Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

It’s crunch time for stock markets around the world this week as its plain to see that the combined efforts of central banks and fiscal stimulus has had almost no impact on the reality that is a major recession forthcoming in 2020. As the US leads the world in its criminally negligent handling of the COVID-19 pandemic, so too it will lead the world’s risk complex down as stock markets rollover, credit and corporate bond markets implode and the USD dives against, well everything. Friday night saw a big inversion in risk on Wall Street, with major stock selloffs after what looked like a sustainable rally. The USD fell against all the majors, while the market most aren’t watching – oil – dropped 5% to match its previous lows, having made no recovery at all and ready to crash another 30-50% as demand is about to evaporate.

Keep your powder dry this week folks. For those of you with some spare powder, BBOZ/BEAR, BBUS, QAU ETFs are calling…

Looking at Asian share markets on Friday, where the Shanghai Composite eventually closed 0.3% higher to 2772 points after a volatile week while the Hang Seng Index lifted some 0.6% to 23484 points, but still unable to keep above above its high moving average on the daily chart. This keeps it in swing mode only and while the daily chart is still showing significant anchoring and firming support I still contend this will continue to stall here with a flop below the low moving average at 22600 points the uncle point:

Japanese share markets soared, with the Nikkei 225 closing nearly 4% higher in what has been a wild week – rising nearly 20% off its lows. But even a cursory glance at the daily chart shows this isn’t sustainable with clear resistance overhead at the 19000 point level providing pressure with futures indicating selling to commence today as Yen firms extremely on Friday night:

The ASX200 was the only market to drop and boy did it drop, falling 5.3% to close the week out at 4842 points with only a brief look above the 5000 point level as the door is shut on further advances. SPI futures are flat this morning and while Friday’s session probably priced in the preceding falls on Wall Street, it won’t take much for this market to wobble and fall over, returning back to the previous level at 4300:

European markets were looking fine at the open but then reality set in as Wall Street combined the fears to produce wide selloffs. The German DAX was the best performer, only losing 3.7% to 9632 points after very briefly touching the 10000 point level earlier in the week. The daily chart of the DAX exhibits a classic dead cat bounce with the next level to watch the obvious low moving average support level at 9000 points proper:

Wall Street’s orgy of buying up in the wake of the stimulus is over. All three bourses fell over 3% with the broader S&P500 eventually closing 3.4% lower to 2541 points. The daily chart shows the return to the 2600 points level, equating to the monthly/yearly 2008 uptrend line looks set to be ephemeral with the dead cat now pointing its paws to the heavens:

Onto currency markets where volatility remains against the long USD holders as it continued to retreat against almost everything as Euro accelerated into the 1.11 handle. This swing trade that started last Monday has morphed into a new uptrend as ATR trailing resistance is broken and a new weekly high almost made. However, momentum is clearly a little oversold and could invert here in the short term:

The USDJPY pair continued its breakdown after falling through the bottom of the ascending triangle pattern midweek, finishing on Saturday morning well below the 108 handle. This should be ominous for risk assets, although the normal correlation has broken down itself, and now with momentum way oversold there is a small potential for stability here:

The Australian dollar continues to be helped by the weaker USD with another push higher through the 61 handle on Friday night. Again, commodity prices discount this reality and the Pacific Peso should be falling back to the 60 or even 59 level if oil and iron ore keep falling, but price remains nicely overbought and momentum still on track – watch trailing ATR support closely:

Oil remains the market to watch that next to no one is watching with a final pullback on Friday night of 5% or so, as the WTI contract finished just below the $22USD per barrel level. The daily chart shows a nominal bottom at the $20 level, but price action is now pointing to a revisit of those lows as no new daily or weekly highs are being made. Its illustrative that this commodity is going nowhere as OPEC+ continue to battle it out and actual demand is falling like a cliff and storage areas are filling up fast. Be ready for another 50% plus leg down:

Finally to gold, which is still holding on to its gains above the $1600USD per ounce level as daily momentum remains steady. I’m still waiting for some consolidation here as price steadies above the high moving average level before calling a new rally in place, as this still looks like short covering to me until the recent highs are fully cleared:

 

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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