Macro Morning

By Chris Becker 

US/China trade tensions are subsiding this time, with US stocks lifting overnight alongside bond yields while the USD remained firm, not withstanding a spike due to the latest OECD Economic Outlook. Commodity prices remain relatively calm during this whole mess although gold is sitting on a monthly low.

Yesterday saw Asian stock markets bounce back a little on the Huawei clawback with the Shanghai Composite returning above 2900 points, lifting 1.2% to 2905 points. In Hong Kong the Hang Seng Index was looking to put in a scratch session, but sold off going into the close, falling 0.4% to 27657 points making another new daily low and still confirming the dead cat bounce. Momentum is not yet heavily oversold and does support a move lower from here:

Japanese share markets retreated slightly as a weaker Yen was supportive, with the Nikkei 225 closing 0.1% lower to 21272 points. Futures however are pointing to a bounceback this morning as both a weaker Yen and positive sentiment overnight will help the cause here, hopefully getting price back above the high moving average for a continued swing play:

Australian stocks continue to advance with the ASX200 cracking the 6500 point barrier, closing 0.4% higher. SPI futures are suggesting more upside today with a 13 point advance expected, with a weaker Australian dollar helping as well. Are we going to finally see a return to the 2007 highs? Its been awhile…

European stocks where much more positive, helped along by the usual lower domestic currency support but also the potential for a second UK Brexit referendum with the German DAX gaining nearly 0.5% to close above 12000 again at 12143 points. By remaining above the psychologically important 12000 point level and with daily momentum not yet negative there’s hope still for a bounceback to the former highs:

Wall Street is fighting back, dependent on tweets from the Head Twit with the NASDAQ bouncing 1% higher while the S&P500 eventually closed 0.8% higher to 2864 points, taking back all of the previous losses and putting in a new daily high. It’s still precarious here and this is normal behaviour during a dead cat bounce, so we’re not out of the woods yet:

Currency markets had a bit of volatility overnight with the OECD release with both Pound Sterling and Euro spiking briefly before getting back to their depressed moods, with the latter still hovering near its recent new weekly low below the 1.12 handle. The four hourly chart continues to show the bears in charge here, although there is little potential for a bounce higher as momentum remains quite negative:

The risk proxy USDJPY pair is heading higher again, breaking out above resistance at the 110 handle proper after gapping to that level on Monday morning, finishing near the 110.50 level this morning. This is looking more and more positive but may be getting ahead of itself, so watch 110 to turn into sturdier support going forward:

The Australian dollar is struggling here post RBA minutes release as traders weigh up a potential cut next month, keeping the Pacific Peso below the 69 handle. Trailing ATR resistance at 69.20 remains strong and there’s potential for a follow through below the 68.65 area today:

Oil prices remain poised here waiting on the action around Iran to subside with the WTI contract finishing just below the $63USD per barrel level in a wishy-washy third session in a row. This move could see the start of a re-engagement of the previous weekly uptrend, with my short term target at the former highs near $66:

Finally to gold, which fell again overnight, but not yet at the previous bottom, falling to $1274USD per ounce again disappointing the gold bugs after failing recently to punch through the key $1300USD per ounce level. This keeps it near, but not below the previous bottom with $1260 or so the downside target here if broken:

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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