Macro Morning

By Chris Becker 

The short sellers are getting wiped out as stability turns into dip buying overnight on Wall Street and in Europe rebounding solidly. US Treasuries fell slightly but yields remain super low while commodity markets firmed slightly on the better risk sentiment, with the Australian dollar coming back before selling off later in the session.

Looking at the action on Asian markets yesterday, where the Shanghai Composite played catchup, bouncing nearly 1% higher to 2794 points while the Hang Seng Index put in a similar lift, up 0.5% to 26120 points. This keeps it above the January lows at 25000 points and a new daily high, but still in trouble with 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 were up slightly with the broader TOPIX stalling while the Nikkei 225 lifted by 0.3% to 20593 points, taking back the previous session losses. Futures are look much better today, with the daily chart showing a desire to return to the 21000 point support level so as not to make this a dead cat bounce. A new daily high above the high moving average is required to negate that concern:

The ASX200 was again one of the best movers despite a higher Aussie dollar, lifting 0.7% higher to 6568 points. SPI futures are lifting today so we should see a solid open and perhaps a return above 6600 points as momentum is swinging back to former support:

European stocks gapped much higher and stayed there for the session, with no news meaning good news with near 2% rises across the board as short sellers cashed in their profits. The German DAX closed nearly 1.7% higher to 11845 points, still clawing back its previous losses but not yet back above the 12000 point level. The daily chart shows how the previous sessions lows hovered above the May lows at 11600 which does speak more of an overall support level building, but this is still early days yet:

Wall Street continued its own comeback which has now accelerated and broadened from the NASDAQ and into the S&P500 which finished nearly 2% higher to 2938 points. This keeps it on track to watch to get back to its former support, now resistance level at 2950 which must be breached soon to get rid of the dead cat bounce trope:

Currency markets are stabilising however, with a depressed Pound Sterling unchanged overnight alongside Euro which slipped just below the 1.12 handle in a minor selloff. I have noted that watching the high moving average on the four hourly chart for signs of another breakout, but it seems a rounding bearish top pattern is forming instead as momentum wanes and USD gains strength, so I’m watching the former session lows at 1.170 for signs of a breakdown:

The USDJPY pair however is much clear and desptie a deceleration into a temporary bottom, has been unable to gain any traction with price hovering at the low high moving average and now below 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 spiked overnight to breach trailing ATR resistance but has since comeback as it was unable to stay above the 68 handle. This maybe the end of the swing higher and now its another leg down, but the Aussie continues to surprise:

Oil and other commodities still remain weak although are finding some bids here and there, the WTI contract still remains in the doldrums with a slight rise to finish just below the $53USD per barrel level on the back of a poor DOE report. Momentum continues to be negative as the possibility of a selloff down to $50 grows:

Finally to gold, which after soaring to new heights, taking out the $1500USD per ounce level had a pause overnight to match its previous 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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