Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Wall Street rebounded last night with bargain hunting overtaking fear of the bubble popping as half of the previous losses were clawed back. The entire risk complex leapt in, with oil bouncing over 2% while gold and other commodities also gained as the USD weakened slightly alongside bond markets. The bounce should be replicated here in Asia today with futures indicating a good session.

Looking at share markets in Asia from yesterday where in mainland China the Shanghai Composite finished nearly 2% lower at 3255 points while in Hong Kong the Hang Seng Index only fell half that, or just over 1% to 24359 points.  This dip could turn into a wider breakdown as daily momentum goes sharply negative, where the August lows at 24000 points remain the support level to beat:

Japanese stock markets had similar falls with the Nikkei 225 off by 1% to 23032 points. Futures are now indicating a likely fill of the fall with the 23000 point support level remaining the anchor point here in the short term. Watch daily momentum which could turn negative as ATR trailing support at 22300 points remains steady in the medium term:

The ASX200 had the worst session, falling just over 2% as it continues to reject the 6000 point level, closing at 5878 points. SPI futures however are up nearly 80 points so we’re likely to see a staunch defense of trailing ATR support at the mid 5800 point level. This is a messy daily chart with not a lot of confidence going forward:

European markets led the charge overnight with the German DAX finishing more than 1% higher to be back above the 13000 point level, finishing at 13237 points. The daily chart shows support at the 12900 point level remaining firm, with this uptrend channel still intact with daily momentum positive – no bears here yet:

Wall Street came back solidly, filling about half of the previous night’s gains in what could be the start of a rally within a dip of a bubble, or the final breath before another selloff. The NASDAQ gained nearly 3% while the S&P500 was up exactly 2% to 3398 points. The four hourly chart shows the oversold condition that has led to this swingback, although momentum is still negative and trailing resistance has been barely cleared. Watch for signs above 3400 points proper:

Currency markets were relatively calm with a small bounceback against USD with Euro coming back above the 1.18 handle but only just in a very weak move. The four hourly chart showed a test of the previous weekly lows at the 1.1770 level that barely passed and I would contend we should see another rollover again soon:

The USDJPY pair had a similar bounce alongside risk markets, pipping just above the 106 level but unable to make a new intraweek session high, remaining below trailing ATR resistance:

The Australian dollar had a solid breakout this time, in line with the bounceback in risk assets to get back to its Monday morning starting level at just below the 73 handle. This is not yet a new rally with four hourly momentum still negative and no new intraweek price high so watch for a potential inversion back down to the mid 72s today:

Brent futures have swung back a little, lifting just over 2% after the previous 5% drop sent it to a new monthly low, last night finishing just below the $41USD level. As I said yesterday, this could swing violently back, so watch the lower timeframes for signs of a swing play and on the daily chart a test of the low moving average/previous trailing support nearer the $43 level:

Gold finally found some life overnight, bouncing off weekly support at the $1930USD per ounce level to finish at the $1946 level. Price was oversold on four hourly momentum but had been holding on to weekly support with a typical swing play here that could translate into something more, but requires a surge above trailing daily resistance at the $1950 level:

Silver also remains poised here on the daily chart with a small tick higher overnight towards the $27USD per ounce level, as it too bounces off weekly support. There is still significant resistance to overcome at the $28.30 level, but overall the medium term picture looks promising:

 

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. If you need to start unwinding large positions it’s going to take weeks at least. Don’t want to spook the market to much; liquidity will evaporate fast. FYI options weekly expiry 18th this month with Quarterly at the end of this month as well.

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