Macro Morning

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Macro Afternoon

By Chris Becker 

The dead cat twitched on its terminal bounce and markets are now mistaking it for signs of life as Congress finally agrees on a significant fiscal spending bill. Wall Street soared 10% higher with the USD falling slightly, alongside Treasuries while commodities were relatively unchanged, except for gold which soared another 5%

Should be a super green day here in Asia – but this is Soylent Green markets are eating now…

Looking at Asian share markets yesterday, where the Shanghai Composite was up 1% or so after the lunch break but then accelerated at the close to finish 2.3% higher, breaking through the 2700 point barrier finally. Meanwhile the Hang Seng Index closed more than 4% higher, taking back the previous losses and then some to be at 22663 points. The daily chart showed significant anchoring and firming support just above the 21000 point level with a slight deceleration in selling and inversion of momentum that pointed to this swing higher. No reason to get excited until that high moving average is broken though:

Japanese share markets are stonking the rest of the region with a big upsurge in the wake of more internal stimulus, the Nikkei 225 closing over 7% higher for a near 10% gain already this week, at 18092 points. The daily chart was showing significant price deceleration here as the thieves quietly spoke to each other to stop shorting, with support at the 15700 point level quite evident. With a break of the high moving average at the 18000 point local resistance area here comes more temporary upside:

The ASX200 had a very solid session, leading by over 4% at lunch before some profit taking in the afternoon sent it down to only a 1% gain, just before a FOMO trade at the close saw it hold on to the 4.2% gain to 4735 points. SPI futures are up a stonking 6% this morning with many among us who see this joke of a market push through the 5000 point level to be broken on the open!

European markets had big gains as well, with the Eurostoxx 50 closing 9% higher while the German DAX was the best on the continent, up 11% to 9700 points. As I said yesterday, the DAX daily chart was showing a possible bottoming picture with post close futures rallying in the wake of the new Fed QE programs, but you and I have been through that before – watch for the 10,000 point barrier to come falling next:

Wall Street loved the Congress action with the Dow making its best one day gain in nearly a century, up over 11% while the broader S&P500 eventually closed 9.4% higher to 2447 points. The four hourly chart puts the current move in context, showing how trailing ATR resistance at the 2500 level needs to be broken to call this a proper bear market rally, because I don’t think that is our fate just yet:

Onto currency markets where volatility was again minor in comparison, with only a slight selloff in USD (and bonds) which is pointing to some false talking around risk markets. Euro rolled over below the 1.08 handle as it was unable to swing higher on an exhaustion trade overnight, with momentum now flatlining:

The USDJPY pair remains stuck here with yesterday’s very short term triple top pattern now morphing into a consolidation, ready to break higher above the 112 handle, but the hour is getting late for such a breach, as risk will pour in here shortly:

The Australian dollar is still stabilising here helped by the temporary USD weakness with a push higher up towards the 60 handle overnight. With risk markets spiking all along the complex, there’ll be a lot of short positions wound back here, but I’m keeping the view that is temporary:

Oil had another relatively stable session with the  WTI contract lifting slightly to finish just above the $24USD per barrel level. The daily chart shows a nominal bottom forming at the $20 level, but intraday volatility is slowly pushing towards a potential short term spike higher. However be cautious catching this falling knife:

Finally to gold, which is the real reason to get excited! Another wild night that saw it breach the $1600USD per ounce level in the wake of the Congress stimulus package, continuing its epic bounce off support at the October 2019 lows at $1450. Where too from here depends on the sustainability of risk in other markets and the USD weakness:

 

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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