Macro Afternoon

Wow what a day to be a FX trader! Bigly volatility on the Yen and crosses, with the Aussie dollar losing nearly 3 cents within a few minutes! Most currencies are nearly back to where they started, but this has had a big impact on equity markets with the catalyst being Apple’s late earnings revision over declining Chinese sales. There’s still no sign of a return to sanity with the Trump shutdown ongoing either. 2019 is super fun!

The Shanghai Composite spike at the open but has comeback significantly to be up only 0.2% or so at 2462 points as confidence evaporates.  The Hang Seng Index gapped lower on the open again, but saw a lot of mid session volatiliy, closing about 0.2% lower to 25030 points. This keeps it well under previous support at 25600 and creates a solid downtrend line with a retest to the previous lows at 24500 likely:

US and Eurostoxx futures are down going into the London open, with still no evidence of buyers amid this strange session. The four hourly S&P 500 futures chart shows price clinging to the lower edge of the moving average channel with significant resistance at the 2500 level:

Japanese stocks had another day off thankfully due to an extended NY holiday. The USDJPY did an amazing selloff in the witching hour between the NY close and Tokyo open, slamming through six handle – 109 to 103 before recovering to just over 107! These types of events is what gives FX traders grey hair or no hair!

The ASX200 started off very well and kept onto the gains as a much lower Aussie helped revive the stagnant stock market, closing 1.4% higher to 5633 points. The Aussie dollar also met with carnage after breaking through trip markers at the 70 handle, it went as low as 66.50 – i.e 3.5 cents! – with a fightback unable to bring it back above that key level. This is one for the ages:

The economic calendar ramps up tonight with the US ISM manufacturing print for December, which will be very closely watched, alongside initial jobless claims and other private jobs data.

Comments

  1. Yikes, I didn’t realise the poo got so low. Doesn’t show on the charts i’ve looked at for some reason. I’m surprised you weren’t on holiday for this Chris, as it usually happens!

    • technically i am on holidays – i was actually making morning tea for my kids when the flash crash happened! came downstairs to the office with alarms going off!

      and then my new computer blew up – bloody Kogan piece of shit….

      its been a great day

      • The Traveling Wilbur

        +1.

        (Though Count von Count might have been more appropriate; unless you’re doing a portrait of an artist as a young Muppet thing?)

      • MT4 will do alerts, either to your desktop or to mobile devices. Google is your friend here. The standard alert triggers available are not very fine-grained. To do custom alerts you have to write scripts. Bit of a learning curve.
        By sheer luck, not skill, I had no open positions at the time. It’s amazing how quickly it happens. Once those stop-losses start being taken out, more and more AUD comes on the market in seconds. With low liquidity (every bugger on holidays) the price just plummets until profit-taking kicks in. Gave me a cold shiver. Anyway, as an exercise and to calm my nerves, I calculated my maximum possible loss if I had been long AUD/USD 3 lots (usually my biggest position).Total worst case, from top to bottom of the hour, I would have lost about AU$ 13,000. Painful, but not life-destroying. I suppose the message is don’t trade when liquidity is low.

      • Indeed – I use the alerts for when my initial buy signal has been triggered and then for targets. I usually avoid the witching hour and the Monday morning period in toto – I may be switching to completely NYLON trading only as Ive found over the last couple years that the Asian session is losing liquidity and, well, conformity i guess you could call it.

        the flash crash did trigger my buy signals, but I had withdrawn all my cash from my brokers – I never leave cash on the table overnight or when on holidays. I dont trust any of them, especially after the SNB fiasco.

        good to see you’re thinking from a capital management point of view, not profit, its the key to long term survivability – i.e how much could I have lost, not OMG I could have made a brazillion!

      • Hi Chris. I had to Google up NYLON. New York and London. In case that’s not clear to others, trading only during the hours NY and L are open. Sleepless in Melbourne…
        I am going to have to re-think the whole business of using stop-loss orders. They take you out when you’d be better staying in and riding the wave, and when you really, really need them, they’re useless. Time to think more.

      • yeah sorry, I usually avoid gobblydegook, but it came out – I used to trade that session when i first started trading in WA many moons ago – back when I was first invited to join this band of rabble called MB…was much better timezone for it!

      • Thanks for your insights/confirmation Chris. The asian session hasn’t been right for some time for mine. I’ve headed to Lon open to chase whatever’s moving – often a GBP cross. Would prefer NY but I’m just not lucid by then. Did you ever get that Polyphasic sleep to work?

  2. The foreigners are being pushed out of China: some anecdotes from the Saffa and his mate (though surely the Chinese authorities have shown relative leniency to those two given how critical they often are on their youtube channel).

    https://www.youtube.com/watch?v=HrzJcnK_c-4

    ps for some reason they recorded this in Taiwan – possibly towards the south – lovely countryside.

