Macro Morning

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Risk sentiment reversed course sharply again overnight, with uncertainty over the US economy via the Federal Reserve the key driver of a selloff on Wall Street despite solid PMI’s in the US. European PMIs returned to retraction mode, although the outlook firmed, while the USD continued to strengthen against everything particularly precious metals and the Aussie dollar.

Looking at share markets in Asia from yesterday’s session where the the Shanghai Composite was rebounding into the close but ended up finishing flat, up only 0.1% to 3279 points while in Hong Kong the Hang Seng Index was up by only 0.1% to 23742 points. The August lows at 24000 points remain broken here with momentum still substantially oversold, I’m watching for the 23000 level to come under pressure next:

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Japanese stock markets reopened without any confidence, the Nikkei 225 closing a few points lower at 23346 despite a continued lift in the USDJPY pair. The daily futures chart shows a whipsaw pattern occurring with resistance clear at the 23300 level and daily momentum in a firm downtrend. The long tails of buying support below and price still above trailing ATR daily support indicate this market is not yet broken, but watch that high moving average to act as short term resistance:

The ASX200 was the best in the region by surging more than 2.5% on the back of ScoMo’s NBN Part Deux plan, closing at 5923 points. SPI futures however are looking to take back half of that, currently down nearly 60 points or more than 1% in response to the wider Wall Street selloff. The daily chart remains in decline as selling pressure remains stubborn:

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European markets started well at first, absorbing the not-so-good PMI’s before the Wall Street open, with a green sweep of closes across the board, the German DAX finishing 0.4% higher to 12642 points. This was all taken back and then some in post close futures as Wall Street soldoff, with price finishing just above ATR daily support at the 12400 level which puts the leader of the pack in an ominous position going into the end of the trading week, all but confirming a breakdown:

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Wall Street’s rebound couldn’t stick and it only took a cautious word or three from some Fed wonks to send the market into sell mode. The Dow lost nearly 2%, while the S&P500 finished 2.4% lower to 3236 points, matching the previous lows. The four hourly chart showed a nice Schrodingers cat bounce back up to the key psychological 3300 point level but turned this around sharply with the potential to turn this into a rout unless sentiment changes again soon:

The four hourly NASDAQ chart is potentially showing how this may only be a washout selloff, because although it fell the furthest last night – over 3% – it still hasn’t matched its previous lows. Price only barely broke through trailing resistance and is back below the previous weekly lows at the 11000 point level, so the key level to watch for signs of a proper capitulation is a break below the 10640 level:

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Currency markets continue to be weighed down by a strong USD with the Euro pushed to another low as it charts a course well below the 1.17 handle. The medium term picture continues to firm downwards here as risk weighs the return of COVID more in the European sphere. Again, we’re still not yet substantially oversold and we could see further drops tonight:

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The USDJPY pair continued to firm despite risk markets going the other way, extending its move above the 105 handle and former trailing resistance on the four hourly chart. Price is now at the August lows (solid black horizontal line) which could provide substantial resistance, so watch for some keen Yen buying on the open here this morning:

The Australian dollar remains in a similar predicament to Euro, and was sold off sharply overnight to move well below the 71 handle and making a two month low in the process. I said yesterday this was looking ominous for the Pacific Peso as price is rolling over on the weekly chart as well for the first time since the epic rebound from March:

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Oil futures remain in a holding pattern with a small retracement but no real new direction with Brent markers falling slightly to be still below the $42USD level. As I noted previously, the daily chart hasn’t shown a break above trailing ATR resistance yet so this has the potential to fizzle out here as daily momentum rolls over – watch the low moving average at the last two session lows at the $41 level for signs of a breakdown:

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Gold and silver are now in full selloff mode after being under substantial pressure, as the Fed looks to kill the inflation debate overnight with gold breaking through the $1900USD per ounce level decisviely starting in the London session overnight. The weekly and daily charts are now exhibiting a classic breakdown with the potential to get back to the previous secular bull market high just above the $1820USD per ounce level, although there is a small potential for a rebound due to the oversold status:

Glossary of Acronyms and Technical Analysis Terms:

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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

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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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