the 109 handle but is still quite oversold and ready to fold again at the 109.30 level this morning as Tokyo opens. The four hourly and daily charts are no longer range trading with the bears in control but there is the potential for a swift short term swing play above the 109.50 level, so watch momentum readings on the lower timeframes here if risk sentiment continues to appreciate:
The Australian dollar is slowly coming back after breaking through key support at the 73.40 level, following dovishness at the RBA, but some minor USD weakness and stronger commodity prices – save for iron ore – keeping it out of total doldrums. I still contend that level will become strong resistance from here, so watch out for today’s numberwang unemployment print to shake things up considerably, with a potential break below the 73 handle proper:
Brent crude finished nearly 2% higher, following through substantially on its recent proper breakout that saw it hit the $75USD per barrel level overnight. Price action was broadcasting this new trend even before the EIA report and now with momentum overbought, upside targets could be upgraded to the June highs but that longer term resistance level and downtrend is still in play:
Gold couldn’t find more buying support with its little breakout above the key $1800USD per ounce psychological level reversed slightly overnight with no new daily high in place. The rejection of overhead resistance at the $1830 level in the medium term is still the big picture here so even a breakout above $1800 may not yet be enough to get things going:
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!