Macro Morning

By Chris Becker 

The latest US earnings season has started, and while the headline Dow is up, the broader S&P500 is treading water as US interest rates continue to fall. The USD is up against most of the majors, with oil prices abating due to lesser concern about the hurricane in the Gulf of Mexico affecting supply.

Looking at how the action started the week in Asia first, where the Shanghai Composite started slow before picking up late in the afternoon to close 0.4% higher are 2942 points. The Hang Seng Index firmed around 0.3% higher and consolidated Friday’s rise to close at 28554 points, trying to maintain itself above the previous set of highs at 28500. With support firm at 28000, the market is poised to breakout here, so I’m watching the high moving average level at 28600:

Japanese share markets were closed yesterday but reopen today with futures suggesting a mild start to their shortened trading week. An unsettled Yen is the main reason here, and although risk sentiment is positive, this will weight on the market. As usual, I’m watching the upper/lower bands on the moving average to give signals of intent, with the bulls having the slight edge:

The ASX200 lost more ground yesterday, closing 0.6% lower at 6653 points, mainly due to bank stocks but also a general malaise in industrials, remaining well below the 6700 point level breached last week. SPI futures are down about five points, with the daily chart continuing to suggest a possible dip here as the momentum divergence grows ever stronger:

European stocks look like winding back the strange divergence as the potential dip in the northern share markets is abating with the FTSE up 0.3% for the first time in nearly a week and the  German DAX which lifted 0.5% in a very solid session to finish at 12387 points. The daily chart has shown the potential for a dip or even a wider retracement if ATR support at the 12200 point level was not supported – not out of the woods yet. Price needs to get back above that pierced trendline first:

Wall Street remains on track, but there does seem to be a divergence here as the broader indices are not showing full confidence. The S&P500 only closed half a point higher to 3014, with the four hourly chart showing a lot of hesitation here as a bearish rising wedge pattern takes shape. I’m watching the psychologically important level at 3000 for signs of an inversion – remember what I said about looking at some very cheap options:

Currency markets oscillated between USD weakness and strength with the USDollar Index up nearly 0.2% for the session, the Euro almost unchanged to finish this morning at the mid 1.12’s after it failed to get back above last week’s high nearer the 1.1270 level.   I was watching the four hourly session highs here for signs of a probable breakout to the upside but momentum is still not strong enough:

The USDJPY pair was also largely unchanged given no lead from the lack of trading in Asia and remained under the 108 handle where it starts this morning before Tokyo opens. A very wide falling wedge pattern on the four hourly chart maybe pointing towards a coming reversal, so I’m watching the high moving average line and the 108 handle proper for signs of a series of new four hourly session highs:

The Australian dollar is still looking strong but has stalled here right at the previous weekly high at the 70.30 level, possibly setting up for a rollover as momentum does look exhausted. This is a very crowded trade and ripe for a pullback:

Oil prices retraced overnight as concerns about the hurricane in the Mexican Gulf reduced supply worries, so both Brent and WTI fell, the latter getting  back below the $60USD per barrel level. {Price has been unable to make a new daily high for almost a week, so momentum may rollover her soon, I’m watching the low moving average for signs:

Finally to gold, where intraday volatility is falling sharply as traders try to ascertain the next direction, with the shiny metal finishing where it started at the $USD1413 per ounce level overnight.  The obvious level to watch here is obvious at $1420 – if cleared, everyone will pile in:

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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