Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street continued to surge overnight despite the chaos on Capitol Hill with only the NASDAQ pulling back with European stocks outperforming. Oil prices continued to lift on the Saudi cuts while Bitcoin remains unstoppable, lifting to a new record high to be above $36000 mark at one stage as the daily chart moves further into frothy bubble mode:

 

Looking at share markets in Asia from yesterday where the Shanghai Composite was floating along again mid session before a surge at the close sent it 0.5% higher to 3550 points while in Hong Kong the Hang Seng Index was unable to follow in kind, up only 0.2% to 27692 points. The daily chart however is still showing a great breakout that could have more legs, although momentum is clearly overbought and ripe for a pullback, but support at the 26000 point level is very firm:

Japanese stock markets were mixed with the TOPIX gaining while the Nikkei 225 lost another 0.3% to finish at 27055 points. Futures are suggesting another possible bounceback but confidence is lacking here, with the volatility in Yen overnight not helping, so the potential for a proper pullback to or below 27000 points still a consideration:

The ASX200 eventually finished down over 1.1% to 6607 points as Wall Street futures declined, but SPI futures are supportive of filling in most of that on the open today as Wall Street cameback overnight. The daily chart remains in a sideways bent with momentum remaining positive but not yet signalling a breakout:

European markets were able to run freely overnight with the FTSE surging again – despite the lockdown – while the German DAX joined in to finish over 1.7% higher at 13891 points. The higher Euro is no longer weighing here on markets and that solid push above the previous highs above 14000 points is now getting more convincing as momentum kicks up and the daily moving average band moves higher:

Wall Street finished with new record highs as the Democrat victory in the Georgia special elections and Pence’s middle finger to Trump sealed a new Democratic government and some certainty going forward, despite the chaos on Capitol Hill. The S&P500 closed 0.5% higher to 3748 points with the four hourly chart matching the previous high and record to accelerate further:

Currency markets are seeing increased volatility with the latest FOMC minutes pointing to possible more stimulus down the road, with USD generally moving ower against most of the majors. Euro lifted again with some intrasession volatility and kept above the 1.23 handle as a breakout beckons in the short term, with support firming at the low moving average near the 1.22 mid area:

The USDJPY pair finally got out of its rut as Yen buying abated and USD volatility increased in the wake of the crazy coup overnight, sending the pair back up to the 103 handle for a tenuous swing play. Its not out of the woods yet with overhead four hourly resistance still quite firm at the 103.30 level and I would contend that the downward trajectory is likely to continue, with the February extreme lows nearer the 100 handle at parity possible in play here:

The Australian dollar remained strong overnight against USD melee with several attempts at breaching the 78 handle translating into a proper move higher later this morning. Commodity prices and the risk on mood on Wall Street continue to give the Pacific Peso a great boost with a probable charge at the 80 cent level firming each day:

Oil prices continued to surge post the Saudi cut and OPEC+ meeting, with Brent crude pushing up through the $54USD per barrel level, now matching the pre COVID February 2020 level (upper horizontal black line). Medium term support continues to firm here as this breakout continues unimpeded:

Gold inverted sharply overnight, taking back almost all of its New Year gains to finish just below the $1920USD per ounce level in a swift reversal of fortune. I was expecting a small retracement but not as sharp as this, so watch for that trendline and notional support at the $1900 level to come under threat next:

 

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. Burbwatcher triggered a process for me yesterday prompting a question to the Brains Trust.

    What’s the best instrument for Safely Hedging? Lets face it, it’s likely we’ll be jammed in a liquidity trap unless we’re lucky & early enough to get through the exit before it jams if it’s a biggun.

    As I see it, Bonds & Gold (Crypto?) might keep your money (so worthwhile), but they’ll likely not cover for falls within a portfolio if you hold – just keep ammo dry for after the dust settles.

    So, to (make money to) counter losses I’m guessing it’ll be a synthetic of some kind – Shorting shares (probably banned in the moment), Inverse Index ETF’s, Leveraged Inverse ETF’s, shorting CFD’s (Shares{ banned?} or Index), shorting Futures, Buying Put Options? Various levels of counterparty risk in all these in a worst case scenario….. Thoughts?

    • I was hoping to see how the BT replied to you Colin.
      Grantham’s article is spot on. And as tempting as it might be after last year, I’m >85% cash (not AUD sadly) tiny bit of BTC, ETH, gold and silver, less than 5% of my portfolio. And i’m selling out of crypto into this bubble. I might take a look at some commodities and oil companies if either come back a bit, I like Exxon, Chevron, REMX. I also think BABA will come back, like TC, so have taken a small position there. China is ok and KWEB or KERN is worth a look. These are all US listed.

  2. Problem is when will it go off? It can go for another 2-3 years. I just sold most and seating on the fence. Have enough exposure to NCM which covers gold and copper, ALK for gold and possibly gold/copper if Boda gets up, CEL for gold/copper/zinc/lead/silver and PXX for gold/copper. Last 2 very small stakes.

    Will wait until I see decent correction or full blown crash.

    • Most of the counters mentioned will require some timing still – a tad of TA. My circumstances have fortuitously changed & I’m leaning toward minimising the FX (counterparty risk) & spreading back into mainly shares & maybe some small futures bets (Although I was Corzined there). If I get jammed in the share exits I could be stuck in something that takes 10 years before it climbs back to break even (BHP ’87) but at least if I manage to counter I might? minimize any losses. Depends on the type of bust I guess…..
      Just bouncing for thoughts. Your Gold thematic might be the easiest answer…..?

      • another interesting play could be BBUS before Dec pauroll numbers come out of US this Friday night. I’d say these numbers aren’t going to be good looking due to second wave.

        • Likely. Although, I learned (for me) that playing SPY 5 min After the announcement (or when the spread normalised & direction became clearer) worked better for me. Might not be as profitable but provided more certainty. We’ve all got our ways….. I’m trying to get away from the screen & move further into Momo & breakouts off dailies in shares if I can. Maybe still some swings in FX if they’re obviously begging for it…. sometimes they really do 🙂

    • Didn’t you open a US account? I gave you some suggestions Quantumscape tripled at one point, Cliffs is up about 20% in two days and Red Robin yesterday.

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