Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

By Chris Becker 

The dead cat is now in hover mode as Wall Street was unable to translate epic gains in Asia then Europe into anything substantial, with the NASDAQ actually retreating slightly despite the substantial stimulus packaged passed by Congress.  While the USD retreated slightly against the majors, gold suffered a small pullback after its two day surge, with 10 year Treasury yields pulling back below the 0.8% level again.

Looking at Asian share markets yesterday, where the Shanghai Composite closed over 2% higher at 2781 points while the Hang Seng Index surged nearly 4% higher, now at 23527 points, finally breaking above its high moving average on the daily chart. The daily chart showed significant anchoring and firming support just above the 21000 point level and with momentum now crossing over this has all the hallmarks of a proper swing trade, possibly as high as 25000 points:

Japanese share markets were the best in the region in the wake of more internal stimulus, the Nikkei 225 closing over 8% higher for a near 20% gain already this week, now well over the 19000 point level. The daily chart was showing significant price deceleration and with a break of the high moving average at the 18000 point local resistance area the next target level to get to is the former highs at the 20000 point level, but will require a break in Yen IMO:

The ASX200 had another solid session, gapping higher on the open before again selling off during the day, then surging again right at the close to finish 5.5% higher and only one point shy of the 5000 point level. SPI futures are up another 2% this morning as the push back above the 5000 point level begins in earnest – but this isn’t the bottom, yet:

European markets continue to have big gains as well, with the Eurostoxx 50 closing 3% higher while the German DAX was the laggard, only advancing 1.8% to finish at 9874 points. The daily chart of the DAX is still showing a possible bottoming picture here but it may take another solid session before convincing everyone to pour in on the FOMO phase of this swing trade:

Wall Street was all over the place with the headline DOW advancing more than 2% while the NASDAQ slipped 0.5%, the broader S&P500 eventually closed 1.1% higher to 2475 points. The four hourly chart puts the current move in context, showing how trailing ATR resistance at the 2500 level still needs to be broken properly 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 relatively subdued, with the continued minor selloff in USD keeping both Pound Sterling and Euro elevated, although the former had some volatility around the UK’s government response to the virus. The latter remains on a small swing trade higher that started on Monday, and is now heading towards the 1.09 handle  with momentum picking up, but still needing to get above trailing ATR resistance well above:

The USDJPY pair remains stuck here with the ascending triangle pattern on the four hourly chart unable to break higher up to the 112 handle, so watch that lower trendline for a potential breakdown towards trailing ATR support at the 109.70 level:

The Australian dollar was being helped by the temporary USD weakness with a push higher through the 60 handle but has lost its steam overnight. With risk markets spiking all along the complex, there’ll be a lot of short positions wound back here, but I’m still keeping the view that is temporary as it slips back to the lower level of the flatlining moving average band:

Oil remains the market to watch that next to no one is watching with another relatively stable session on both markers overnight, with the WTI contract unchanged to finish just above the $24USD per barrel level again. The daily chart shows a nominal bottom forming at the $20 level, with intraday volatility trying to push towards a potential short term spike higher. However be cautious catching this falling knife:

Finally to gold, which after peaking above the $1600USD per ounce level has now stalled out in a fairly wide trading session that saw daily momentum just pip into the positive side. Still another market hard to gauge in terms of direction, although the underlying situation with futures and physical delivery issues in the wake of the potentially inflationary (which it ain’t ) stimulus packages is really clouding the issue even further. I’m waiting for some consolidation here before calling a new rally in place, as this still looks like short covering to me:

 

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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