Macro Morning

By Chris Becker 

More stability overnight on Wall Street with European markets also rebounding, while interest rates also rose on the better risk sentiment, the oil price fell again as the DOE inventory report underwhelmed.

Looking at the action on Asian markets yesterday, where the Shanghai Composite continued to fall, albeit at a slower rate, closing 0.3% lower at 2768 points while the Hang Seng Index put in a scratch session, losing only a handful of points to close at 2595* points. This keeps it just above the January lows at 25000 points but nowhere near out of trouble in an obviously extremely oversold position that still has the potential to overshoot to the September 2018 lows at 23000. I’m watching for a new session high and to get back above -200 on the CCI:

Japanese share markets had a similar poor, but not broad selloff, with the Nikkei 225 off by 0.3% to 20516 points, just holding on as Yen stabilised throughout the session. Futures are not  indicating any further falls today, even though the daily chart shows how the 21000 point support level is now a distant memory, wiping out the May bottom and heading to new lows. The December 2018 low at 19000 points could still be the most likely target here if this turns into a dead cat bounce:

The ASX200 was the best mover yesterday helped along by the much lower Aussie dollar, launching 0.6% higher to 6519 points. Despite the positive mood on Wall Street, SPI futures are down 10 points or so, and with momentum so oversold the swing back could be violent here so watch the extreme high/low sessions:

European stocks started off much better, bouncing off the recent lows and then gaining more traction later in the session. The German DAX was the best this time, closing 0.7% higher to 11650 points, clawing back its previous losses but unable to get back above the 12000 point level. The daily chart shows how sessions lows are hovering just above the May lows at 11600 which does speak more of an overall support level building, but this is early days yet:

Wall Street continued its own nascent comeback but it was really on the NASDAQ that put on any gains with the S&P500 lifting only a handful of points to close at 2883, as it tries to get back above key psychological support at 3000 points. I’m still watching this turn into a probable dead cat bounce, with a terminus just above the 2900 point level, but the BTFD crowd may alleviate those fears and a return to the May low at 2750 points:

Currency markets continued to see more activity, although Pound Sterling was still depressed and relatively quiet again as the Euro failed to breakout above the 1.12 handle once more. From here its important to watch the high moving average on the four hourly chart for signs of another breakout, as price remains bunched up and momentum poised for another leg higher as the series of higher lows extends:

The USDJPY pair had decelerated somewhat into a temporary bottom, but has been unable to gain any traction with price hovering below the high moving average and just above the 106 handle on the four hourly chart, spiking down to match the previous start of week low.  This keeps the pair well below the July lows with the longer term chart suggesting a bottom actually nearer the 104 handle. This isn’t over quite yet:

The Australian dollar stopped falling after the surprise RBNZ double cut and attempted a small bounce overnight, but remained well below the 68 handle. Price has been unable to make any new substantive high and remains below trailing ATR resistance as well, but I’m still watching the high moving average as signs of a possible swing higher, but for now all the signs point down:

Oil and other commodities have gone from very weak to almost gutless as the trade war continues with the WTI contract slumping overnight to finish just above the $52USD per barrel level on the back of a poor DOE report. Momentum continues to be sharply negative as the possibility of a selloff down to $50 grows as no new daily highs see the bulls abandon this trade:

Finally to gold, which is soaring to new heights, now taking out the $1500USD per ounce level overnight to another new yearly high. This is now getting WAY overbought but you can’t keep the shiny metal down after being depressed for so long, its the FOMO trade and then some!

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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