Macro Morning

By Chris Becker 

Stocks pushed slightly higher on Wall Street overnight, following a mixed session in Europe where risk markets remain poised before tomorrow nights FOMC Meeting. Interestingly, the Fed Business Index fell sharply last night to a 2 year plus low, with consumer and household sentiment figures also dropped, putting more pressure on the Fed put.

The economic calendar is focused locally with the latest quarterly house price data plus RBA minutes from the previous meeting.

Looking at yesterday’s action first, Chinese share markets rebounded following their poor showing on Friday with the Shanghai Composite lifting 0.2%, almost back above the 2900 point barrier, while the Hang Seng Index stopped its retreat, bouncing 0.4% higher to 27227 points. The daily chart is stabilising somewhat here in the wake of the huge protests outside the exchange, but caution still reigns:

Japanese share markets put in more scratch sessions, with the Nikkei 225 failing to change at all, closing 0.04% higher to close at 21124 points. This was despite short term weakness in Yen but overnight has seen this turn to strength, so futures are indicating another flat session again today. As I said in my weekly outlook yesterday, Japanese stocks are likely to tread water this week with a bearish bias with no new daily highs and negative momentum:

The ASX200 slid back yesterday despite a positive trend in back stocks, with industrials pushing the bourse 0.3% lower to 6530 points. SPI futures are steady in the wake of the small blip on Wall Street, but this market remains incredibly overbought and crowded with price unable to punch back through the 6600 point barrier. I’m watching for breaks below the high moving average for signs of an inversion and another dip:

European stocks remain in a mixed mood with the FTSE trying to push higher but stalled with another scratch session while the German DAX slipped ever so slightly after it too failed to breakthrough what has been very firm resistance at the 12200 point barrier. In the short term, 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 continues to face its own uphill battles, still uncoupled from reality and wanting that Fed Put in the form of interest rate cuts badly. Tech stocks were the only clear winners overnight with the S&P500 trying to break free but failing later in the session to finish with a 2 point rise, unable to get back above the psychologically important 2900 point level, closing at 2889 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 were relatively subdued overnight with the USD still flexing its muscles against the majors. The Euro tried and failed to get out of its current plight, now stuck at the 1.12 handle with the four hourly chart showing the abandonment of long positions on Friday night. 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 but a series of lower four hourly highs – with a lot of upside selling – is suggestive of another retraction imminent, as its yet again pushed down to the mid 108’s. Price has been unable to get anywhere near the trailing ATR resistance at the 108.70 level, as this now two week long resistance area remains very stubborn:

The Australian dollar is about to bust through a four year low with another fall below monthly support, finishing this morning just above the mid 68 cent level versus USD. As I said previously, this monthly support level could disappear quickly if the USD uptrend continues:

Oil prices continue to decline despite the warmongering in the Gulf with the WTI contract finishing just below the $52USD per barrel level in a weak session overnight. Price action is somewhat confusing, still although the possibility of a swing higher is now declining. 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 still high higher despite the stronger USD with Friday’s breakout not yet proving false as the shiny metal took a very small step back last night to finish at the $1339USD per ounce level. While this still looks like a blowoff event for mind and I’m continuing to watch gold at the hourly and four hourly level this week for signs of profit taking, there’s also the potential for a 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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