Macro Morning

By Chris Becker 

Stocks came back on both sides of the Atlantic overnight despite a fall in USD, positive sentiment building due to the Hong Kong situation changing for the better, while Boris had another failure in his Brexit plans. Bond markets were relatively stable while gold continued to leap to new highs, with commodity prices also finally getting some traction.

Looking at the action on Asian markets yesterday, where the Shanghai Composite ramped up into the close to finish nearly 1% higher at 2957 points while the Hang Seng Index lifted up into the stratosphere, closing 4% higher to 26559 points, all on the back of the extradition bill being rescinded. Pressure has lifted swiftly to bounce off the terminal low just below 25000 points and could fill in quickly if the protests actually end, so the next target to watch is the 27000 point resistance level overhead:

Japanese share markets were mixed even as the Yen sold off slightly during the session with the Nikkei 225 closing a handful of points higher at 20649 points. With USDJPY getting bullish overnight and the Hong Kong situation almost resolved, futures are looking very good this morning with a breakout above the 20800 point level imminent, finally resolving this bottoming pattern:

The ASX200 slid back on the retail sales and GDP print, falling 0.3% to 6553 points with no support from the Australian dollar. SPI futures are up over 20 points this morning, with a much better lead from Wall Street but still held back by an advancing Australian dollar. 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 a handle to the cup is forming, but momentum remains negative:

European stocks had a less nervous night, despite all eyes on the epic drama in the UK Parliament, with a sea of green across the boards and across the Channel too with the FTSE up 0.6% despite a much higher Pound Sterling. The German DAX finished 0.6% higher taking back the previous losses and then advanced further in futures with a nice breakout evident on the daily chart here but still below trailing resistance:

Wall Street also advanced last night after a shaky start previously, with the S&P500 up over 1% to take back its previous losses and finishing at the 2937 point level.  This puts it back near long held resistance at 2940 which had been a distant memory and reversing momentum into something more positive – but not yet confirmed:

Volatility abounds on currency markets still with Pound Sterling launching higher, now up 300 pips after a 200 pip inversion to start the week! Euro is following, but only in relative terms with a break above the 1.10 handle after being oversold since the start of the week, but momentum remains somewhat weak so it might be too far a target to get back to former support, now resistance at the 1.1060 level:

The USDJPY pair bounced back despite general USD weakness with risk sentiment improving, making a new intra-week high but still below last week’s high. Momentum is looking a lot better here, but its still a very sideways market:

The Australian dollar looks like its in full top gear mode, but the gains since the RBA hold are more modest than the four hourly chart looks, with some resistance coming in at the 68 handle, which couldn’t be broken overnight. I said previously that this could run out of steam very quickly if risk goes off, so I’m watching for an inversion or consolidation next as momentum is way overbought:

Oil prices are loving the volatility with both Brent and WTI contract prices launching over 4% after almost making a new monthly low with the latter finishing just below the $56USD per barrel level. Price remains under a lot of pressure here with some big ranges, so the best way to play it remains large breakouts or breakdowns:

Finally to gold, which made another new daily high advancing to the $1552USD per ounce level overnight on USD weakness. 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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