Macro Morning

By Chris Becker 

Its all about trade talks again overnight with US stocks leading the charge, European stocks also surging while the FTSE retraced as a higher Pound Sterling and more Brexit chaos takes a toll. The services ISM was surprised to the upside, helping boost sentiment and taking some heat out of gold which fell more than 2% as Treasury yields also backed off. Should be a green finish to the week here in Asia with futures indicating rises across the board.

Looking at the action on Asian markets yesterday, where the Shanghai Composite swiftly leapt higher and held on to those gains, closing 1% higher to 2988 points while the Hang Seng Index has retraced slightly given the huge gains previously, finishing with a scratch session losing a handful of points to 26515 points. This is to be expected after a huge surge so we could see further consolidation going into the weekend, but price should be maintained above the high moving average as this bounce turns into a rally:

Japanese share markets were the strongest given the risk on mood and as Yen sold off slightly during the session with the Nikkei 225 closing 2% higher at 21085 points making a new monthly high.  With USDJPY getting very bullish overnight and the Hong Kong situation almost resolved, futures are again looking very good this morning with a breakout above trailing ATR at the 21200 level possible today::

The ASX200 surged in the damn the torpedos/recession move, up nearly 1% to close at 6613 points as the Australian dollar continued its advance. SPI futures are up over 20 points this morning, with a great lead from Wall Street but still held back somewhat by that stronger Australian dollar. Price action on the daily chart indicates a firm trend is underway, but ATR reisstance overhead needs to be cleared before getting back to the recent highs:

Despite all eyes on the epic drama in the UK Parliament, only the FTSE fellback in (out) Europe overnight with continental stocks advancing on the good mood. A pause in the rally in Euro is helping somewhat with the German DAX finished 0.8% higher to 12126 points, gapping higher and looking very bullish here as the shorts abandon their positions: 

Wall Street loves the empty talk on trade talks but doubled down on risk with the better than expected ISM print, advancing strongly across the board overnight. NASDAQ was up almost 2% while the S&P500 lifted over 1.3% to firmly put long held resistance at 2940 behind it. Another close above that level and its all guns blazing to get back to the previous highs above 3000:

Volatility remains high on currency markets still with Pound Sterling lifting to a two month high while Euro tried to get into the stratosphere before being pulled back late in the session to finish up this morning just above the 1.10 handle. Momentum remains mixed here with selling action indicating it might be too far a target to get back to former support, now resistance at the 1.1060 level:

The USDJPY pair also tried to get into full steam on the ISM print but came back slightly to be just under the 107 handle this morning. This firmly takes it above the long held resistance level at the mid 106’s but momentum is considerably oversold so I would not be surprised if we see some consolidation and a pullback to the low moving average:

The Australian dollar is slowly topping out here with its big post RBA uptrend stalling out just above the 68 handle.  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 continue to enjoy a lot of volatility with both Brent and WTI contract prices both breaking out last night before retracing back to almost where they started, with the latter finishing just above the $56USD per barrel level. As I said yesterday it still remains the best way to play oil with large breakouts or breakdowns – and that means a close, not just a feint:

Finally to gold, which after making another new daily high has been flummoxed by the better than expected ISM print, falling straight back to the $1519USD per ounce level overnight. while the overall price action remains bullish you should always expect these retracements and dips as normal in a rally, with the previous small dip in momentum (note the lower readings below 100) indicating there is consolidation ahead:

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!

Comments are hidden for Membership Subscribers only.