Macro Morning

By Chris Becker 

Traders in the US didn’t like the long weekend break despite a lift in local consumer confidence with tensions over the ongoing trade dispute with China causing much angst. The USD was all over the place, firmest against European currencies while the Aussie dollar tread water, but commodities like gold, oil and copper all fell as bids went to safe havens like Yen and Treasuries.

Yesterday saw Asian stock markets in a better mood with the Shanghai Composite pushing above 2900 points, closing about 0.6% higher to 2909, while the Hang Seng Index is looking to close at a similar advance as well, up 0.4% to 27390 points, finally not making another new daily low. The daily chart has been showing a deceleration pattern with a bottom potentially forming here at the 27000 point level. I’m watching the 27000 point level very closely for signs of a full inversion:

Japanese share markets were up slightly again with the Nikkei 225 closing 0.4% higher to 21271 points but still looking in a weak position after correcting for most of May.  Futures are pointing to a big drop on the open this morning despite only a slight advance in Yen overnight, with the potential for price to fall below the once stable area around the 21200 point area:

Australian stocks put on some solid gains with the ASX200 lifting 0.4% to 6480 points, trying to get back above previous support, now resistance at 6500. SPI futures are down over 40 points or -0.6% in response to the selloff on Wall Street overnight. I’ve been saying for awhile that this is a market that’s well overbought and ripe for a pullback, so watch the 6400 point area very closely:

European stocks at first did well, helped by a lower Euro and Pound Sterling as currency traders returned to their desks in The City, but sold off alongside Wall Street when US markets reopened later tin the session. The German DAX closed 0.4% lower to just above 12000 points gain with the daily chart remaining very weak as daily momentum is not yet positive and price still below the high moving average:

Wall Street reopened in a foul mood after the Memorial Day holiday with the NASDAQ falling 0.4% while the S&P500 fell nearly 0.9% in a swift reversal of fortune for the bulls. The classical bearish head and shoulders pattern on the daily chart is now ready to break the neckline so this could be ominous if the 2800 point barrier is breached tonight:

Volatility in currency markets returned overnight with selling off in Pound Sterling and Euro the name of the game with the latter pushing back below the 1.12 handle and a return to the mid levels of trading from last week. The four hourly chart shows the inability of the Friday night bounce to go anywhere with momentum now clearly oversold and ready to break tentative support at the mid 1.11s:

The USDJPY pair is moving more into bearish mode with more Yen buying overnight as a safe haven trade, pushing the pair back down to the 109.30 level and actually making an intrasesssion weekly low. It’s been unable to get back above the 109.50 level and the high moving average which suggests to me that there’s no more upside swing here with the next area to watch is a breach at the 109.20 terminal support area:

The Australian dollar is definitely in a holding pattern here, waiting for the June RBA meeting, still above the 69 handle but unable to get above last week’s intrasession high at the 69.30 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 unable to move as the bulls and bears battle it out as futures traders return to their desks with a slightly fall to 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 very short uncle point – I’m watching the more bearish Brent contract for signs of capitulation here:

Finally to gold, which is vainly trying to come back as well, but the USD was too strong overnight so it finished several dollars down to the $1279USD 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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