Macro Morning

By Chris Becker 

Stock markets were a little calmer overnight as the US GDP print came in strong as expected, although revised a little lower. The big mover was DOE oil inventories which were much larger than expected, sending crude prices at least 4% lower. The USD remained firm against the majors as the Australian dollar finally slipped back down to the 69 cent level.

Yesterday saw Asian stock markets all close lower with the Shanghai Composite down 0.3% but still clinging above 2900 points, while the Hang Seng Index finished 0.4% lower to 27133 points, unable to arrest the recent decline. The daily chart still shows a deceleration pattern with a target at the 27000 point level but sentiment and momentum remains against this market:

Japanese share markets were also off with the Nikkei 225 closing 0.3% lower to be just below 21000 points, looking to be in a very weak position and restarting its corrective phase. Futures are mixed this morning given the volatility in Yen overnight, but correlated risk sentiment and end of month window dressing could see price stabilise here to finish the week despite the oversold condition:

Australian stocks were the worst in the region with the ASX200 falling another 0.7% to close below previous support at 6400 points. SPI futures however are up 19 points on the rebound on Wall Street so we could see a finish just above that level to give the bulls hope going into next week’s RBA meeting and the start of a new month:

European stocks lifted slightly, despite quite a bit of continental economic volatility, particularly in Italy and Spain. Lower domestic currencies are helping again with the German DAX bouncing back after its big selloff previously, closing 0.5% higher to close just below key support at 12000 points. The daily chart remains in an extremely weak position here with lower momentum and price unable to get back above the high moving average so it remains in correction mode with daylight to 11200 points below:

Wall Street’s foul mood reversed slightly with late buying sending the S&P500 some 0.2% higher to 2788 points. The bearish head and shoulders pattern on the daily chart remains confirmed until a solid rebound above 2800 points is underway, so there’s still another day to Sell in May:

Currency markets are slowing down somewhat although Pound Sterling remains on a downtrend, the Euro decelerated into a bottoming action just above the 1.11 handle after the previous poor response to the German unemployment print. The four hourly chart shows how tentative support at the mid 1.11s has been broken with price now match the previous weekly low, so there’s likely more downside ahead:

The USDJPY pair was unable to make good on its surprise move higher with a false break and selloff later in the session bringing it back to the mid 109’s again. This week has seen it unable to get back above the 109.50 level or the high moving average and as I suggested, this looked more like an exhaustive swing play here rather than a new trend. Trailing ATR resistance at 109.80 is firming here because of the false break:

The Australian dollar is slowly getting out of its week long holding pattern here as price made a run for the 69 handle again on the back of lower commodity prices. Everyone remains watching this level closely for signs of another inversion as we head into next week’s RBA meeting:

Oil prices slumped on the DOE inventory report both Brent and WTI falling around 4% overnight. The latter contract has made a definite new low, breaking below the $57USD per barrel level. I had warned that previous high intraday volatility was an ominous sign of more downside to come and here we are, we’re price could swiftly fall to $52 or lower:

Finally to gold, which finally found some buying support even as the USD remains strong, lifting nearly $10 to finish at the $1288USD per ounce level overnight. I still contend there needs to be a lot more interest here to get back to the $1300 level as the overall price trend remains down but this looks like the start of a short term swing play higher:

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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