Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

By Chris Becker 

Wall Street reversed course – again – overnight with the latest ECB meeting adding to the volatility as Euro swung wildly on the lack of concern about the currency itself, as all other policy measures were left unchanged. US jobless data disappointed with new and continuing claims climbing against expectations, and Congress (the opposite of Progress) was unable to make a deal on continued stimulus measures. Pound Sterling cratered on another stepback on Brexit talks with more volatility expected as the EU continues to remain firm.

Looking at share markets in Asia from yesterday where Chinese stocks were about to put in scratch sessions, but sold off towards the close with both the Shanghai Composite and Hang Seng Index falling 0.6%, the latter down to 24313 points.  This dip is slowly turning into a wider breakdown as daily momentum remains sharply negative, where the August lows at 24000 points coming up fast as the support level that must hold:

Japanese stock markets were the best performers with the Nikkei 225 rising nearly 0.9% to 23235 points. Futures however are indicating a likely fallback to the 23000 point support level as it remains the anchor point in the short term. Watch daily momentum which could turn negative but its steady as she goes so far:

The ASX200 put in a solid session, closing 0.5% higher to 5908 points, but still quite shy of the 6000 point level. SPI futures of course are down nearly 80 points so we’re going to see a big selloff as confidence escapes the market, with trailing ATR support at the mid 5800 point level looking set to be broken today. This is a messy daily chart to say the least:

European markets were on tenterhooks pre and post ECB meeting with almost no change or mild selloffs the endgame, with the German DAX finishing just over 0.2% higher to remain above the 13000 point level, finishing at 13208 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 – but I can hear them scurrying around in the forest, taking a dump:

Wall Street had conniptions, solidly taking back its previous gains as this looks more and more like the final breath before another violent selloff. The NASDAQ lost over 2% while the S&P500 was down 1.8% to 3339 points. The four hourly chart shows the oversold condition that led to a swingback has reverted with trailing resistance unable to be cleared. Watch for signs of a return to the previous lows below 3300 points and a possible wider rout:

Currency markets moved out of calm mode to cocaine mode with a big surge in Euro before it was canned by the USD, pushing up to the 1.19 handle and then smashed down to the 1.18 level, or 200 pips range in a within 12 hours. The end result is basically no change since the start of the week, but medium term this looks bearish  as USD remains king:

The USDJPY pair went nowhere instead, remaining just above the 106 level and still unable to make a new intraweek session high, remaining below trailing ATR resistance:

The Australian dollar had a solid breakout above the 73 handle and then gave this all up and reverted back to were it started yesterday, in line with other undollar assets. I warned yesterday that this was 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:

Oil futures swung all over the place again, with Brent futures dropping back down below the $40USD level late in the session to almost make a new daily low. There are almost no buyers here so I can see a potential selloff further below here even though momentum is extremely oversold:

Gold continued to defy the USD and almost made a new daily high, but fell back alongside the other undollars after getting past the $1960USD per ounce level, settling at $1945 instead. This is just a swing play from the oversold nature of last week and requires defence here at the $1940USD per ounce level and then another surge above trailing daily resistance at $1950 or gold will continue to slide sideways:

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. Thanks Chris.

    ok, boys and gals.. who dares to swim today?
    I’d say margin calls are in play already and if markets fall fir bit tonight then Monday comes will be real ugly here.

    I think gold stocks will fall today ~2% but this is hard to predict.. anything can happen through the day.

    • I’m thinking for today (this might change):

      – bit of YANK
      – bit of BBOZ
      – bit of BBUS

      Just sold SHK, which I bought yesterday afternoon, for a 23% gain…lol…this is OK as it was only a 1-day punt, which paid 🙂

      I want to buy some energy shares for a longer hold and flip (maybe a few weeks), but am having trouble bringing myself to do so, as I’m concerned the current climate will see even good companies get sold off. As companies, I like:

      – GNX
      – 14D
      – BLU

      I’m also loving other Aussie manufacturers:

      – DRO
      – AL3
      – CBR

      I’ve been buying these high and selling low, holding for a few days to a couple of weeks at a time, and they’ve been very profitable as they look like genuinely good bets, especially if AUD slides…wish I could just buy and hold, though.

      Boy, I’d really like to buy and hold long-term for a lot of these, but I hate making paper losses in the meantime – I’m big on opportunity losses…which makes life harder, frankly….

      Thinking out loud: maybe MB needs a general day-thread, where we talk about whatever, but particularly trading? We would still all comment appropriately within articles, and Macro Morning and Afternoon, but could have somewhere else to go during the day? Just a thought.

        • I built a model for few resource companies to forecast day’s lows and highs and been monitoring for over 3 weeks with amazing results. I started using it this week and I am 5 out of 5 for now. Only trading small volumes as I am still convincing myself that this is not just a fluke.
          My idea is to have 8 wins out of 10 trades which would mean really good wage. So far so good as model works for when market goes up and down.
          Obviously there are few indicators that I have to keep an eye on that can influence this model negatively or positively. I am super conservative with days like today and I do expect days where this model will not work due to too much volatility – just don’t trade then.
          Will keep you posted if this model works over longer period of time but if I used it over the last 3 weeks I should have made lot of money.
          Probably when I start deploying more money it will fall apart.

        • if it doesn’t work I will not sell it because it doesn’t work. I have ethics.
          if it works I will keep to myself because it works. Why sell something that can make me rich?

          • So you can frontrun a tipsheet to turbo your richness & create a multistream income for when it’s not working so well….. fame & Rene Reusa parties too…..

            If you can program & backtest it you’ll have sped things up & have defined stats you can snuggle up to while you sleep….

          • I am confident the model works perfectly now and will work just as good for long time but it is not for every day person who trades but does not read.
            There are few indicators one have to monitor in order to make sure forecast prices will hold. If one or two (let alone all) start to flash red it requires brains to predict what to do next and exit or hold. Most readers here can make money with such model but most of the herd will lose.
            But thinking of Rene and Reusa parties makes me reconsider..

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