Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

The very interesting divergence on global stock markets continued on Friday night with Wall Street going gaga for tech stock earnings while the rest of the civilized world took a deep breath and realised that COVID-19 troubles are not going away, with steep falls across the remainder of the risk complex. The month end window dressing was overshadowed by the Fitch re-rating of US debt and the failure of the US Congress to pass any further stimulus that ran out on Friday, leaving millions of Americans without any income. Remember the S&P500 is really only the S&P5 – there is absolutely no breadth to this market and the correlated risk complex may more than stumble this trading week.

Looking at share markets in Asia from Friday first where in mainland China, the Shanghai Composite was the standout, lifting 0.7% going to close at 3310 points, while in Hong Kong the Hang Seng Index slipped to finish down 0.5% to 24595 points. This shunts price just below trailing daily ATR support with momentum pushing into the negative zone and the overall dour mood could see a wider breakdown here:

Japanese stocks however had a shocker, with the Nikkei 225 falling almost 3% to 21710 points to a two month high. Futures are down again this morning, with price looking to slip below key support at both the daily ATR and weekly price level at 21800 points as this market looks very weak despite a temporary reprieve in Yen buying:

The ASX200 also fell over 2% to close the week out below the 6000 point level, closing at 5927 points as bank and other financial stocks got whalloped.  SPI futures are signalling a fall below the 5900 point level on the open. Again, its time to watch bank stocks as I would contend that the breadth of the market will be under a lot of stress due to the new Victorian shutdowns, which will have a measurable impact on hope here:

European markets continue to feel not only the weight of their domestic currencies, but actual economic reality with the mid week reversal now turning into a possible wider selloff. The German DAX was the best of a bad bunch, closing 0.5% lower to 12313 points, with other bourses falling 1% or more and futures looking dour. Momentum has rolled into negative mode on the daily chart, which shows ATR support also taken out firmly, all now pointing to a proper trend reversal below 12000 points:

Wall Street however continues to run on hopium and delusion, with tech earnings outweighing all the fundamental and macro trends that are spelling big D Depression across the country. The S&P500 finished 0.7% higher to 3271 points, with support filling in and bouncing price back to its previous record high. The daily chart shows that price is not behaving like anything but a bull market, with very strong support at the 3200 point level and now ready to push through resistance into ever more highs!

NASDAQ says depression? What depression? Keep that bull(shit) market going baby:

Currency markets had been heavily concentrated against USD all week but the Friday night flurry of financial reports sent the undollars down sharply with Euro shunted over 130 pips lower after briefly touching the 1.09 handle. The so-called no-lose situation in selling USD maybe turning around here as four hourly momentum inverts and trailing ATR support comes under threat just below the 1.08 level:

The USDJPY pair was subsequently pushed bigly higher with a sharp break above the 105 level in line with the Fitch re-rating. Price had decelerated into firmer support at the 105 handle but became extremely oversold before this volatile whipsaw taking it straight back to where it started the week just below the 106 handle. While four hourly momentum is nominally positive now, its going to be hard to discern direction anytime soon, but watch session lows as a guide:

The Australian dollar also fell amongst the undollars, coming back below its previous weekly highs at the 71.70 level, after breaking the 72 handle in what looks like a market literally caught short by the Friday economic prints. Momentum has inverted from the nicely overbought levels with price retracing back down to the 71 handle, but not making a new weekly low. Watch trailing ATR support here to come under threat next:

Oil futures rose nearly 1% on Friday with the Brent marker remaining just shy of the $44USD per barrel level again. The weekly chart is more illustrative here, showing the rebound from the almost single digit lows at the over-reaction in April to now, settling right on trailing ATR weekly resistance. Are we witnessing the first stage of a recovery to go back to the pre-COVID ca. $60-70USD per barrel levels or is this the last stage of a relief rally and rollover is imminent?

Gold was untouched by the sell off in other undollars – a clear sign the bulls remain in charge. Friday night saw a retest of the previous highs after a swift retracement previously, now back at the record high $1974USD per ounce level again. The daily chart shows a market impatient for further upside as this short term consolidation still requires more breathing room before another retest of the $2000 level:

Silver also came back too, firming above the $24USD per ounce level, which almost equated to the previous closing record high with the potential to shoot higher here relative to gold if breached:

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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