Macro Morning

By Chris Becker 

Last night saw risk markets try to breakout of its recent contained mood with US stocks putting in scratch sessions as European bourses found some more risk as Euro and Pound Sterling retreated against USD. Industrial production figures from the US is partly to blame on the spoiling mood while the German ZEW Survey came out better than expected.

Looking first at the Asian session yesterday where Chinese stocks rebounded, particularly the Shanghai Composite which climbed over 2% to close at 3253 points, while the Hang Seng Index  reversed its recent small dip, pushing 0.8% higher to 30033 points, getting back to the previous steady state of daily highs above the 30,000 point level. It remains to see today if it can breakout here:

Japanese stock markets were mixed due to a slightly stronger Yen with the Nikkei 225 treading water to finish up 0.2% to 22221 points. Futures are looking good again this morning with Yen still weak overnight, with this significant breakout above the previous daily highs looking to be filled:

Australian stocks did well on the Chinese risk on move and the lower Australian dollar with the ASX200 closing 0.4% higher to 6277 points. SPI futures are flat again due to the lack of action overnight on Wall Street with the daily chart showing a stuck albeit bullish market ranging between slowly rising trailing ATR support at the 6090 point level still and resistance overhead at 6300 points:

European stocks were the better performers overnight with green across the continent and on the FTSE with the German DAX closing 0.6% higher to 12101 points on the back of a very positive ZEW sentiment survey.  This fulfils the classic breakout pattern above resistance at 12000 although there is the possibility of a small retracement if other risk markets do not align soon:

Wall Street was non plussed again with quarterly earnings failing to find any risk takers with the S&P500 rising only 1 point but still just above the 2900 point barrier.  The four hourly chart still clearly shows an uptrend that has steady support and momentum behind it, with the BTFD crowd stepping in without hesitation. With 2900 points cleared the next target remains at 3000, but where is the hussle?

On to currency markets where Pound Sterling took a little tumble and the Euro followed suit despite a very positive ZEW survey with a rollover back below the 1.13 handle. Note how the recent breakout was thwarted as it approached the weekly downtrend line in black above, so I’m watching for ATR support to come under threat:

The USDJPY is still trading in tight bands but remaining near its Friday night high, finishing just above the 112 handle this morning.  Momentum was starting to roll over a little and we could see another small retracement, but the risk on mood is not pushing this any lower for now:

The Aussie dollar cane back to life a little overnight, almost getting back to the Friday night high around the 71.70 level after bouncing well above trailing – and now rising – ATR support. Momentum remains positive on the four hourly chart but this is looking like a slowdown:

Oil prices finally founds some strength with Brent crude and the WTI contract advancing with the latter closing back above the $64USD per barrel level as its small retracement comes to a conclusion.  The next target remains previous weekly/monthly support at the $65 to $67 zone, so watch for a close above the recent highs to re-engage:

Finally to gold, which was looking ready to break below the key daily/weekly support line at the $1283USD per ounce level yesterday and has done so clearly overnight, falling through to close at $1276 while other risk assets climbed. This is setting up for a breakdown back to monthly support below $1200:

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!

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