Macro Morning

By Chris Becker 

Another mixed session on stocks overnight with European bourses advancing again while Wall Street stalled due to a drop in health care stocks from the “Mediscare for all” and a slump in oil prices. The USD firmed slightly against the undollars, particularly gold which made another new daily low while CPI prints in the UK and the EZ confirmed that inflation is no problem for Europe.

Looking first at the Asian session yesterday where Chinese stocks produced scratch sessions again with the Shanghai Composite floating along to close only a handful of points higher at 3262 points, while the Hang Seng Index also treaded water, losing a couple of points to close lower at 30117 points, still hovering around a steady state of daily highs above the 30,000 point level. This market needs to punch through that resistance soon or the bulls will runaway:

Japanese stock markets were better due to a momentary selloff in Yen with the Nikkei 225 lifting 0.25% higher to finish at 22277 points. Futures are looking good again this morning with Yen still weak overnight, with new daily highs continuing to push this market higher with my target at the October/November 2018 highs at 23000 points:

Australian stocks did poorly on the absorption of the Chinese risk and the higher Australian dollar with the ASX200 closing 0.4% lower to 6256 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 again with green across the continent although the FTSE has stalled due to the lacklustre CPI print. The German DAX closed 0.4% higher to 12153 points as its breakout turns into a blowout pattern above 12000 points. This is looking considerably overbought and ripe for a pullback:

Wall Street was non plussed again with quarterly earnings pushing the S&P500 down 6 points to close right on the 2900 point barrier.  The four hourly chart shows an uptrend that has support behind it but momentum is fading here and ready to break below the 2900 level unless the BTFD crowd steps in soon:

On to currency markets where Pound Sterling took another little tumble on the poor CPI print while the Euro held relatively firm before a last selloff saw it pushed below the 1.13 handle again. 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 still come under threat:

The USDJPY is still trading in very 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 but has now firmed so we’re unlikely to see another small retracement as the moving average band pushes higher:

The Aussie dollar tried to maintain itself above the 72 handle overnight but was thwarted again and sold off down to the uptrend line before settling at the 71.70 level in late trade. Momentum remains positive on the four hourly chart but this is looking like a slowdown:

Oil prices still can’t get around what looks like firming overhead resistance with the WTI contract retracing its recent advance to close back below the $64USD per barrel level as its retracement still continues.  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 remains well below the key daily/weekly support line at the $1283USD per ounce level losing a few dollars overnight for another new daily low. 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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