Macro Morning

By Chris Becker 

With the long weekend at hand in the US and UK markets closed as well, the focus was on the European continent as markets reacted to the EU parliamentary elections. While the Brexit Party got a big hold, the populists and nationalists didn’t fare as feared, helping lift sentiment.

Yesterday saw Asian stock markets start the week in a generally upbeat mood with the Shanghai Composite surging after the long lunch session to close nearly 1.4% higher to 2893 points, while the Hang Seng Index was looking to close in the green but eventually fell 0.25% to 27288 points to make another new daily lows. The daily chart shows a deceleration pattern with a bottom potentially forming here at the 27000 point level, but there is very little buying support as price stays away from even the low moving average. I’m watching the 27000 point level very closely for signs of a full inversion:

Japanese share markets were up slightly with the Nikkei 225 closing 0.3% higher to 21182 points responding positively to the Abe/Trump meeting and Governor Kuroda’s recent comments. Futures are pointing to a solid open this morning despite only a slight selloff in Yen overnight, with the potential for price too stabilise above the 21200 point area and try to get back to the high moving average band:

Australian stocks went nowhere with the ASX200 falling a handful of points to remain solidly below the 6500 point barrier, closing at 6451 points. SPI futures are up a handful of points as the local market remains listless without direction from the US. Clearly this is a market that’s well overbought and ripe for a pullback, so watch the 6400 point area very closely:

European stocks were better all round post-election but the FTSE was closed leaving the bag to be carried by the German DAX which climbed 0.5% to 12071 points, remaining above 12000 points gain. The daily chart is still looking very weak with daily momentum not yet positive and price still below the high moving average:

Wall Street was closed due to the Memorial Day holiday with S&P futures suggesting a flat open this evening. The daily chart is still displaying a classical bearish head and shoulders pattern with the recent dead cat bounce forming the right shoulder but the shorter timeframes are suggestive of a possible relief rally in the works:

Volatility in currency markets abated overnight with no traders in  Pound Sterling while Euro was subdued, hanging around just below the 1.12 handle after a very minor breach on Friday night. The four hourly chart shows how this level maybe too far with a lot of intrasession sellers pulling it back to the solid black line that denotes weekly support. Should see some more volatility return tonight as The City wakes up:

The USDJPY pair was also relatively stable, hanging around the 109.50 level with only a small gap down overnight to remain below the 110 handle and almost back to last week’s pre-breakout lows.  If the high moving average isn’t breached soon the next level down is the 109.20 terminal support area:

The Australian dollar couldn’t make good on its Monday morning highlights, falling again overnight to just above the 69 handle, getting back to its previous trailing ATR resistance level. Just like every other trader out there, I’m watching the 69 cent level closely for signs of another inversion:

Oil prices are still trying to comeback after their recent snap selloff with the WTI contract lifting slightly again in the absence of trading volume to finish just above the $59USD per barrel level. Note how the daily lows have been respected very well at the $57.50 level, a sign that a lot of long speculators are positioning for a possibly swing higher here, but with a short uncle point:

Finally to gold, which is vainly trying to come back as well, eventually finished where it started at the $1285USD per ounce level. Note how momentum was never oversold (below -100) and is now positive, but still needs a lot more interest here to get back to the $1300 level as the overall price trend remains down:

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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