Macro Morning

By Chris Becker 

Another mixed night on equity markets at least with currency markets stabilising going into tomorrow nights ECB meeting, with bonds selling off on the possibility of a cooling trade war with China. A possible hot war with Iran is likely to be averted as National Security Advisor John Bolton got the tweet flick overnight, which sent oil volatility higher, while gold continues to deflate into the US CPI print tomorrow.

Looking at the action on Asian markets yesterday, where the Shanghai Composite was at first taking back its previous gains, but recovered somewhat post lunch break to put in a minor scratch session, still above the 3000 point barrier at 3021 while the Hang Seng Index is doing the same, still at 26672 points remaining somewhat overbought. There is still hope here if price can significantly break above trailing ATR resistance at the 27000 point level – but has to be soon:

Japanese share markets were the only ones moving forward with the Nikkei 225 closing 0.4%  higher  to 21392 points making yet another new daily high.  This remains a very solid breakout following weeks of consolidation with a bottoming pattern, with price now closing above trailing ATR resistance and momentum well into the positive zone.  USDJPY  rose again overnight, so despite my concerns of too fast a move, we should see more upside today as price closes in on the previous double top high near 21800:

The ASX200 was the worst in the region, falling a decent 0.5% but still maintaining a solid run above the 6600 point level, closing at 6617 points.  SPI futures are up around 17 points this morning as the lead from Wall Street was subdued, as the 6600 point level continues to act as local support.  Price action on the daily chart indicates a firm trend is underway, but ATR reisstance overhead needs to be cleared substantially before getting back to the 6800 point highs:

European stocks were generally positive as local currencies abated, with the German DAX again putting in a solid session to finish up 0.3% to 12268 points. The DAX daily chart continues to be very positive, with price action well above its own high moving average and now clearing ATR resistance as support at 12000 points firms, as this bounce looks like turning into a sustainable rally:

Wall Street was somewhat subdued with tech stocks falling slightly while industrials held on to the recent gains as the  S&P500 closed gained only one point to finish at 2979. While price remains well over long held former resistance at 2940, momentum is now with futures indicating a continued slow start to the week as the key 3000 point barrier remains untested :

Currencies are in a holding pattern it seems as a brace of central banks and key inflation figures are released soon. Pound Sterling calmed down somewhat overnight but is still looking like surging again, while Euro remained very steady just below the mid 110’s. Price remains above trailing ATR support proper on the four hourly chart but the high/low moving averages are tightening suggesting a breakout will occur soon. I’m positioning for a break below ATR support as this pattern morphs into a double bearish top:

The USDJPY pair continued higher however, finishing well above the 107 handle again and making another daily high this morning. Although momentum is considerably oversold a pullback is not yet evident as Yen sellers buy up domestic Japanese stocks instead – watch support at the low moving average at ca. 107.30 to hold here but also for signs of an inversion:

The Australian dollar is also calming down with almost no volatility overnight, finishing below the 69 handle again.  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 was way overbought but now receding to the zero signal:

Oil prices tried again to breakout but may get flummoxed as the WarHawk Wonder John Bolton gets the flick which may allay Middle East fears. WTI had a wide range overnight but eventually settled just below the $58USD per barrel easing off the throttle a little. This breakout only has a small target to reach at the $60 level so its a low risk/reward proposition:

Finally to gold, which is now selling off going into this week’s CPI print, finding no buyers to support it at the $1500USD level as Asian sellers pushed it well below yesterday.   I keep saying you should always expect these retracements and dips as normal in a rally, but momentum is now well into the negative zone for the first time since the major resistance level at $1425 or so was broken, so consolidation could turn into a bull market dip back down there:

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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