Macro Morning

By Chris Becker 

With no economic events overnight, risk markets hinged on the unhinged tweets from Trump while the UK tried to de-escalate tensions with Iran over its seized oil tanker. Tech stocks had a very positive night while industrials on Wall Street were subdued as disappointing earnings keep rolling in. Currency markets were quiet as gold hovered near its recent highs.

Looking at the action in Asia yesterday, where Chinese stocks sold off the most with the Shanghai Composite 1.3% lower and well below the 2900 point barrier while the Hang Seng Index also off, closing 1.4% lower to 28371 points. This puts it below the previous set of highs at 28500 as pressure mounts so I’m watching the low moving average level and recent dailys lows at 28300 to come under pressure today:

Japanese share markets were able to shake off most of the negative sentiment due to a much weaker Yen, but the Nikkei 225 still fell, closing 0.2% lower to 21416 points. With not much happening with the positively correlated USDJPY pair overnight, and the continued uneasiness over risk sentiment there’s probably going to be another stalled session today. I’m still positioning here for a possible break below the 21000 point level, however the recent bounce has potential to turn into a swing higher above the high moving average, with a short upside up to the previous set of daily highs at the 21700 point level:

The ASX200 was the relative best in the region, falling 10 points or about 0.2% to close at 6691 points. SPI futures are up over 10 points or 0.1%, and given the overall trend and the positive lead from Wall Street overnight that could turn into a larger move today. Momentum is picking up again and support at the 6570 level remains very firm:

European stocks wobbled along, with no real push from domestic currencies to help or hinder with the German DAX again eking out a meager gain of 0.2% to finish at 12289 points. The daily chart remains anemic as price struggles at the ATR support level at 12200 points and while momentum is not yet negative, unless there is a better sentiment change coming soon its not looking good:

Wall Street was split somewhat with tech stocks gaining while the industrials were barely moved. The S&P500 advanced 0.3% to 2985 points in what looks like only a minor blip higher following the ominous bearish engulfing candle on the daily chart previously. Shifting to the four hourly chart, there has been no new highs since the mid July highs. I still contend that there’s likely to be a further dip back to the previous highs at the 2955 point level unless earnings really start to shift to upside surprises:

Currency markets remain poised here without a lot of intrasession volatility with the USD remaining somewhat strong against the majors. The Euro was almost pushed below the recent session lows right on the 1.12 handle but is just holding on, remaining precarious here at a key psychological level:

The USDJPY pair was unable to turn its bounce back into anything substantive finishing where it started at the 107.80 level. The four hourly chart shows how overhead ATR trailing resistance remains too far away to be threatened, and despite the Friday night bounce, this has been a good Yen buy so far for position traders. With the wedge low at 107.80 taken out the next stage is the June lows at 106.80:

The Australian dollar remains the smoothest pair for USD players but had almost nothing to do yesterday with another slow melt back to just above the previous daily highs at the 70.40 level. As I said last week, the previous move was overdone anyway and ripe for a dip:

Oil prices have been unable to rally on increased Persian Gulf tensions with the WTI contract inching forward to close just above the $56USD per barrel level, staving off another new daily low. There is chance for a follow through below ATR daily support here and a full retracement back to $50 – but volatility beckons as usual:

Finally to gold, which is just holding on to its recent kickback to finish again around the $USD1425 per ounce level. The bearish engulfing candle and price action remaining below that significant downtrend line from the record highs is putting a lot of buy fingers on pause for now, so time to switch to the lower timeframes:

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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