Risk sentiment slunked away overnight with the fallout from Putin’s gas Ruble gamble seeing oil prices spike again and pushing European then US stocks down, with a similar 1% plus retracement expected here in Asian trade today. The USD remained strong but basically unchanged overall, although the Aussie dollar pushed up to the 75 handle on the commodity price surge. Bond markets also saw a pullback with the 10 year Treasury yield back down to the 2.3% level as commodities were strongly bid, led by oil prices with Brent crude back above $120USD per barrel while gold and copper lifted.
Bitcoin is still slowly gaining upside momentum here after being contained around the $41K level last week, almost reaching the $43K level overnight. Daily momentum is now nicely overbought with the next level of resistance at the $44K level coming up shortly at the February highs the target in this move:
Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were somewhat directionless going into the close, with the Shanghai Composite closing 0.3% higher at 3271 points while the Hang Seng Index had another great session, up 1.2% at 22154 points. The daily futures chart was showing some engulfing bullish candles plus solid swing momentum readings that suggest more upside as price heads up towards former support, now staunch resistance at the 22600 point level, but I remain cautious:
Japanese stock markets continued to cruise higher on the lower Yen with the Nikkei 225 closing up a stonking 3% to 28040 points. Futures indicate a pullback on the open given the falls on Wall Street although Yen remains extremely weak which is fuelling this rally. While overhead ATR resistance on the daily chart has been taken out, that candle pattern does suggest a possible reversal even as momentum has swung well into the positive zone to be almost overbought. The real resistance is at the February highs:
Australian stocks were the relative laggard, with the ASX200 lifting “just” 0.5% to finish at 7377 points. SPI futures are down about 50 points on the slump on Wall Street so that bounce will be wiped out on the open this morning. The daily chart continues to show a lot of potential here although momentum is getting a bit ahead of itself so watch for a potential rollover through the low moving average here:
European shares pulled back relatively sharply with only the FTSE finishing with a mild scratch, as the Eurostoxx 50 index lost over 1.4% to close at 3869 points. While price action was slowly moving the market closer away from a pure swing trade and into a reflation rally, its starting to falter now without any really substantial new daily highs. As I’ve been saying for awhile now, it really needs to clear the 4040 point area next as momentum remains neutral:
Wall Street followed suit as risk sentiment soured, with all three bourses losing the same 1.3% or so, the S&P500 finishing at 4456 points. Price action on the daily chart was looking promising, with the double bottom formed at the March lows, and daily overhead ATR resistance cleared above the 4400 point level. As I said yesterday however, to get out of this correction phase requires a defence of that former resistance, now support zone and overnight price action is pulling back again to that critical area:
Currency markets saw no effective change to USD strength in the absence of any economic reports although more hawks at the Fed who are broadcasting possible double rate rises are keeping USD quite strong. Euro is slowly deflating as the Ukrainian invasion continues to keep a lid on risk taking here with the four hourly chart showing an inversion of the previous new weekly high back down to the 1.10 handle proper. There remains the potential to fallback to the start of war position, as four hourly momentum remains negative while daily momentum is neutral at best:
The USDJPY pair continued its push higher, this time properly pushing above the 121 level overnight as the USD builds more strength against Yen in what should be an unsustainable surge – but it keeps going up and up! Momentum is extremely overbought with price now zooming uncomfortably above the previous trend channel. This has all the hallmarks of a retracement soon, so watch short term momentum readings carefully:
The Australian dollar still has the zoomies with a proper go well above the 74 handle, almost hitting the 75 cent level this morning as commodity prices came back with a vengeance overnight. high. The four hourly chart shows a clearance of the previous weekly highs with short term momentum remaining well overbought with the 74 level acting as strong support in the short term:
Oil markets this time properly followed through on their start of week bounceback last night, bouncing off strong support with Brent crude pushing through the $120USD per barrel level again. This still has the potential to return to the overshoot highs above the $130 level, with daily momentum getting back into the overbought zone:
Gold was able to move sharply overnight after failing to make headway mid week and retracing below the nascent uptrend line from the $1900USD per ounce level bottom, pushing up to the $1944USD per ounce level. Four hourly momentum has switched from negative to almost overbought quite quickly and while overhead ATR resistance remains uncleared in the short term, this could be setting up for a big break above $1950:
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!