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OVERNIGHT MARKET SNAPSHOT FOR THURSDAY 28/01/21 (as at 8am AEDT)
- SPI200 (Mar) overnight futures down 73 pts to 6632
- SP500 down 98.85 pts to 3750.77
- NASDAQ down 355.47 pts to 13,270.60
- Dow Jones down 633.87 pts to 30,303.17
- FTSE100 down 86.64 pts to 6567.37
- DAX30 down 250.53 pts to 13,620.46
- GOLD futures US session (Feb) down $11.60 to $1839.30 an ounce
- COPPER futures US session (Comex Mar) down $0.0755 to $3.5440 a pound
- OIL futures US Session (Nymex Mar) down $0.05 to $52.56 a barrel
- CRB Index down 0.09 pts to 175.33
- AUDUSD trading at 0.7655
- EURUSD trading at 1.2113
- GBPUSD trading at 1.3690
- USDJPY trading at 104.1100
- USD Index US Session (ICE Mar) up 0.434 to 90.582
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US indexes fell hard in a risk off tone following on from a rough European session. Some of the move lower can be attributed to a major short squeeze and hedge funds selling long positions to shore up cash to cover failing short positions. The VIX volatility index spiked 40% as traders ran for cover. Concern is now that the selling could gain a head of steam as more traders are forced to lock away some gains and ETFs sweep the market. The Fed Reserve said nothing surprising and kept rates on hold as expected and made no change to its monthly bond purchases. They also pledged to keep that support intact until a full economic rebound is in place. The DOW closed down 2.05% while the broader SP500 ended down 2.57% and the Nasdaq closed down 2.61% for the session. In Europe, major Indexes were hit hard after the open as Germany cut its growth forecast to 3% from 4.4% as mounting coronavirus cases take their toll. The DAX gave up all the gains plus some from the previous session dragging other major indexes down with it. The ECB said that they could cut rates further below zero if necessary to keep its inflation target on the radar.
Some hedge funds have been hit after shorting overextended stocks that have been up on thin air. GME is well and truly in the spotlight as price rockets higher in a major short squeeze that has sent one hedge fund to the wall. There are also some big movers in Europe; drugmaker Evotec jumped 9.6% with other heavily shorted stocks; that are up as funds get it really wrong. Risk is the most important thing when trading and it goes to show that even some of the ‘big boys’ fail to understand this concept.
The USD Index rallied from the open of the European session as buyers jumped into the currency for a safe haven as share markets took a hit. Price fell on the open for US trade after recent sellers were squeezed out of the action. We expect that the recent stimulus and potential for more will continue to weigh on price although the volatility and swings will increase. Support continues to hold around 90.000 while sellers are stepping in on spikes into 90.900. The EURUSD took a hit on the USD rally as recent buyers bailed on their bets for higher prices. The 1.2115 zone was wiped and stops were triggered for a spike into previous lows around 1.2060 before buyers jumped back in to kick price higher and settle around the 1.2100 area. The next step for the Euro will depend on the USD and whether the safe haven run is contained. The GBPUSD also took a hit on the spike into the dollar although the action was contained by buyers. The trend up remains in tact for now but there is a short term offerzone that held around 1.3745 that recently capped the action. Bulls will need to hold the 1.3635 area to stave off a major swing lower. The AUDUSD took a bigger hit than other major pairs as the risk currency tested the key support area 0.7660 area. We will see if the level is going to hold in the coming day as price is extended into the zone. Further strength into the USD will break the back off Aussie dollar bulls as price will see a deeper correction. The USDJPY held a retest of the 103.500/550 area and raced higher on dollar strength. Price extended into a resistance area that will need to hold to cap the rally. If the 104.030 level breaks then expect a long squeeze for a retest of 103.870. If it holds then the bulls may not be finished yet.
SPOT GOLD came under pressure from the Dollar rally and as safe haven buyers stepped aside. Price pushed down to 1832 after breaking below the 1846 as stop losses were triggered. The move lower has the look of a washout of buyers which would suggest that we may see higher prices in the near term. This would work in well with the idea of the overnight moves (in the USD and Indexes) being a ‘reactionary’ trade and squeeze before markets regain support. Crude Oil fared the risk off move in European share markets well as a spike lower was recovered on the US open. Price did fall away from the 53.20 area, as energy shares struggled in US trade, and closed around the previous sessions close. We will be watching to see if the major themes for demand and growth continue to provide support. Copper felt the pressure from the dollar rally and risk off tone as prices pushed lower to extend through support. We expect to see a reaction from buyers but the move shows that there is some fear of a major selloff hanging over markets.
Cryptocurrencies could not escape the selloff as prices took a hit in a risk off tone as traders locked in recent gains….or losses. Bitcoin is currently trading at $31021.7 down 3.08% while Ethereum is at $1269.02 down 5.11% and Ripple is at $0.25471 down 4.36%.
The ASX200 had a rough session as buyers disappeared and and traders locked away some gains. The index headed lower right from the open and ended the session down 44.1 points to 6780.6 as Energy, Resources and Metals and Mining took the bulk of the selling pressure. Falling stocks outnumbered advancing ones by 799 to 596 and 357 ended unchanged.
The ASX200 is expected to open down 70 points as the SPI200 was led lower by a selloff on overnight markets.
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ECONOMIC DATA OUT TODAY (AEDT)
JPY Retail Sales 10:50am
AUD Import Prices 11:30am
EUR German Prelim CPI All Day
USD GDP Data, Unemployment Claims and Prelim Wholesale Inventories 12:30am
USD New Home Sales 2am
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SPI200 INTRADAY LEVELS TO WATCH