  3. Labor committed to scaling back negative gearing despite steepest housing downturn since GFC
    https://www.abc.net.au/news/2019-01-03/labor-negative-gearing-gfc-housing-downturn/10682884

    Business leaders warn against tighter lending standards in wake of banking royal commission
    https://www.abc.net.au/news/2019-01-03/business-leaders-warn-against-even-tighter-lending-standards/10683046

    Australian dollar briefly falls below 68 US cents, its lowest value in 10 years
    https://www.abc.net.au/news/2019-01-03/australian-dollar-below-70-us-cents-wall-street-fail-rebound/10680896

  4. China’s economic slowdown accelerates and sinks the Australian dollar … Sydney Morning Herald

    https://www.smh.com.au/business/markets/china-s-economic-slowdown-accelerates-and-sinks-our-dollar-20190103-p50pd2.html

    How badly is China’s economy doing? Look behind the official GDP figures | South China Morning Post

    https://www.scmp.com/comment/insight-opinion/united-states/article/2180471/how-badly-chinas-economy-doing-look-behind

    China credit crunch is another red light to the global economy – NZ Herald

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12185010

  5. I don’t think Frydenberg and Phil Lowe have thought their current strategy through.
    Greenspan claimed he couldn’t have known about subprime lending because it was happening in remote parts of California etc. and the Fed didn’t have the data. Total bs but at least plausible.
    When housing goes completely pear here what are Frydenberg and Lowe going to say when they were the last people telling the banks to double down on subprime? Especially Lowe who has spent a lot of time studying financial stability. Reputations will be destroyed.

    • Bush Jr was notified of all the endemic fraud in mortgage origination and was in formed to ignore the FBI’s warning due to the ME wars – by his advisors – usual suspects. Where I thought Greenspan’s milquetoast mea culpa was they got some things wrong about humans after going on a deductive rationalization lark to the point of absurdity or more accurately – a payed PR marketing campaign for big business that imploded due to its fallacy of composition at on set, based on ideological axioms without regard to the real world w/ zero rigor and the only response is to double down or paper over failures.

      • No doubt they knew about it but the point I’m making is starting in 06 when everyone could see subprime was toxic and housing went into downturn, they didn’t go out in public and tell originators to increase subprime lending.
        As far as I know there has never been a case where systemic reckless lending has come to light and then policy makers have responded by encouraging more reckless lending!

      • proofreadersMEMBER

        I doubt that Frydendebt and Captain Phil could give a fig leaf – they will move on very expediently to even more and greater veneration from their respective fan clubs.

      • Sweeper it never stopped till roll overs did with Lehman, being the looser at smilie poker, in fact contra to rational agent models it increased due to everyone trying to squeeze the last drop out before the big horn in the sky blew – and – manufactured some of the most toxic to short seeing the end near.

        Even to the point of putting the Orange Tanned Monkey in charge of Fanny Mae et al to gain market share as a privatization push.

        All legal like Obama and his AG said.

        Mate this is so “fog of war” where at the end McNamara is at a table having diner with is NVC opposite numbers and asks the question – we offered you guys everything and you still would not give up the China affiliation … response was hay dumb anglophone guy – we have been at war with China for almost 2000 years off and on – that we buy weapons to fob off the French and now the US is just an ends to a means …. self determination.

        Could say the same for Castro’s first visit to DC – Hay Castro well played – Kudos – now look you can do anything you like or call yourselves what you like – but – when our corporations want a sweet deal on national resources or labour costs they get what they want – Capiche …

        He would not bend the knee, ready to trade after a hard bargain is won and both sides have to compromise – but again – thats not how it works with the leaders of the “free” [tm] world.

      • Amortization of bad loans with more bad loans is dependent on buyers of the paper until everyone yells …. Minsky !!!!!

      • TailorTrashMEMBER

        I’d take Chifley any day …….I think he had his heart in the right place and it was formed in the right place ….
        …….better the banks ( and their place in money creation ) are owned and controlled by all the people rather than by in part foreign shareholders and bonus chasing
        executives………
        But then I’m from a simpler time so I may have quaint,simple and confused beliefs that have no place in this new fangled debt is the answer world.

      • We are reaching for the lighter fluid. Withnail & I may be the most apt allegory for the recklessness and short-sightedness of our leaders. The difference is that we are uncastable in any roles and we lack the dignity to not surrender ourselves to any Uncle Montys that may cross our paths.

  6. Every week or so I like to visit the property forums to see what the tards are thinking. This one just blows my mind as to how they 1) see the past through rose coloured glasses, and 2) extrapolate it into the future. Just read these two paragraphs and consider the IQ of most property investors…..

    “Not too sure how you measure best investment. I just value capital gain, never worried about the final value. For last 30 years, Sydney, Melbourne and Brisbane achieved near 10% gain per annum. I think Brisbane cannot be discounted as they have huge investments in the pipeline including queens-wharf.

    As you mentioned Brisbane performs 10% per annum for next 3 years that means 33% gain. Some suburbs will perform better. I guess mostly Sydney and Mel will be in negative territory or flat until 2021.”

    10% for the last 30 years? It’s been nuts, but that’s a bit over the top. With wages growing below inflation but property supposedly growing at 10% ad infinitum I don’t know where these twats went to school, but they were smoking cones instead of going to maths lessons.

