Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk took a nosedive overnight when Trump decided to play the biggest DickCard of political machinations, squashing any hopes of a stimulus package to help the American people (and Wall Street of course) before the November 3rd “election”. The USD immediately spiked against everything while Wall Street took back all its Monday gains with tech stocks hit the hardest. Crude futures rallied but then took back half the gains while gold and silver tumbled as Bitcoin cruised on above the $10,000 level.

Looking at share markets in Asia from yesterday’s session where Chinese mainland markets remain closed but in Hong Kong, the Hang Seng Index was the strongest mover in the region, up more than 0.9% to be almost above 24000 points. The daily chart continues to show a swing play that is now about to meet some resistance at the former 24000 point support level that has to be broken to turn this into a proper uptrend as momentum remains negative:

Japanese stock markets also pushed higher with the Nikkei 225 closing up 0.5% at 23433 points. Strong resistance at 23300 points remain the key level to beat this week, so continue to watch the low moving average to act as short term support as price action gets tighter around these levels. A risk off play is possible so watch Yen safe haven buying as a proxy:

The ASX200 had a relative staid session, gaining only 0.3% in the end to finish at 5962 points.  SPI futures are down nearly 20 points on the DickCard that has been offset somewhat by the profligate Budget machinations last night, so we’re unlikely to see a return above the 6000 point resistance level which remains firm and daily momentum is not yet positive:

European markets were a bit mixed after the solid start to the week, with the FTSE barely lifting 0.1% while the German DAX finished 0.6% higher, closing at 12906 points. The daily chart was showing a potential breakout building here above the high moving average or at that 12900 level as price action bunches up above daily ATR support at 12400 points. Daily momentum is still negative here as well:

Wall Street pulled back significantly with the NASDAQ falling 1.6% while the S&P500 finished 1.6% lower at 3360 points, taking back the previous gains. The four hourly chart shows a clear breakout above last week’s price action but the acceleration hit a brick wall on the DickCard play, pushing the bourse back to last week’s pre-Trump hospital visit. Momentum has switched briefly to negative levels but could bounce back as the 3300 point support level remains a firm BTFD level:

Volatility in currency markets was matched with USD gaining solidly against most of the majors, as Euro was pushed back towards the 1.17 handle and now below last week’s price high. The next level to watch is ATR support at the 1.1720 level that must hold or this two week rally could be over:

The USDJPY pair held on vainly with a small pushback but no capitulation as yet, with safe haven Yen buying not yet evident.  Trailing ATR support at the 105 handle remains firm here with momentum going from slightly overbought to a mean reversion, which could be presaging a rollover soon:

The Australian dollar was flummoxed on both the new Budget and the DickCard, pushed solidly down towards but not through the 71 handle overnight. This follows a meek reaction to the equally meek RBA meeting, with short term support at the 71.30 level now likely to act as resistance as momentum flips to the negative mode:

Oil futures are building in volatility with another big move overnight that was eventually shunted, with a near 4% increase on Brent that was then pushed back to a near 2% gain to just below the $42USD level. The series of lower daily highs is spelling trouble ahead here as volatility begets volatility – it must break above the $43 level soon or faces a push below $39 swiftly:

Gold was starting to gain traction with a follow through above the $1900USD per ounce level but this was negated quickly with Trump’s DickCard move overnight, sending it back like the Aussie dollar to last week’s mid level and thwarting all the longs that had been positioned for more upside. This could spell another move lower to the $1850 level as long positions are completely unwound in the short term at least:

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. It was smart play by Trump. Caught me by surprise but that was the only option he had left. I don’t think Dems wanted to pass any stimulus and therefore they are (were) pushing for a massive one. Such move allowed Dems to look like they want stimulus but at same time they knew Reps will not agree to those terms and Dems weren’t moving. This is why I bought BBUS last Friday but ended up selling as I made money 30min later on the back of the news of Trump testing positive.
    I bought BBUS yesterday again as things settled and I still expected long foreplay and markets to tank on the week of the elections. By Trump pulling the pin and, for first time, explaining clearly why he puts Dems in difficult position. Clearly he’s got at least one smart adviser there.
    This will be interesting to watch.
    Chris check his tweets – he is clear why is pulling out. Obviously that’s not his words but nevertheless it is clear message and will resonate with many undecided voters.

    Now he can blame Dems and their unreasonable demands for crashing the markets.

    • Agree. It looks like Trump has decided he has only one more play and that is to crash the market and claim he is the only one who can “Make America Great Again” after he is elected. More demonstration of clinical delusional paranoia. lol

    • Ronin8317MEMBER

      The Democrat leadership doesn’t want a bill, but the moderate Democrats fighting for their seats wanted one. Even if negotiation have continued, there won’t be a bill anyway, but it has to happen to avoid the Democrats fracturing internally. Saying the Dem demands are unreasonable will resonate with his base, however it’ll also unit the Democrats.

      https://www.politico.com/news/2020/10/06/trump-ends-coronavirus-relief-talks-amid-stalemate-with-pelosi-426819

      The attacks ads on both side will reach a new pinnacle of nastiness.