Macro Morning

By Chris Becker 

Risk sentiment was pushed lower overnight as the less dovish Fed and a slump in new home sales saw a selloff across Wall Street with tech stocks leading the way. Oil prices shot higher again on more Gulf tensions with the USD roaring back to life.

Looking at yesterday’s action in Asia first, the Shanghai Composite fell nearly 1% lower as it retraced swiftly back below the 3000 point barrier while the Hang Seng Index has moved even further, down 1.2% to 28185 points. The daily chart had been trying to build above last weeks breakout but an inability to make any new session highs above 28600 was telling, so watch for a further retracement below 28000 points to confirm this dead cat bounce:

Japanese share markets were surprisingly resilient despite a much stronger Yen with the Nikkei 225 closing 0.43% lower to 21164 points. Futures however are suggesting a much weak session today with the potential to push back down below the 21000 point barrier, as risk sentiment sours, so watch the low moving average for a full rollover here:

The ASX200 remained the best in the region, but it was all relative, falling 0.15% to 6658 points.  SPI futures are down at least half a percent though on the poor lead from Wall Street, where very strong support at the 6500 point level must hold to keep this ephemeral rally intact:

European stocks started off well enough, remaining a little cautious but fell as US stocks came online with the FTSE putting in a scratch session while the German DAX made another new daily low, falling 0.4% to 12228 points. The daily chart shows how price has been unable to beat the April highs near the 12500 level with the recent price pattern all but confirming an imminent big retracement back below former trailing resistance at 12200 points:

All eyes are on Wall Street to provide the positive lead for risk sentiment, and last nights action was not good given that it only took a less than supportive – not hawkish – comment from one Fed wonk to see it evaporate. The DOW fell 0.7% while tech stocks sank over 1.5% on the NASDAQ. The broader S&P500 finished nearly 1% lower to 2917 points. This is not the small retracement everyone was considering necessary to arrest the recently fast incline, with price about to cross below the low moving average – a harbinger of further falls:

The USD came back against most of the majors  with the Euro confirming its bearish rising wedge pattern to fall below the 1.14 handle and settle at the mid 1.13’s overnight. There’s substantial support at the 1.1330 level to overcome however, corresponding to the previous weeks highs so this could just be a one off:

The USDJPY pair came back slightly after yesterday’s big flop below the 107 handle, getting just above that level overnight but not looking positive as the high moving average was not breached. There is an overall decelerating pattern here but still not evidence of a solid bottom:

The Australian dollar fell only slightly on the USD strength with not that many sellers as this trend up towards the 70 handle continues. There are some signs of exhaustion at the four hourly session highs and today I’ll be watching hte RBNZ meeting and the AUDNZD pair – now at a new low – for signs of possible weakness below the 69.50 level:

Oil prices have re-engaged to the upside, helped by more Gulf volatilty but also recent inventory reports with the WTI contract advancing more than 2% to well above the $58USD per barrel level, taking out key ATR trailing resistance above. Daily momentum is now positive and price action poised to revisit the former highs:

Finally to gold, which continues to leap higher and advancing to yet another new record high, this time up to the $1423USD per ounce level overnight despite a stronger USD. This remains a big potential move on the way back to the 2008 levels, but its way – way – overbought in the short term:

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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