Macro Morning

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Macro Afternoon

By Chris Becker 

Wall Street rebounded overnight, spurned on by a surge in home sales and the usual quarter/end year rebalancing meme. Meanwhile the latest German CPI surprised to the upside which sent Euro up sharply before retreating later in the session alongside other undollars, with gold still holding to its record high, but only just while other industrial commodities lifted out of their sideways funk.

Looking at share markets in Asia from yesterday where the Shanghai Composite reopened after a long weekend, but fell 0.6% to 2962 points while in occupied Hong Kong the Hang Seng Index gapped lower with another selloff below the previous daily lows, moving 1% lower to 24301 points. Price action remains volatile here, even on the daily chart with another session low that threatens the nascent uptrend from the May lows. Support must hold here below the low moving average at the 23500 point level with we could see a return to below 23000 proper:

Japanese stocks fell back the hardest with the Nikkei 225 retreating well over 2%, finishing at 21995 points and making a new two weekly low. Futures are indicating a rebound alongside Wall Street with the daily price chart still looking weak here as low volatility suggests a breakout or breakdown very soon. Watch daily ATR support at the 21500 point level and the high moving average for those signs:

The ASX200 had a solid selloff with local concerns about the Victorian outbreak weighing on the market, off by more than 1.5% to 5815 points and looking vert weak on the daily charts. SPI futures are up 60 points or around 1% with a bounce off ATR daily support and the recent lows at the 5750 level which still must hold here as we go into the usual month/quarter/year window dressing:

European markets had a relatively solid night as industrial activity picks up across the once-closed continent, with the German DAX closing 1.2% higher to 12232 points. Momentum remains pretty flat here with price still poised on daily support. I’m still watching for a sharp retracement below 12000 points or a breakout above the 12500 local resistance level:

Wall Street remains schizophrenic with a hint of good news telling the ‘bots to buy everything (including the Fed buying Apple bonds FFS) with a strong move across the board, particularly the Dow up nearly 3% while the S&P500 eventually closed 1.5% higher at 3053 points. The daily chart shows this is still not enough to stem a rollover as momentum slips into negative mode. I still contend we could be in for a big breakdown here below 3000 points:

Onto currency markets where the volatility truly lies! Euro perked up going into the German CPI print and almost broke out above the 1.13 handle in a big move that was almost immediately retraced as the strong USD returned it back to where it started.  The former weekly lows remain the target here this week so watch the low moving average for signs of another inversion in the short term:

The USDJPY pair was more successful in pushing higher above the 107 handle with a solid move to the previous weekly highs at the 107.50 level overnight. While overbought, this sets up for another leg higher if correlated risk assets can literally get together so watch price to hover around this level or even retrace slightly before another uptick:

The Australian dollar however remains somewhat depressed and fell throughout the session to daily support at the mid 68 level. This chart is not a good sign for Aussie bulls as the lower edge of weekly support just above the 68 level is coming under threat once more:

Oil prices came back slightly again with Brent futures moving almost up to the $42USD per barrel level, bouncing off the recent daily lows. Daily momentum is still flat, but positive for now, with a breakout above the high moving average at $43 or so required before another legup in this ridiculous rally:

Gold came back to yet another daily high, finishing at the the $1772USD per ounce level overnight, just edging higher to continue its recent breakout. Price is well above the previous nominal highs and sets up for further upside, as momentum remains in a solid overbought mood here as it begins to reign in the next target at the 2010 highs above $1800:

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!

Comments

  1. call me ArtieMEMBER

    Hi Chris,

    spurred on by a surge in home sales

    Not actually. The number you refer to was an increase in the number of new listings of homes for sale, not fulfilled sales at all. Markets seem to have viewed it as a positive. I disagree. I interpret it as
    a) maybe sellers who had been holding back finally decided to list their houses or (more likely)
    b) large increase in forced for sale listings due to unemployment

    Price movements over the next weeks should make it clear which. Artie

    • Pending home sales is almost completed sales, not just listings: “the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction”
      The macro view might be correct (forced sales e.g) but the market is always right until it’s not. I can’t think of this being positive in an era of record unemployment and coming off a super low base, and probably just correlates to RE agents able to sell property since Yanks are running around like headless chooks instead of locked up in their cages.

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