Wall Street remained in a risk averse mode on the first session of the trading week, despite solid sessions across Europe which reflected the bifurcation of risk seen in the Asian session previously. The continuing war in Ukraine is still weighing on bond markets as well, with the 10 year Treasury pushing up through the 2.1% level for a new three year high, while currency markets continued to see USD soar against everything, with the Australian dollar one of the biggest casualties. This was not helped by a big drop in commodities, with Brent crude losing over 5% to remain just above the $105USD per barrel level, while gold lost more than 2% to drop sharply to the $1950USD per ounce level.
Bitcoin remains well and truly contained with no big gap over the weekend as it holds below the $39K level, anchored back at the weekly lows. The daily chart doesn’t look too exciting in terms of upside potential here as we wait for a proper retracement below the $37K level next:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares sold off again with the Shanghai Composite closing more than 2.5% lower to 3223 points while the Hang Seng Index had a steep loss, falling more than 4% as it breaks well below the key 20000 point barrier, closing at 19619 points. This was the worst day since 2008, with price action on the monthly chart showing how much this market has broken down, now falling below the 20000 point level as momentum moves into extremely oversold mode. The fallout from the tech wreck could get worse here:
Japanese stock markets however steamed ahead, helped by a much lower Yen as the Nikkei 225 closed 0.6% higher at 25307 points. The daily futures chart is still not showing much potential upside here, despite the possibility of a bottom brewing as the last couple of closes don’t look so promising as price action is contained. The potential to rollover again is building here so watch for a break below the 25000 point level, as daily momentum remains oversold and not in its favour:
Australian stocks proved resilient with the ASX200 finishing over 1% higher to get back above the 7100 point level, closing at 7149 points. SPI futures are indicating a near 1% reversal however on the open, with the much lower Aussie dollar hopefully helping steady the market amid the risk off mood. I keep mentioning it, but there’s still considerable resistance overhead at the previous weekly/monthly support levels so watch daily momentum that needs to get back into the positive zone soon before considering any long opportunities:
European shares had a solid start to the trading week with strong sessions across the continent, although post close futures pulled most of those returns back to the scratch side. The Eurostoxx 50 index finished nearly 1.5% higher at 3741 points but post close futures showed a lot of this taken back with a dead cat bounce still likely here. To properly bottom out here requires a solid close above the former support, now staunch resistance at the 4040 point area with a swing trade on its way beforehand with a solid close above the high moving average at the 3800 level:
Wall Street however couldn’t make any traction and sold off again with the NASDAQ finishing 2% lower while the S&P500 lost just over 0.7% to finish at 4173 points. This keeps price action contained below four hourly and daily overhead ATR resistance and follows my contention that the previous bounce was nowhere near enough to get the market fully out of trouble. The proper target here is resistance at the weekly highs around the 4400 point level, which is still a long way to go – keep watching oil markets for the catalyst, IMO:
Currency markets are still seeing a lot of USD strength although the Euro remains somewhat supported post the slightly hawkish ECB meeting with a finish at the mid 1.09 level overnight. The Ukrainian invasion continues to keep a lid on risk taking here with the four hourly chart showing a return to the dominant downtrend, with this week’s target still at the previous weekly lows near the 1.08 level, but watch for a potential break above the high moving average and towards the 1.10 for a snap rally:
The USDJPY pair continued to push higher, breaching the 118 level overnight and making another new daily and weekly high. The USD becomes the safe haven choice with momentum now reverting from its extremely overbought stage that could be presaging a sharp reversal here as price action should revert to mean here soon, but it seems new multi year highs cannot be discarded lightly:
The Australian dollar continued its big roll over (which has seen a lot of the “market” economists shut up thank Dog below) as USD continues to gain strength and commodity prices pull back from their recent exuberance. Last night saw the Pacific Peso drop below the 72 handle , wiping out the previous intraweek low at the 72.40 level that had strong buying support with short term momentum now extremely oversold:
Oil markets continue their post-crazy breakout with a consolidation that is preceding as I have foreseen. The subsequent reversal as OPEC+ ramps up production has seen Brent crude lose nearly 5% overnight, finishing at the $105USD per barrel level for another solid daily new low. Daily ATR support is broken properly now, as is definite support at the $106 level, so the next target is obvious at the psychologically important $100USD level:
Gold was smacked down overnight, for good reason as it too got way ahead of itself, retracing well below the $2000USD per ounce level to finish where I thought it should be at the $1950 level instead. If it stalls here as daily momentum inverts from its extremely overbought levels, we should see conditions for consolidation and a sideways catchup play before another leg up:
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!