Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Wall Street is loving – or ignoring – the Democrat’s new VP pick, with all three bourses either making new record highs or an inch away from wiping out all of 2020’s losses and on the road back to former record highs. This is all being led by tech stocks again, with the NASDAQ up by over 2%, with risk correlation across other stock markets now in full swing with futures indicating big jumps on the open here in Asia this morning. US inflation picked up with the latest CPI data moving faster than expected with a move higher in oil prices too as DOE figures indicating a sharper than expected drawdown in inventories.

Looking at share markets in Asia from yesterday first where in mainland China, the Shanghai Composite was down sharply before the lunch break, almost by 2% but has managed to fill half of that gap to finish 0.6% lower at 3319 points. In Hong Kong the Hang Seng Index rallied at the close to finish 1.4% higher at 25244 points in a solid move and breakout that pushes price well above former trailing daily ATR support as daily momentum flips back to the positive zone. Watch for another follow through here today as this bullish reversal may have legs:

Japanese stock markets had modest sessions with the Nikkei 225 closing 0.4% higher at 22843 points. Futures are indicating a further re-engagement above that line as Wall Street and the correlated USDJPY pair go higher overnight. I’m watching for a retest of the July highs above the 23000 point level and then the medium term uptrend is on for real:

The ASX200 was down most of the day, not helped by poor earnings result from CBA and others, including gold miners, but rallied towards the close to eventually finish only 0.1% lower at 6132 points. SPI futures however are up more than 40 points where we’re going to see a very decent follow through here following the strong lead from Wall Street, possibly surpassing the May highs:

European markets continued their new found bullishness with broad move highers across the continent as Euro remained weak against the USD. The German DAX put on nearly 1% to 13058 points before moving higher again in post close futures. The daily chart is no longer confused here with solid momentum and price action now making proper headway, but it still needs to clear the May highs and the June false high well above the 13000 point level:

Wall Street loved the inflation print as bears were wiped out again by BTFD buying with the S&P500 putting in a new intrasession record high before closing 1.4% higher at 3380 points. The four hourly chart of S&P futures was showing signs of building support after a minor dip and price has now re-engaged on the week long trendline. To the moon Alice? Since nothing else can stop this juggernaut:

Currency markets are wavering somewhat as the strong USD meme starts to run out of puff, even as US CPI surprises to the upside, with Euro having another go at breaking out of its funk, breaching the 1.18 handle before reverting back only marginally below this morning. No new session high here on the four hourly chart, which still lines up with my contention that the next level below to watch this week is support at the 1.17 zone as momentum remains negative in the short term:

The USDJPY pair continues to build on its recent positive momentum although it slowed down mid session overnight to just miss out on breaching the 107 handle proper. The extreme overbought status is starting to revert and rollover here, so watch for potential support at the mid-July anchor point (upper horizontal black line):

The Australian dollar remains the weakest against USD, but it had another go at breaking out of its short term downtrend overnight with a solid move higher but no new session high since the start of the week. This temporary bullishness sold off at the 71.70 level and is fading going into this morning’s sessions with momentum still not positive on any timeframe. Support must hold here or we’re likely to see a reversion to the recent lows at the 71 handle proper:

Oil futures found some life in the wake of the DOE report with the Brent marker putting on more than 1% to pip above the $45USD per barrel level, matching the previous post breakout but anemic new highs. The daily chart is still showing a sideways bullish trend but alongside WTI, but I still contend that the lack of any new daily highs and lots of intrasession selling near those highs is suggesting a breakdown:

Gold continues to have an epic ride with a big bounce back above the $1900USD per ounce level after its recent solid ride down. It was short live however, with the four hourly price chart showing solid resistance at the $1950 level where it again rolled over post the US CPI print. It’s possible this correction could spill over and continue down to the previous breakout and record high at the $1825 level, which would give price some better medium term longevity:

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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Comments

  1. I decided to seat it out and did not buy any gold stocks yesterday. probably a mistake but I think there will be bigger trade to be made in the next 3 months. Waiting.

    • Mike Herman TroutMEMBER

      I am with you on that Niko, I keep thinking there has to be another decent entry point at some stage given what has gone on. But I am often wrong but everything seems like upside down world so probably best to do the opposite of what I think…

      • Could be worse. I seem to be almost perfect at calling tops and bottoms.

        Timed the bottom to the tick yesterday. To sell. F me dead.

    • I took my gold miner profits 2 weeks ago, after a spectacular run up in June/July. I will wait for a month to see where the dust settles. I’m expecting a further pull back, but who knows in this crazy world.

    • I only topped on one gold junior yesterday. It had just started to make a decent move before the correction, so the timing was good given that I kept missing out on the early stages of it’s move. I think I’ve now got as many PM miners/explorers as I can cope with, and I’m happy with my mix. If we get a further pull back at some stage I may top up on a few of them but other than that, I think I’m now just in the sit back and enjoy the ride stage of my strategy given that I’m not a trader