    • Its the periphery that always gets it just like in America and Piigs…. Jumbo always rides out adjusted. Partly due to the wealth factor [diversification and offshore assets] and rollover is not as high – say Ascot in Brisbane et al.

      • ” Jumbo always rides out adjusted. Partly due to the wealth factor [diversification and offshore assets] and rollover is not as high – say Ascot in Brisbane et al.”

        What the fvck does that even mean? Fvck me dead skip, you talk in tongues.

        Does anyone else here understand what the autistic marsupial is talking about?

      • @Timmeh

        I’d wager to guess it’s a reference to “the elephant inside a snake” thing? You know – Antoine de Saint-Exupéry? Little Prince?

        Of course – I could be parsecs away…
        .
        .
        .
        Aaaanywhoo – I gotta tend to me volcanoes now…

      • Timmeh, I’m glad you’re here to say what I regularly think. And on this topic there’s also no disagreement, I have no idea how anyone makes heads or tails of what he’s on about 90% of the time

      • Lookup jumbo loan. It is an American credit term. They are assessed slightly differently e.g. stricter underwriting rules and a larger down payment than a standard mortgage. Low income plebs are not getting Jumbo loans. Plebs will have issues when credit turns.

        Skip works for the C-suite renovating Queenslander houses, where those assets represent a minor fraction of household and family wealth. He is sweet.

      • cee, i think you are onto it. Are you a psychologist for autistic retards by chance? Because most people have difficulty in deciphering the mangey roo’s missives.

      • OK sorry I thought you might be up to scratch on this stuff …. my bad.

        Jumbo prime is a factor of wealth that has deep and broad asset locations internationally which buffer any effects the unwashed experience in a down wind e.g. the unwashed buy over price dog boxes in non established locations [waves at Hugh] which are also prone to vulnerable income or under-unemployment experiences. I mean its not controversial that labour is the first casualty in any economic uncertainty or that their prime residence is the only asset they have or did you not know how blackrock became the largest RE rent mob in America. Wipes tear from eye for all the RE sprukers trying to off load stock to international investors.

        Now for price to occur a trade has to occur and in jumbo prime locations that just does not happen – in cases like Ascot et al. So it really does not matter what happens to all the dog box locations because were talking about a completely different set of factors …. Oh I know … some Jr Market ideologues think supply and demand and some other wonky stuff effects everything the same … idiots …

        What part about the velocity of trade being almost zero and the established price reflective of it – is confusing.

      • Yay, skip you managed to write a comment I could understand. Yet you continue to call australia as the US. Our overlords are working on us being plebs of the like of blackrock. But we ain’t there yet. Did you get touched by a BlackRock ceo when you were a child?

      • My clients are not day traders[.]

        The majority are professionals that have built up capital over a life time and come from lesser background as kids. The last two were a no nonsense bloke that used to be a trawler captain up coast that got lucky and got a job for a German fit out company and has always poured capital back in to productive enterprises and the newest is a builder that has spent yonks doing it solo by refurbishing established RE to new standards after owners have sold on ….. would not touch a bloke like Hugh or his ilk with a barge pole. The last goes a complete year with out income or getting payed until the project is sold e.g. he carry’s all the risk ….

        So what capital formation are you keyboard RIMF’s creating and how much risk are you actually exposed too as fine young entrepreneurs … did you break a sweat to day …

      • I’m saying the data in a global market has a shared quantity because its all one huge ideological template and the RE thing was exported from the USA and not China or Russia via the Chicago boys.

        I think you might be served by reading Hudson’s ‘Super Imperialism’ and how that squares with so called supply and demand.

  7. Things are worse than I thought. Martin North is on the ABC talking about lending standards and they’ve gone for the manic close-up camera angle. The end is nigh.

  8. Hey guys – check this sh*t out – they obviously don’t have no bloody kangaroos to save them:

    (Insolvency statistics in Austria)

    https://www.ksv.at/media/657/download – 2017-18
    https://www.ksv.at/media/196/download – 2015-16

    State Cases 2018 Cases 2017 change Liabilities 2018 in million EUR Liabilities 2017 in million EUR
    ——————————————————————————————————————-
    Vienna 2603 1916 35.9% 450 179
    Lower Austria 1180 590 100.0% 299 87
    Burgenland 196 77 154.5% 46 10
    Upper Austria 1023 657 55.7% 160 74
    Salzburg 328 247 32.8% 64 47
    Vorarlberg 464 216 114.8% 65 25
    Tirol 610 344 77.3% 116 37
    Styria 796 358 122.3% 181 65
    Carinthia 587 310 89.4% 107 41
    ——————————————————————————————————————-
    Total 7787 4715 65.2% 1488 565

    .
    .
    .
    Ouch!!

    • I think understanding a thing vs ideological cog dis and the need to burn it down to the ground to punish the immoral impure is a a bit more than childish and selfish.

      But then libertarians are a strange cult.

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