Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk markets ran out of puff overnight as the prospect of a meaningful stimulus package from the US Congress waned, with Treasury yields moving higher and risk currencies rangebound as a result. Commodities prices moved higher in the confusion, but gold and Bitcoin suffered large drops before later recovering somewhat. Volatility is tracking low which is worrying.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite sold off sharply into the close, down nearly 1.1% to 3371 points while in Hong Kong the Hang Seng Index went the other way, up nearly 0.8% to 26502 points.  The daily chart however shows a market ready to breakdown soon as futures indicate a pullback towards the 26000 point level and a possible close below the low moving average as momentum inverts:

Japanese stock markets however got moving again, with the Nikkei 225 finishing nearly 1.3% higher to 26800 points. Futures are suggesting a pullback of most of this push higher – which notably did not exceed the other daily highs – with the daily chart potentially rolling over here if resistance at 27000 points still proves too tough to beat:

The ASX200 was the relative laggard, up only 0.6% but still a solid session to finish back above the 6700 points at 6728.  SPI futures are also indicating a minor pullback to the 6700 point level so this must be met with caution, even though the Christmas rally really wants to continue:

European markets were unable to gain traction again with a series of minor lifts across the continent, although the German DAX stood out with a near 0.5% gain to close at 13340 points, however it took all of this back in post close futures as Wall Street flummoxed. Yet another market remaining in stall mode, as support firms at the low moving average in the short term, I still remain cautious about the inability to push above 13300 points:

Confidence disappeared on Wall Street as the punchbowl was taken away, with tech stocks hit the worst as the NASDAQ lost nearly 2% while the S&P500 closed 0.8% lower to break below four hourly support. This was after a clear break above the 3700 point level to a new record high, but not unexpected as the market was well overbought so the key area to watch tonight is support at the 3660 level which must hold:

Currency markets are seeing volatility lift again with Pound Sterling having a swift roundtrip of over 70 pips while Euro broke below the 1.21 handle that it had been threatening all week. The two week long breakout was way overdone and pressure in the short term has now turned into a proper mean reversion trade, but I still consider a major reversion is possible:

The USDJPY pair is not just stabilising at the 104 handle but lifting higher, attempting to break above considerable resistance at the 104.40 area but thwarted later in the session. Momentum has flipped to positive on the four hourly chart but only briefly, so watch price action around the low moving average to see if this short term blip higher will fail:

The Australian dollar had a big move higher overnight on the weak USD meme, popping to a new monthly high and nearly hitting the 75 cent level, but this was pulled back sharply by over 50 pips, back to where it started again at the low 74 level. I was expecting a rollover here but there’s more life to the Pacific Peso yet, but this flip back down does speak of more resistance ahead:

Oil prices are still trying to find strength with Brent crude lifting slightly before closing again just below the $49USD per barrel level last night. That one-off warning sign on the daily candlestick still might be putting in a top signal, but this has not yet come to pass, requiring at least a break of the low moving average as a violent reversal below the $46 level:

Gold was fighting back with conviction, able to get back above the pre-breakdown lows at $1860USD per ounce, but was smacked down royally overnight with some big short positions, sending it back to a weekly low at the $1840 level instead. Momentum had been flatlining and rolling over and as I said yesterday it was critical that the $1860 level become firm support in the sessions ahead – and here we are:

 

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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