All day Friday XJO made us believe it would be only one way traffic from here but those overconfident shorts would soon get burned with the rip up of European equities into NFP US news.
This was good for ST longs that believed the tape after watching Thursday close (myself included)
50dMA turned out to be a decent target (as mentioned) to close - however it did overshoot this level by about 22pts but there was no need to be greedy.
Those are great questions so lets see if we can unpack what happened and whats ahead in the week ahead.
Before we look at the Aussie market lets look at the weekly trading on ES (SPX futures)
The prior weeks close was very red but also stopped right on a very important level for ES - being the old neckline from the head and shoulders pattern that broke down then was recaptured in the most recent *bear market rally.
Mondays open did break the old neckline, however there was a failed backtest on this zone later in the session - this set up the week quite well for the bears.
We then saw very similar trading to Aussie index with price bouncing between levels of significance - all levels marked by dotted lines on chart are major levels I'm watching, none of which I actually moved last week (these were all marked in previous weeks). Between these levels and dMAs they all played a part.
ES daily.
The fact that Fridays sell off could not break the previous sessions low does give some hope to bulls and this becomes the level of most interest to start the week - zone between 3900-3910.
If this level breaks look toward 3829 - with an extreme low of around 3770
If 3770 goes then things may get very ugly very fast but lets not get too exited just yet...
How does Fridays session look for the week ahead?With US having a public holiday Monday this is a great opportunity for MMs to shift the market to where they can profit the most as volume will be very low.
With the artificial spike leading into Fridays session, I'd imagine many shorters fed MMs some extra contracts to profit from at lower prices and the extreme green move would have also stranded many long players that thought the market was *cheap...
This would make for a very good case to push the market lower and tap out all the naughty long players when volume hits on Tuesday.
If this were to happen expect some pretty swift and pretty aggressive moves lower potentially causing ST capitulation or driving extreme fear into markets causing a significant push lower.
However before all the bears start getting ahead of themselves you should know that due to the quick drop from Fridays session there are very thin profiles all the way back to 3980.
Logic says bears reign supreme and market dumps, although we all know markets aren't logical and this last week has shown me that volatility is well and truly back so expect this week to see more of the same (meaning unless Thursdays low can be broken strongly expect 3980 to hit at some stage).
Enough about the US, lets take a look down under...Earlier in this post I spoke about the levels of significance going into the week ahead (for the week that's just passed)
Good news is not much has changed (so I haven't had to change last weeks charts much at all).
All levels mentioned in previous posts are very relevant.
I've circled the nearest downside support to watch (below 6770) if we see red on open tomorrow - currently around 6730 on OANDA chart.
6770 is still a major support so if it's broken and that ascending support line does hold then I'd expect a backtest on this level before further decisions are made.
A strong move south will put the MAJOR level of 6612 in play - I'd expect a decent initial reaction off this level.
Just like the US there are actually very thin profiles above so if bears can't take strong control expect some heavy volatility at the very least.
Australia 200 daily..
.
Anyone watching CBA last week should have seen some decent (short) gains after seeing a good breakdown after failing to recapture $97.65 level mentioned in last weeks post.
However, it did perform quite well amongst the sell off last week.
Keep your eyes on this stock and the levels mentioned last Sunday (for both CBA and XJO movements)
Link to post here
https://hotcopper.com.au/threads/22-08-indices.6905097/page-215?post_id=63366284
What about gas???I know what you're thinking, what the hell are you doing talking about gas on XJO thread?
A few weeks ago I mentioned to
@Calvo that since the war broke out I've been expecting Natural Gas to not only hit ATH but be the cause of a major downturn in the world economy and financial markets alike.
For those unaware heres post with quick history lesson in Nat Gas - no surprise what lead to ATH
(yes, it was Russia and Ukraine)
https://hotcopper.com.au/threads/22-08-indices.6905097/page-129?post_id=63291709
The recent break out in gas markets was certainly expected as was the pullback.
A few weeks ago I mentioned on another thread I'd expect a range between $8.80-$10 and this is exactly what we've seen.
https://hotcopper.com.au/threads/rlt-chart.6023711/page-2815?post_id=63260050
Price peaked at $10.02.
Friday just saw a push down for the only test below $8.80
Close was within 2c of this level.
Obviously being at the bottom of the range lends more weight to the bears however those familiar with Wycoff will know what a spring pattern is and considering the news over the weekend this may well be the case but will have to see if it offsets Euro zone news to cap Russian energy.
In short Russia/Gazprom has decided to turn the taps off to Europe
I mentioned back at the beginning of the year this would happen but I did not expect until after European summer had passed.
(It seems they didn't wait long but lets see how it plays out)
For those that missed the news, here it is
https://www.ft.com/content/5867c175-df16-4c8b-9b7a-a868a19d0138This is significant and something every market participant should be aware of as it could have massive implications across the globe.
Gazprom is a global leader for LNG, helium and hydrocarbons.
They have now taken themselves out of the equation in these markets and opened the door for the right companies in that space.
It's a sector I'm very heavily invested in and one that I regularly trade - keep your eye on it...
If you're into trading Nat Gas then I've attached chart with significant levels below
Fridays open and close actually both mark significant levels I'm watching (for different reasons)
On the right you'll see I highlighted buying activity.
The volume balance on the way up is far from normal for a commodity - with buyers absolutely dominating!
So I am expecting a break on that $10 level eventually.
Trading has just become very interesting with Europe announcing cap on Russia energy - leading to drop on Friday.
However it looks like Russia have parried that move making the week ahead one of interest
Europe has been doing its best to accumulate as much as possible before Euro winter starts but as outlined in this article
https://www.theguardian.com/business/2022/sep/02/nord-stream-1-gazprom-announces-indefinite-shutdown-of-pipelineTheres only so many suppliers Europe can hit up once they've chewed through their stores - which they will.
Price between $7.75-$8.15 is very interesting if we see lower - a break down here should excite the market bulls...
Price above $9.20 is also very interesting - a break higher should put market bears on alert for some potential excitement...
Natural Gas daily.
For those still wondering what the hell am I doing talking about Nat Gas then I've also added a comparison chart
Natural Gas vs DXY
If you are trading indexes then I'm sure you're aware of DXYs influence - and if you're not then I'd certainly spend some time getting your head around it as it matters...
Natural gas vs DXY 2022 comparison chart
.
With that said, there are a number of upcoming factors that may seperate the two but I'd still keep watching and learn about these markets...
SummaryOk, theres a bit of info to digest so to summarise.
Bears are well in control.
US public holiday could see some games tomorrow.
Both US and Aussie markets have actually held significant levels of support till now.
If these levels cannot be breached then expect some volatility - potential to burn over-leveraged bears is real.
Potential to burn over-leveraged bulls has more weight leading into Tuesday.
Russia have just made a significant move that may lead to a very bearish outlook - they'll at least add to volatility.
A couple of other things to watch in the week ahead
US/Taiwan have potential to throw a real spanner in the works
Currency markets could ignite some major moves this week that will be felt in equities...
My own (not financial) advice.
Most traders seem to want to go for the HUGE moves with all bulls expecting ATHs
And all bears expecting 'Generational Lows'
(20min delay)