Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

The bounce is on with no bad news equating to stronger risk sentiment overnight, helped along by comments that US/China trade talks are “progressing” (alongside the Greenland purchase!) Talk in Germany about more stimulus also helped continental stocks but not the Euro which slumped to a new low, while the Australian dollar fell slightly as oil prices rose alongside other commodities, save gold which is having a welcome breather.

Looking at the action on Asian markets yesterday, where the Shanghai Composite rebounded strongly to close 2% higher at 2883 points while the Hang Seng Index did even better, up 2.2% to finish at 26297 points. This is a great result, sending the bourse up to a new high and above the high moving average but not quite above the previous bounce point. This does not rule out a recovery but its early days yet, this remains one for the bottom pickers:

Japanese share markets did well as the Yen was steady throughout the session with the Nikkei 225 advancing nearly 0.8% to finish at 20536 points. Futures are suggesting a mild gap higher on the open better start this morning as Yen sold off more overnight as Wall Street continued its bounce back. The daily chart is showing a bunching up of price between 20100 and 20700 which could result in a big breakout if risk sentiment increases from here, but this is a swing play for now:

The ASX200 started the week with a bang, up 1% even to close at 6467 points, with bank and oil stocks leading the way. SPI futures are up a modest 12 points following Wall Street’s performance overnight, so while the good mood will continue today, the daily chart remains weak at best. Resistance at 6530 or so needs to be cleared before getting excited here:

European stocks were strong across the board, helped by the stimulus comments and a much lower Euro with the German DAX finishing another 1.3% higher at 11735 points, finally getting back above recent support at the 11600 point level. I mentioned yesterday that last Thursday’s candle was a classic bottoming pattern with its long tail on oversold momentum, and there’s now mounting evidence of a potential bounceback –  but caution until that high moving average band is solidly broken and closed above first:

Wall Street loves a positive story, which for now is the absence of bad news with the BTFD crowd pushing the three major bourses again, all but the Dow moving 1% higher with tech stocks leading the way. The S&P500 finished 1.2% higher at 2923 points, with the 2900 point level taken out but not former daily ATR resistance at the 2940 level which still needs to be cleared to call this correction off:

Currency markets are somewhat mixed again with Pound Sterling having a shaky start to the week while Euro tried and failed to gain traction in the midst of more stimulus talk. You know the union currency is in trouble when the Germans start talking stimulus! Unable to crack through the 1.11 handle overnight its now retraced to almost match the Friday lows with the four hourly chart showing the potential for further losses here down below the 1.10 area:

The USDJPY pair moved higher again, a steady rising and relatively tight trend channel up to but not through last week’s session highs at the 106.70 overnight. While I continue to watch trailing ATR support at the mid 105’s to come under pressure here again if we get another risk off event, this has the potential for another breakout above the 106.80 level:

The Australian dollar however has turned its steadying trend into a fail with a drop off of buying support overnight seeing the Pacific Peso flop to the 67.70 level and well into negative momentum territory. As I said yesterday, I still contend there’s a lot of weakness here so I’m positioning for a return to former ATR support at the 67.40 level where I expect another breakdown and back to the previous lows below the 67 handle:

Oil prices re-engaged to start the week well, with the WTI contract lifting nearly 1.5% to finish just above the $56USD per barrel level overnight. This puts it back above the high moving average on the daily chart but momentum still remains negative and not supportive of a trend here until overhead ATR resistance at $57.50 is taken out:

Finally to gold, which as expected is rolling over here as part of a consolidation period after a big flourish in the last couple of weeks that took it well over $1500USD per ounce. While it has now retraced below the level, this is a good correction and should see a sideways trend from here:

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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