Macro Morning

By Chris Becker 

Friday night on Wall Street was a mixed bag with strong retail figures pushing the USD and interest rates up, with revisions on previous months also lifted, giving watchers less hope that the Fed will pull down interest rates sooner if the US consumer is still strong. Oil prices blipped higher on the Iranian war mongering while gold almost broke its previous high as the Great Undollar is embiggened by the USD.

The economic calendar starts the week in Asia today with an empty ticker, with a few tertiary releases to watch later tonight.

A recap of Friday’s action first, where Chinese share markets were the main casualties again as the Shanghai Composite fell  nearly 1% to get back below the 2900 point barrier. In Hong Kong, the Hang Seng Index continued its retreat, falling another 0.8% to 27078 points. The daily chart is showing price retesting the former lows with little to no buying support, so this week I’m watching for a break below the 26500 point level as a sign more carnage is coming:

Japanese share markets were the odd ones out, with the Nikkei 225 lifting just over 0.4% to close at 21116 points, staving off a new weekly low. This was despite short term strength in Yen but Friday night saw this evaporate, but the correlation is not holding up with futures neutral for today’s session. This means a market treading water to start the week, but overall in a downtrend with a bearish bias with no new daily highs and negative momentum:

The ASX200 also finished with a positive result, but only just – up 0.18% to 6554 points, capping off a relatively strong week. SPI futures are up about 8 points, as this markets remains incredibly overbought and crowded. I’m watching for breaks below the high moving average for signs of an inversion and another dip:

European stocks went back to a negative mood as the prospect of a Boris Johnson PM and Middle East tensions took away remaining confidence. The FTSE dropped about 0.3% while the German DAX fell nearly twice that to end the week with a scratch result. Price had been rebounding nicely, trying to claw back over the previous key support at the 12000 point level but its obvious that the daily chart is still in a weak position here, just holding on:

Wall Street is facing its own uphill battles, wanting to rally on the back of a Fed Put, but stymied by good economic news! The S&P500 dropped 0.2% and remained unable to get back above the psychologically important 2900 point level, closing at 2886 points.  There is still the chance of a rollover here as I’m watching the four hourly ATR support level at 2870 closely:

Currency markets had more action as the USD continued to firm against most of the majors with the Euro plummeting straight down to the 1.12 handle with the four hourly chart showing the abandonment of long positions on Friday night. There was a small deceleration pattern into the 1.1260 support area before this selloff but this was false hope, taking the union currency back to its previous weekly low. I’m watching the next key support level at 1.1180 closely for even more downside action:

The USDJPY pair is still trying to get out of its bottoming pattern here with a mild but still positive move higher on Friday night to get above the mid 108’s at least. This is still well short of trailing ATR resistance at the 108.70 level, and is not backed by the usual positive correlation with risk sentiment so I’m wary of this move until that two week long resistance area is brushed aside:

The Australian dollar flopped alongside Euro after wanting to get back above 70 cents, but failed and returned right back to where it came from, hitting below the 69 handle at last week’s intrasession low. This monthly support level could disappear quickly if the USD uptrend continues:

Oil prices came back slightly as tensions increased in the  Gulf, with the WTI contract finishing about 1% higher to the mid $52USD per barrel level. I suggested recent price action was just a pause before breaking again but this price action is somewhat confusing, suggestive of a possible swing higher but not showing any real signs of life either. I still contend it has the potential to make its way down to $42 as it likes to overshoot the fundamentals:

Finally to gold, where hope is climbing ever higher despite a stronger USD with a big breakout on Friday night that exceeded the former highs before snapping back to reality to finish again at the $1341USD per ounce level. This looks like a blowoff event for mind, and indicative of getting the last few hyper bulls back on the train, so I’m wary to say the least. I’m watching gold at the hourly and four hourly level this week for signs of profit taking, but also at the $1347 level for a potential second blowoff breakout!

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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