Macro Morning

By Chris Becker 

US markets reopened overnight, and were flummoxed by a weak ISM manufacturing print that retracted for the first time in three years, sending risk sentiment in negative territory. Stocks and the USD fell while Treasuries rallied sending the 10 year yield down to a three year low, hovering just above 1.43% as the market prices in more  Federal rate cuts. Gold was a big benefactor overnight, while other commodity prices fellback.

The big news was the development in the British Parliament as freshly minted PM Boris Johnson lost his majority as a key Tory member defected to the Lib Dems midway through his maiden Brexit bill, which was defeated. This will likely trigger a general election, sending Pound Sterling higher and volatility higher!

Looking at the action on Asian markets yesterday, where the Shanghai Composite closed with a small lift, up 0.2% to finish at 2930 points and building above the psychologically important 2900 point level. In Hong Kong, the Hang Seng Index fell 0.4% to 25527 points as selling pressure continues to build, price remaining well below the low moving average on the daily chart, still anchored nearer the terminal low just below 25000 points:

Japanese share markets put in scratch sessions as Yen remained firm, but steady with the Nikkei 225 closing a handful of points higher at 20625 points. The problem is with the risk off mood overnight translating into a big selloff in USDJPY, Japanese shares are likely to invert here and threaten tentative support at the low moving average closer to 20000 points:

The ASX200 also put in a nothing result, falling 6 points to close at 6573 points with no support from the RBA at its meeting. SPI futures are down over 40 points this morning, or around 0.6% as the double whammy of a poor lead on Wall Street and the Brexit saga carry on to invert risk sentiment – again. The daily chart is still trying to decide if its a cup type bullish pattern, or just another dead cat bounce, with price action indicating more pressure to knock out the tentative uptrend as momentum remains negative:

European stocks had a nervous night, closing before the Brexit brouhaha with mild losses across the continent as a much firmer Euro stole back some of the recent tailwinds.  The  German DAX finished 0.4% lower at 11910 points, although that’s still above recent support at the 11600 point level it keeps it firmly anchored below 12000 points. Momentum on the lower timeframes indicates a rollover is possible soon, so watch the recent daily highs as possible short term resistance to firm:

Wall Street came back last night from the long weekend, with so many things up in the air – Hurricane Dorian, Brexit and local macroeconomic prints like the ISM manufacturing survey, which was in TLDR terms – not good. All three major markets closed down for the session, with tech stocks leading the way, the S&P500 the relative best only down 0.7% to 2906 points.  The four hourly chart shows a potential break below 2900 points that if broken will open the floodgates for selling as long held resistance at 2940 remains a distant memory and is pushing into a second month as momentum remains in negative territory:

Currency traders are loving the great volatility around continental currencies with a big blip higher in Pound Sterling almost replicated by Euro as the ISM print was overshadowed by the Boris loss. The Euro lifted off the deck to almost breach the 1.10 handle after being oversold since the start of the week, but the overall longer term price pattern remains down:

The USDJPY pair fell back on general USD weakness on the ISM print, and is looking weak coming into Asian session, hovering just above trailing ATR support on the four hourly chart at just below the 106 handle. This is looking ominous for risk assets, with a break below signalling a lot of safe haven buying and a switch out of equitieS:

The Australian dollar went into full reverse mode yesterday as the RBA stubbornly held at its latest meeting, going into a nosedive prior on the poor retail sales figures and then shooting higher throughout the night to finish this morning at the mid 67’s. I did mention the potential for breakout above the high moving average, at low probability but high payoff yesterday – and it worked thankyou very much – but this could run out of steam very quickly if risk goes off, so I’m watching for an inversion next:

Oil prices came back to full volatility overnight as US traders stepped back in with both Brent and WTI contract prices falling around 1% with the latter almost making anew monthly low before recovering to just below the $54USD per barrel level. Price remains under a lot of pressure here with little to no chance of a potential breakout above trailing ATR resistance at the $57 level:

Finally to gold, which after another short term consolidation phase as seen it burst higher again, almost making a new intra-session high before settling at a new daily high at just below the $1550USD per ounce level. Overall, price action remains bullish as the previous small dip in momentum (note the lower readings below 100) is now picking up again, not requiring any further retracement to get the bugs moving higher again:

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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