Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street took another tumble on Friday night, knocking it back to a six week low (although the NASDAQ is still up over 30% for the year) as a sea of red pervaded European bourses as well. Currencies were largely unmoved with secondary economic releases not having much of an effect, while oil futures held on to their recent highs, copper is now at a two year high and gold lifted slightly. A dour start to the trading week here in Asia is likely as the cue from Wall Street leaves risk markets on tenterhooks.

Looking at share markets in Asia from Friday’s session where the Shanghai Composite surged into the close, to finish over 2% higher to 3338 points on vaccine and belligerent nationalistic news while in Hong Kong the Hang Seng Index has come back, but not as much – up 0.5% to 24445 points. The August lows at 24000 points are still holding the bears back here as weekly support hangs in the balance with momentum still strongly negative – are we going to see a breakdown today?

Japanese stock markets put in a weak finish as the stronger Yen continued to bite with the Nikkei 225 closing 0.1% higher at 23360 points. Price had wanted to test resistance at the previous weekly highs as daily momentum remained in the positive zone but the much stronger Yen is a big headwind, so watch for a potential break below the low moving average here in line with the decline in overall risk sentiment:

The ASX200 was the worst, although it started with a flourish, eventually closing 0.3% lower at 5864 points. SPI futures are down over 60 points or more than 1% given the falls on Wall Street and the higher Australian dollar which will test the mettle come the open this morning:

European markets sold off across the board, with peripheral bourses hurting the most as COVID-19 spreads yet again throughout the continent. The German DAX fell 0.7% to 13116 points, making a new weekly low in the process but still looking very firm here. I continue to note that the daily chart is still not in a bearish mood compared to the FTSE or Asian bourses, with support at the 12900 point level intact. It’s resistance at the recent daily/weekly highs near the 13300 point level which remains the key uncle point going forward:

Wall Street however continues to show signs of capitulation here with the S&P500 closing nearly 1.1% lower to 3319 points. The daily chart shows how support at the key psychological 3300 point level is barely holding on and was briefly tested on Friday. Overhead resistance is at the previous failed breakout position at the 3420 point level is just too strong and overall this looks like the last hurrah before a final selloff:

The four hourly NASDAQ chart is the harbinger of where this could go, watch previous weekly lows at the 11000 point level very closely here:

Currency markets remain mixed with some minor volatility around the ranges but USD was essentially unchanged for the week. The Euro finished at the mid 1.18’s – where it started the week apart from the wide selloff and recovery mid-week. The picture remains mixed in the short term as the union currency continues its sideways dance, making it hard to discern real direction in the medium term – resistance at 1.19 being the key upside target to breach:

Yen buying continues however, with the USDJPY pair remaining in breakdown mode, extending further below the August lows (solid black horizontal line) and into the mid 104’s. I suggested a swing back up to the high moving average was likely soon as the pair remains in well oversold mode, but there are no signs yet of a return to mean. Watch the key weekend gap play here this morning:

The Australian dollar was relatively calm despite the intrasession volatility to finish the week out just below the 73 handle again, not making a new weekly high or low in the process. I’m watching the low moving average at the 72.80 level as a guide to support and possible breakdown in line with other risk assets:

Oil futures held on to their surge play through the week, with Brent futures retracting slightly to remain just above the $43USD level for another weekly high taken out. Notably, on the daily chart, there hasn’t yet been a break above trailing ATR resistance so this has the potential to fizzle out here as daily momentum is not yet positive:

Gold is still lacking in traction and finished the week basically where it started, sitting just below the $1950USD per ounce level. The daily chart shows a descending triangle pattern forming but it is very weak, suggesting that the battle between bulls and bears is not yet over. Watch the hihg moving average at the $1960USD per ounce level for signs of an upside breakout:

Silver may still be the better precious metal play here but only just, with price pushed back below the $27USD per ounce level, as momentum continues to lag and no new daily high is starting to bite on confidence.  Significant resistance at the $28.30 level remains the level to beat :

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

    • Narapoia451MEMBER

      Do you think your theory on the institutional players clearing out the long options is playing out?

      • already did mate. Retail call options holders got cleaned up last Friday as that was the expiry date for most. Now, depending on how much of those options were bought with margin loans, we may see sharp sell off due to margin calls being triggered.
        I don’t have any data to be able to make informed forecast hence why I did not dare to buy BBUS on Friday. If we see sharp sell off tonight I will subscribe it to margin calls but be aware this is just my theory.
        ATM futures are not really screaming crash but who knows what happens from 8pm onwards as we get closer to the US trading session.

    • not almost. It’s all over since RBG died. The mirage has lifted on any chance of a Biden win – and with it any chance of the US coming back into the fold of western liberal democracies. Bye bye…