Macro Morning

By Chris Becker 

The oil crisis in Saudi Arabia dominated the headlines overnight, pushing stock markets down and sending WTI and Brent crude prices nearly 14% higher. Other safe havens like Yen and gold continued to lift from their Asian sessions, while Treasury yields fell back amidst an absence of economic events. Commodity currencies remain under pressure while the USD flexed its muscles again.

Looking at the action on Asian markets yesterday, where the Shanghai Composite reopened after a long weekend and was relatively stable, down just a handful of points to remain just above the 3000 point barrier while the Hang Seng Index was not so lucky, closing nearly 1% lower at 27124 points, holding just above former overhead resistance at 27000 points. Price had tentatively broken through  trailing ATR resistance at the 27000 point level last week but momentum is now flatlining given the risk off mood, so I’m watching the high moving average to come under pressure here on the daily chart:

Japanese share markets were closed for a holiday, leaving speculation in Yen which saw the USDJPY pair gap down but not as far as expected. A cursory look at the daily chart shows price action is a classic bubble like blowout which is likely to be resolved in a pullback today given the co-ordinated risk off mood across other stock markets, so watch for the 21650 local support area to come under stress:

The ASX200 actually made some gains, but only a handful of points, starting the week at 6673 points.  SPI futures are down about 0.25%,  indicating a continued staid start to the week. Price action on the daily chart is indicating a possible rollover here with hesitation brewing and signs of a pullback below former ATR resistance:

European stocks dropped in response to the big rise in oil prices with the German DAX dropping nearly 0.7% to 12380 points. This is a welcome pullback as the DAX daily chart pattern is nearly bubble like and requires some deflation. Whether or not price can hold here just above the high moving average or continue to retrace is another matter:

Wall Street did a little better than European bourses, with all three markets only retreating around 0.3% or so with the S&P500 closing  just below the 3000 point mark. This is a much more stable price pattern compared to other stock markets as above, but still requires a break above the former early July highs slightly above or this reflation rally is over:

Currency markets went nearly all in USD with both Euro and Pound Sterling pulled back, the former more so where it finished this morning right on the 1.10 handle. This is to be expected with a big print in oil prices so we could see the September lows at the mid 1.09’s as the next target:

The USDJPY pair at first gapped down significantly on the open here in Asia yesterday as Yen safe haven buying pushed it to the low 107s but this was quickly filled throughout last night and we’re back to Friday nights session highs above the 108 handle. Its a hard read from here as momentum was considerably oversold but has had the appropriate inversion and good fill so there is potential for an upside breakout:

The Australian dollar is still somewhat calm amidst all the Euro- and oil-vol with only a small drop overnight where local support at the mid 68’s is keeping the bears at bay.  . There is a possibility of a rounding top here as consolidation could turn into inversion, so watch momentum readings and local support at that mid 68 level:

Oil prices immediately gapped over 10% higher with a lot of intrasession volatility, with WTI eventually closing overnight just below the $62USD per barrel level. It’s hard to make predictions, especially about the future direction of oil prices, but the volatility will be high for some time:

Finally to gold, which is not giving that much support to the safe haven bid considering the volatility and finished with a weak session overnight to just below  the $1500USD level. While hope is building here for another leg higher, I’m not convinced and we could see more downside action to the previous resistance level at $1425 as part of a bull market dip:

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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