Macro Morning

By Chris Becker 

US stocks gapped down on the open and remained in the red all session in response to the weak session in Asia, with European bourses barely keeping afloat as well. All because the punchbowl might be filled only halfway by the Fed instead of overflowing, as US Treasuries remained slightly above the 2% yield level and the USD remained strong against the undollars.

Looking at the action in Asia yesterday, where the Shanghai Composite was flummoxed by not only by the NFP result on Friday, but also suggestions that the trade war with the US is far from over, falling more than 2% to be at 2933 points.  The Hang Seng Index also put in a big selloff, falling 1.5% to 28331 points, breaking well below the previous set of highs at the 28500 level. The area to watch here is the low moving average support but also the previous session lows just above the 28000 point level which must be supported for this rally to continue:

Japanese share markets were also lower as safe haven buyers turn to Yen instead with the Nikkei 225 closing 1% lower at 21534 points. Although the USDJPY pair rallied overnight, futures are quite mixed this morning in line with coordinated poor market sentiment, so it’s unlikely we’ll see a new daily high form here:

The ASX200 was pulled back strongly from its previous record highs with a 1.2% loss to 6672 points, not helped at all by the falling Australian dollar on Friday night. SPI futures are flat given the mixed lead from Wall Street, and the market is well overdue for a retracement as short term price action is a classic false break higher move. Watch for support at ca. 6550 points as the uncle point that could give way as momentum diverges from price:

European stocks gapped down and stayed down despite continually weak domestic currencies, particularly Pound Sterling, with a series of scratch results across the continent. The German DAX fell 25 points or nearly 0.25% to finish at 12543 points, retracing back from its series of lower daily highs as momentum continues to wane. This sets up for a potential dip or swing play back to the previous breakout level around 12380 points or so:

Wall Street did even worse on the poor sentiment with all three major markets posting falls, NASDAQ the strongest, off by 0.7% while the S&P500 finished 0.5% lower to 2975 points. This keeps it below the psychologically important 3000 point level and in sight for a short term dip as no new daily high has been made for over a week. I’m watching the previous high at the 2960 level to come under pressure next:

Currency markets remain too quiet again as both Euro and Pound Sterling melt lower in repeated price patterns of last week.  The union currency remains below its weekly long held support level at the 1.1270 area and is threatening to break below the 1.12 handle. As I said last week, price action was suggesting a flip over and a move back to the April lows:

The USDJPY pair however continues to shoot higher despite the brief Yen safe haven buying reprieve, making another new intraweek new high at the 108.70 level. I’m still expecting a retracement however as momentum is way overbought, but it could surprise to the upside if more vocalisation about keeping the easing train going by the BOJ is transmitted:

The Australian dollar remained back below the 70 handle after a very minor rally in the first session on the Monday morning open, finishing at the 69.70 level before the Sydney open this morning. I’m watching the session lows on the four hourly chart for a further inversion below the 69.50 level:

Oil prices remain relatively stable as no news is good news from the Gulf with the WTI contract falling slightly to finish right on the $57.50USD per barrel level. It still looks like staunch resistance at the $60 level remains too hard to beat but I’ll continue to watch the recent daily lows to see if they’re being supported for signs of a possible violent melt up higher:

Finally to gold, which failed again to get out of its recent funk, falling for a new daily low to finish at the $1395USD ounce level, as resistance around the $1420USD level firms. This almost seals its fate, but I’ll watch ATR support at $1370 to hold here first before suggesting a full blown correction and winddown of longs:

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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