A big night on risk markets with the ECB and BOE meetings resulting in large volatility on currency markets as the latter raised rates for the second time in three months while the former was quite clear it was ready to tackle inflation as well. This was all before the reaction to the slump in earnings from Facebook/Meta that had already been factored in on futures with the NASDAQ having the worst session since late 2020, falling nearly 4%, dragging the rest of Wall Street down with it. To add to the frivolity, Amazon surprised with a mammoth turn around in earnings, which is seeing a spike in post-close futures. While Euro soared nearly 200 pips on the ECB shift, other risk currencies were pushed up slightly as gold had a volatile back and forth around the key $1800USD per ounce former support level. Commodity markets were better supported with Brent and WTI crude up more than 1% while copper fell back.
Bitcoin is again failing to make any sort of meaningful moves with a failed recovery at the start of the week turning into a sideways slide as it drops below the $37K level. The four hourly chart shows a new intrasession weekly high, then the subsequent rollover as it heads back to ATR trailing support with the probability of further rollover here as momentum and buying support disappears:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares remain closed for Chinese New Year. Japanese stocks markets took back almost all of the previous sessions gains, with the Nikkei 225 closing 1% lower at 27241 points. Futures are suggesting another uneasy open despite a much lower Yen overnight, as volatility across all risk markets rises, with this swing play probably over for now. Watch for a close below the low moving average on the daily chart to signal a return to the previous lows at 26000 points or so:
Australian stocks had a wavering session with the ASX200 closing 0.1% lower at 7078 points as tech stocks were hit the most. SPI futures are down more than 1% so we’re likely to see a weekly finish below the 7000 point level and another market showing an uneasy recovery. There’s a still lot of room to recover here from the previous weekly/monthly support levels which are proving too firm as resistance so far with daily momentum not even back below oversold levels and price is not yet above the high moving average so caution must continue:
European shares fell immediately due to the post close Facebook rout and were not helped at all by ECB President Lagardes comments in the post meeting press conference, with falls across the continent. The Eurostoxx 50 index lost 1.9% to finish considerably lower at 4141 points while futures slipped even further as the tech wreck continued on Wall Street, with the soaring Euro providing additional resistance in the short term. Price action is obviously a dead cat bounce now rolling over, feet and legs in the air, so we’re likely to see a return to the previous lows at 4070 points or so as momentum remains steadfastly negative:
Wall Street started badly and continued throughout the session with the S&P500 finishing 2.4% lower at 4477 points. The four hourly chart showed price at the lower edge of a megaphone pattern and then slipping off to trail back below the 4500 point level, with futures indicating some fill of these losses in the post-close Amazon hullabaloo. Momentum is not yet negative, having retraced to neutral settings and price is still well above the previous tight rectangle of support and resistance so this is not a major selloff indicator just yet:
The daily chart of the NASDAQ however is very interesting. The near 4% drop overnight shows how price failed to get back above trailing ATR resistance that has held since the top was made in November last year and is now in the next phase of the dead cat bounce. Price must hold above the 14400 point level here:
Currency markets are well and truly out of USD reverse mode with the double whammy BOE/ECB meetings overnight pushing both domestic currencies higher, but more so for Euro which nearly soared 200 pips on Lagardes comments! Pays to stay up late and trade this doesn’t it? Before hand, the swing play was already turning into a proper trend as four hourly momentum became nicely overbought and price almost cleared the previous weekly high, with resistance at the 1.14 handle swept aside in this move. There is likely to be some consolidation and some interesting volatility to come before the Fed’s meeting in March as they all race to pull the rate lever:
The USDJPY pair managed to get out of its little hole however, again going against the normal correlation with risk markets as Wall Street tanked. The former retracement is now ready to push back above the 115 handle, although momentum is only nominally positive, longer term price action from the late January lows is supporting further upside here:
The Australian dollar sat back and did almost nothing amid the European volatility overnight, remaining just below the mid 71 level, as it continues to take a breather after a 100 pip plus move higher that has almost taken it past last week’s intrasession high at the 71.70 level. Short term momentum is now just positive and no longer overbought although price action is setting up here for a breakout, so watch for any move above 71.50:
Oil markets finally moved along after being well supported but lacking direction in recent weeks with Brent pushing above the $90USD per barrel level overnight for a new yearly high. The next target at $100USD per barrel maybe a step to far, but that low moving average area has not been touched yet and momentum remains nicely overbought:
Gold moved over $40 in total direction overnight as it responded to the European central bank machincations, but managed to finish just above the former $1800USD per ounce support level, albeit with slightly lower daily high. Price action remains contained below the daily trendline from the December lows where there still could be a full retracement down to $1760 or so after a small amount of consolidation here so watch for any rollover as price approaches trailing ATR resistance on the four hourly chart:
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!