Macro Morning

By Chris Becker 

Its all swings and roundabouts with the Chinese overnight indicating they won’t retailiate against Trump’s latest tariffs (and they’ll overlook his lying about phone calls too!), which sent risk markets sharply higher, dragging the USD along as well. Treasury yields dropped, with the 10 year losing 10 points as money went back into stocks, as gold also pulled back to almost a new weekly low.

Looking at the action on Asian markets yesterday, where the Shanghai Composite was down a handful of points again, remaining below 2900 points while the Hang Seng Index was continuing its mild retreat before a late rally at the close saw it lift 0.3% to 25703 points. Price is slowly getting out from under pressure by lifting above the low moving average on the daily chart, and for now has stave off a return to the terminal low just below 25000 points. This could be the start of a swing rally higher, with the first target to reach the previous bounce high at 26200:

Japanese share markets put in scratch sessions, closing before a big selloff in Yen, with the Nikkei 225 largely unchanged at 20460 points. Futures however are pointing to a very good start to the session today after Yen slipped overnight in the risk-on mood. Indicative price is now hovering at the previous highs at just below 20700 which if broken could see a surge of buying as this pattern as wiped out most of the position players:

The ASX200 was the best again in the region, but its all relative, as it escaped with a very mild rise of 0.1% to finish at 6507 points.  SPI futures are up nearly 50 points or 0.7% higher so we should expect a solid session today.  The daily chart is morphing into a cup type pattern, capturing the hopes of bulls so watch for resistance at 6530 to be taken out today as the first step to getting a handle pattern back up to the 6640 level:

European stocks are finally gaining some traction following all the Brexit shenanigans, with continental stocks gaining over the FTSE for a change. The German DAX finished 1.2% higher at 11838 points, bursting through recent support at the 11600 point level and also turning the weak daily chart pattern into something that looks more bullish. I’m watching momentum readings to become positive soon and a break above 12000 points before calling this dip over:

Wall Street loves a good story – damn the facts – with all three bourses again putting on solid gains, the S&P500 finishing nearly 1.3% higher at 2924 points. The four hourly chart shows how    short term resistance at the 2900 point level has been taken out but price is still rejecting long held resistance at 2940 points. Again, it ain’t over:

Currency traders are still loving the volatility with the Euro now definitively breaking down below the 1.11 handle overnight to almost a monthly low. Momentum is definitely against the union currency as we head full on into Brexit – not long now. The overall longer term price pattern remains down:

The USDJPY pair continued its late Asian session breakout, but found some selling pressure up near last week’s terminal highs at the mid 106’s. Remember this pair is acting completely on speculation that the US/China trade war will find an armistice soon – be careful of false wishes and keep your risk management tools at the ready:

The Australian dollar had a mild push higher before sellers stepped in and slapped it back to reality, keeping it at or near the Monday morning gap open level. The Pacific Peso is not looking healthy here at all as the failure to breach the previous weekly high so internal weakness indicates a breakdown soon:

Oil prices lifted again with both Brent and WTI up 1% or so with the latter contract closing in the mid $56USD per barrel range. This puts it back above the high moving average on the daily chart with the potential to breakout above trailing ATR resistance at the $57 level:

Finally to gold, which is starting another rollover pattern, falling over $20 last night to make a weekly low at the $1527USD per ounce level. While this continues to be a nice ride with only some hesitation along the way, I continue to caution to keep a series of uncle points ready, perhaps the first starting at just below the $1500 handle is prudent, because dips and consolidation periods are not unusual at all:

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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