By Chris Becker

Another interesting week in macro markets .

As usual for Monday mornings, I’ll take a step back and look at markets with a longer term view as my “Trading Week”.

The Shanghai Composite had broken out to a new weekly high and was on track to hit its previous high at 3300 points before the higher than expected CPI print and financial numbers took the wind out of the market. Price fell to the high moving daily average and is setting up for a sweet short swing position, where I’m watching the low moving average and then the previous resistance line at 3160 points closely for a follow through:

ssec_ix_price_daily_and_commodity_channel_index___daily___40_periods.10aug16_to_25feb17

The Nikkei tried to breakfree alongside other risk markets but remains in a holding pattern as the stronger Yen continues to prevail against USD. The daily chart shows how it has not made a new daily high since the start of the year and this is weighing on confidence. While daily support at 18600 points remains firm, it could retest that level again this week as the Yen headwind remains too strong:

In local shares, the ASX200 had a great week, finishing above its recent intra-week high above 5800 points as traders position for a new bull market. Note on the weekly chart below that the market wants to return to its former high at 6000 points:

xjo_ax_price_weekly_and_commodity_channel_index___weekly___40_periods.03oct14_to_04apr17

The bourse is pushed on by a series of solid earnings reports plus the real powerhouse – Megabank, or the financial index which comprises over half the “broader” index. The weekly chart of the XXJ (ex-property trusts) shows its solid breakout last week above temporary resistance, but not a new weekly high although very close! Momentum is overcooked here and local banking shenanigans should keep a cap on it, but this is the de jure risk proxy for Aussie share traders when everything else is going higher, so for now the macro doesn’t matter!

xxj_ax_price_weekly_and_commodity_channel_index___weekly___40_periods.02oct14_to_04apr17

On to Europe, where stocks are trying to surge higher in line with the US but were being held back by stronger domestic currencies. With the Euro and Sterling falling again, the German DAX pushed higher last week almost heading back to its previous weekly high with support at 11500 points holding firm. My target at 12500 points, the 2015 high, remains in sight as momentum kicks up again – the bulls seem to be back in charge (but not drinking the Kool Aid yet):

US stocks are the biggest bull game in town with the S&P500 making a new weekly high and a new record high. This melt up is pushing all my caution bells though, with the weekly chart showing a clear bearish rising wedge pattern that could be setting up for a big pullback here. Momentum is overcooked on all timeframes, which is usual in a bull market, but again, I’m cautious! The clear signal for a full short position would be a breakdown below the lower trendline on this pattern and weekly support at 2240 or so – but caution on the other side tells me that BTFD is just too strong to fight against:

A quick look at US Treasuries where yields moved over a tight range during the week as the mood switched between risk on/risk off/WTF is Trump saying now…It ended the week above 2.4% but is not showing any signs yet of blowing out – I’m still watching the lower moving average on the weekly chart to hold here:

On to currencies, where USD opened higher against the majors but remained still during the week with the US Dollar Index just above the 100 line:

Pound Sterling is slowly melting down after its recent surge high to the 1.27 handle on the back of a bigger than expected CPI print. In the last stages of the week some selling pressure pushed the point of control to below the 1.24 level and momentum is now pushing to the negative side. With a close below the low moving average here the next level to watch is in the intraday low at 1.2330 to begin a daily short position:

Euro had fallen through the daily uptrend recently heading down to trailing ATR daily support where it found a bottom at the 1.05 handle before reversing late in the week. This looks short lived with Friday’s price action pushing back to the daily low moving average area at the 1.06 handle. This will be the crunch point to start this week and ATR support again to watch for a short against USD:

Yen’s performance last week was muted as it slowly sold against the USD after the firming trend from the 118 high on the USDJPY seemed to have halted. But unlike the other majors, Yen is still the dejure safe haven currency in Asia and was bought up to bring the USDJPY pair back below the 113 handle and where it might threaten the previous low at 111.50 this week:

The Aussie dollar continued to power ahead following the February RBA meeting and the return of a risk on mood. The daily chart shows an ascending triangle with defined resistance at the 77 handle against USD remaining the area to watch, which equates to the previous 2016 high. Conversely the daily uptrend line plus the low moving average is the specific support zone to hold on to going forward:

Oil still remains in a very tight consolidation zone, which I’ve been saying for sometime should herald a big breakout soon (low volatility always begets high volatility). The weekly chart below shows this in spades as oil traders keep hitting their head up against the $55USD per barrel level on the WTI contract. This is a very simple trade – go long on a breakout, but wait until then!

And to gold, which after a small retracement has firmed back up to its previous high at the $1240USD per ounce level as its bear market rally continues to gain on the reflation trade. Watch this high level here for signs of another breakout as this should take it up to $1300:

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)

BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe

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!

Macro Morning (Trading Week)