Macro Morning

By Chris Becker 

The US earnings season is putting several headwinds in the way of an ever-rising stock market with US bourses falling overnight in disappointment. European markets fell as well as the prospect of a hard Brexit becomes more likely, with Treasury yields falling again in response.

Looking at the action in Asia yesterday first, where the Shanghai Composite was been unable to get out of its rut, falling another 0.2% to 2931 points while the Hang Seng Index was also off by about the same to 28593 points, still able to maintain itself above the previous set of highs at 28500 but going nowhere. With support firm at 28000, the market was poised to breakout here, but risk sentiment is flat lining, but continue to watch the high moving average level at 28600:

Japanese share markets were the worst off even as Yen moderated, with the Nikkei 225 closing 0.3% lower to 21469 points. Note how the daily chart was signalling a series of lower lows with price bunching around support at the 21400 point level before breaking yesterday. Compounding these falls is a much weaker USDJPY pair overnight so expect a break below the 21000 point level today:

The ASX200 was the odd one out and got some traction with a bounce today as the Australian dollar fellback. The bourse closed nearly 0.5% higher to 6673 points. SPI futures are down 15 points or 0.25%, with the daily chart showing this dip likely to continue down to ATR trailing support at the 6500 level:

European stocks quickly reversed their recent rebound as the hard Brexit lingers in the spotlight again. The FTSE took back its nascent gains and lost nearly 0.6% while the German DAX fell even harder, off by 0.7% to finish at 12341 points, matching the previous daily lows. The daily chart is losing the fight against a wider retracement down to ATR support at the 12200 point level:

Wall Street has turned the recent stumble into a dip with the three main bourses all falling in sync due to the poor earnings season. The S&P500 closed 0.65% lower to 2984 points, reverting decisively below the 3000 point key level as the bearish rising wedge pattern comes to fruition. Remember my take on cheap options? This could get worse, I’m looking at the 2955 point level matching the April highs as the uncle point here:

Currency markets struggled for direction overnight with the USD weakening somewhat on the earnings disappointment, while Pound Sterling tried to find a bottom. The Euro came back slightly  to finish slightly above the 1.12 handle this morning but its a weak move with no new break above the high moving average on the four hourly chart. As expected the union currency is trying to find a bottom near last week’s lows at the 1.12 level which I’m watching for signs of a follow through:

The USDJPY pair fell down after failing to get out of its stalled pattern at the 108.20 to 108.30 level as risk sentiment continues to sour. Momentum was never positive during this swing play and overhead ATR trailing resistance was too far away to be threatened. We’re likely to see a test at the wedge low near 107.80 here:

The Australian dollar came back slightly as well before flopping again to finish a pip or two above the 70 handle overnight. There’s still a chance of a rollover here below ATR support or lower below the 70 cent level so watch momentum to cross to negative:

Oil prices continued to fall overnight with the WTI contract closing below the $57USD per barrel level and matching its previous daily lows in June.I’m watching the previous daily lows at $56 or so for signs of a follow through:

Finally to gold, which finally benefited from the currency volatility and brokeout of its pennant pattern here to a new high at the $USD1426 per ounce level overnight. As I said previously,  if the $1420 level was cleared, everyone will pile in so watch this space:

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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