Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

A mixed night on risk markets as the Asian close presaged downside volatility that didn’t eventuate on European markets, but kept Wall Street on edge with only tech stocks on the NASDAQ advancing as the latest US stimulus package didn’t do much to lift confidence. Commodities finally couldn’t find a bid with iron ore dropping nearly 6% while oil prices came off at least 2% as Bitcoin firmed above the $23000 level after a short term wobble.

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite fell sharply going into the close, eventually finishing down nearly 2% at 3356 points while in Hong Kong the Hang Seng Index was off even more before recovering to close 0.7% lower to 26119 points. The daily chart is sliding down from its sideways shuffle into something more ominous as momentum flops into the negative zone, with ATR daily support at the 26000 point level now coming under stress:

Japanese stock markets fell back in line as well, with the Nikkei 225 closing 1% lower to 26436 points. Futures are suggesting some buying support on the open, but this sideways market really needs to get out of this funk soon with resistance at 27000 points an obvious sticking point. I’m continuing to watch the low moving average at the 26400 point area as a potential breakdown looms:

The ASX200 didn’t escape the losses either, down over 1% to 6599 points, not just keeping well clear of the 6700 point level but also dropping through the psychological key level of 6600 points.  SPI futures a little bit of support but the daily chart is looking tenuous as strong daily support at or just below the 6500 level must continue to hold going into year end:

European markets bounced back on some good economic reports but also some short covering and Brexit shenanigans in the mix, with the German DAX closing 1.3% higher at 13418 points, taking back nearly half of its previous slump. The nascent breakout from last week remains thwarted with this increase in volatility during a low volume period still not unsurprising, but concerning if prices close below ATR support at the 13000 point level proper:

Wall Street diverged with the NASDAQ actually lifting 0.5% while the S&P500 was 0.2% lower at 3694 points, still unable to get back above the 3700 points barrier.  The four hourly chart shows volatility contained within a very wide band of low and high prices with a point of control near the 3680 point level. I still contend if the market cannot clear 3700-3710 before Xmas we are in for more downside:

Currency markets are also seeing increased volatility with Euro flopping again overnight to make a new low for the week, getting back below the 1.22 handle and actually below what was short term support at the 1.2170 level. As I said yesterday, the inability to beat last week’s session high was telling in the volatility ahead so watch for more price falls going forward:

The USDJPY pair was a bit quieter overnight, with a small surge above the previous lows, but still unable to make a new session high for the week. Resistance remains strong at the previous weekly support at the 103.60 area (solid black horizontal line below) but momentum readings have switched to positive in a sign that it may have another go at a breakout here. I remain unconvinced as the medium term trend remains down:

The Australian dollar also felt the double weight of a stronger USD and weaker commodity prices (read: iron ore) with a deflationary dip down towards but not yet below the 75 handle. As I said yesterday, watching the 75.40 level for signs of a short term retracement that could spread into something more meaningful:

Oil prices came back slightly overnight (relatively speaking), with Brent crude down over 2% to finish just below the $50USD per barrel level. While momentum remains nicely overbought this is the first break below the daily low moving average that acts as short term support and is setting up for a swing play here below trailing ATR support at the $48.50 level:

Gold also had an interesting night, with another trip back down to the previous support level at $1860USD per ounce. While the daily chart is still building a bullish inverse head and shoulders bullish pattern, the lack of resolve in the short term may see further falls below the neckline here to unravel the pattern:

 

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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Comments

  1. Looks like another COVID collapse is on the way presumably with another post COIVD boom to follow.

  2. Sold my BBUS only to see 30min later Trump rejecting the stimulus package for all right reasons but I am sure MSM and even MB will not report it because Trump = bad.

    • He’s right to reject it, just completely wrong timing. And he could have pushed for the larger cheques as part of I dont know, leadership of his cult for the last couple of months. Maybe getting some good work done before he gets kicked out next month?

      • I think he is building for 2024. This gives him perfect platform to say he looks after the Americans. And stupid senate trying to sneak so much pork for other countries gave him perfect opening.
        And timing was very poor on his part. 😒 He should have done it 30min earlier so I would have kept my BBUS.