Macro Morning

See the latest Australian dollar analysis here:

Elon Musk may have just saved Bitcoin

Nobody can stop the music on risk markets with more extensions of overbought rallies across the Atlantic overnight after solid sessions here in Asia yesterday. Another potentially successful vaccine against COVID was announced, but was tempered by record new daily cases throughout the US and Europe. The USD retreated slightly against most of the majors, now making another new yearly low against Yuan, while gold and silver had volatile sessions, eclipsed by the moonshooting Bitcoin, on its way to $17000!

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite bounced back sharply, closing more than 1% higher to 3346 points while in Hong Kong the Hang Seng Index was up 0.8% to be just above 26381 points. The daily chart is looking very toppy here as momentum remains in overbought mode as daily price action is almost stalling here as it tries to punch through resistance at the 26800 point level:

Japanese stock markets were the best performers with the Nikkei 225 climbing just over 2% to 25898 points not held back by a much stronger Yen. Futures are suggesting even more upside on the open this morning in line as the latest GDP print provides more ammunition for the buyers, but this market is obviously way overextended and ripe for a retracement. USDJPY support is not correlated at all at the moment, so I continue to be very wary (but happy!) of this move:

The ASX200 technically closed 1.2% higher  – where it was in the morning before the shit hit the fan – closing at 6484 points. The daily chart is a repeat of other equity markets with momentum still well overbought so we would normally see a further pullback soon, but watch those session highs for another potential breakout above 6500 points:

European markets had very solid positive sessions as it builds on its good start to the week, with the German DAX gaining 0.5% to close at 13138 points. The daily chart is still showing strong resistance at the August highs at just over the 13000 point level which remains crucial as the next stepping stone:

Wall Street wants to push higher with the S&P500 gaining above its late August high, finishing 0.7% higher at 3612 points. The four hourly chart is showing a market ready to break higher but hesitating here at just above the 3600 point level as momentum remains well overbought and concerns over COVID hold risk completely back:

The NASDAQ had a slithgly milder session, lifting 0.5% to start the week at 11892 points. The pattern on the daily chart remains nominally bearish as price action is still unable to clear the downtrend from the August bubble like highs (upper black sloping line). The key is daily support to hold on at the 11500 point level and then push above 12000:

Bitcoin’s breakout cannot be held back, having made yet another new daily high well above the $16000 level and seemingly on its way to $17000 on the FOMO trade. This is classic bubble psychology, having now risen over 50% since the breakout above $11000 in early October but where will it stop?

Currency markets are starting to move around although Euro was unable to get through short term resistance just above the 1.1850 trailing ATR level last night after a period of stability.  This remains the area to watch in the short term with some economic prints coming up that could provide the catalyst:

The USDJPY pair tried to breakout last night on the vaccine news but was immediately pulled back to its session lows to the 104.50 level instead. The four hourly chart is nominally bearish after this swing short trade from the 105.50 level down, with momentum reading negative, but staunch support at the 104.50 level is holding on here:

The Australian dollar is the one making gains in line with other risk markets, punching through the 73 handle overnight to almost match its previous weekly highs. Four hourly ATR support at the 72 handle proper continues to hold here to support this risk-correlated move higher:

Oil prices are still showing their hand here with obvious selling keeping both markers right on the September/October points of control, with a move higher by Brent pushed back below the $44USD per barrel level overnight. While price may try again to breakfree above the $44 level, I’m watching for more session lows as more short sellers step in:

Gold is still licking its wounds, with a volatile session on the vaccine news again, dropping over $20 before recovering to finish where it started, but in a weaker position at the $1886USD per ounce level. The four hourly chart shows the key resistance level to break through at the obvious $1900 handle as it continues to build a bottoming pattern but still watch terminal support at the $1860 level which must hold:

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)

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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  1. The ABC new reported that the US had registered over a million new Covid cases in the last 6 days, with deaths running at over 1000 per day. Anecdata I’m seeing from medical professionals at various locations indicates that several state health systems are near 100% use, and if much more load is applied they’ll overload and things will start to get really bad.

    I wonder if any of this reality will ever intrude into the current US market cheerfulness?

    • They’re fucked. And I’ve run out of sympathy to give, even though they are going to experience a 9/11 casualty total per day (aka over 3000 dead) by Xmas or so.
      And then when/if? Biden is sworn in late January, pencil in a big market correction in February similar to this year as they scramble to deal with it out of control and the republicans obstruct any and all attempts to do so…causing chaos.

      • Yeah, when Obama got elected the joke was that yet again the worst job in America was going to a black man. Arguably the job Biden will be inheriting is worse due to active neglect and divisiveness by Trump for his own personal ends. Trump really is the worst President of the 45 by some distance, leaving America weaker, sicker, more divided and poorer.

    • It’s so weird, they should be prepared for this coz this happens every year with the flu season, right?

    • ErmingtonPlumbingMEMBER

      Considering the lack of any kind of decent welfare provisions in the United States covid-19 may be seen by Wall st investors as a good thing for the economy.
      By killing mostly older and poorer Americans who aren’t as avid consumers as Younger more well of Americans Wall Street types probably see a coming spending boom from an inheritance lead recovery in the long term.
      I’m only half taking the p!ss saying all this.
      Some will see an extremely high death rate, in the millions, as a good thing for long term Plutocratic/Market outcomes.
      Just don’t expect them to admit it.

      Just look at how much the economy boomer after WW2. A similar per capita death rate should do the trick.

        • ErmingtonPlumbingMEMBER

          I think people feeling under “cultural assault” is more responsible for people reembracing religiosity.
          Narratives around what happens after death don’t have the same entertainment value in our mass media world.

    • collinearity. stock market participants employ economists who also look at same forward macro indicators, and project a Fed reaction also as this drives future liquidity conditions.

    • When there’s more than one data point there’s something to squabble about….. But Nothing focuses the mind like markets all correlating to 1. Particularly when the direction is down.

  2. You can’t stop the music, nobody can stop the music.
    Take the heat from flame, try not feeling pain,
    Though you try in vain it’s much easier.
    No, you can’t stop the music, nobody can stop the music.
    Change the master plan, take the hope from man
    ’cause that’s easier to do.