Macro Morning

See the latest Australian dollar analysis here:

Australian dollar dislocates from greenback amid dirt frenzy

Wall Street’s wobble in the previous session has turned into a full rout overnight with short-exposed hedge funds tipping the major bourses deep into the red. European stocks followed, wiping out their previous gains as the risk market pivots to a much less hopeful stance despite the latest FOMC meeting resulting in a hold on stimulus.  The USD is higher against most of the majors while Treasury yields lowered again with the 10 year remaining settling right on the 1% level while commodities were mixed.

Bitcoin continues to struggle with finding its way with yet another volatile day, heading below the $31K level as it matches last week’s intraweek low by breaking below the $30K level briefly. Too many Reddit kids buying Gamestop and not enough buying crytpo instead?

Looking at share markets in Asia from yesterday’s session where the Shanghai Composite tried to get back above the 3600 point level, closing 0.1% higher at 3573 while in Hong Kong the Hang Seng Index failed to get back above the 30000 point level, closing 0.3% lower at 29297 points. The daily chart is moving from stall mode to proper pullback with a drop below the 29000 point likely in today’s session:

Japanese markets climbed slightly higher, with the Nikkei 225 finishing 0.2% higher to 28635 points. Currency strength is not that much of an issue now, instead its all about correlated risk taking, with a big drop expected in today’s open given the rout on Wall Street as resistance at 29000 points firms once more:

The ASX200 returned from the Australia Day holiday with a sharp decline, finishing 0.6% lower to finish at 6780 points with SPI futures indicating another 100 plus point drop on the open. The daily chart was showing a slight breakout above the bullish rectangle pattern but not enough momentum to get there as Wall Street pulls the brakes:

European markets fell sharply after the previous session showed some internal weakness building, with 1% plus losses across the continent and in the UK. The German DAX took back all of the previous gains to finish 1.8% lower at 13620 points. Resistance at 14000 points remains way too strong even though momentum was positive, it didn’t reach the previous overbought stages. My contention of a swing play back down to ATR support at the 13200 point level is slowly moving ahead here with the potential of a full break below 13000 building too:

Wall Street had broad losses across the board, with the NASDAQ down over 2.6% while the S&P500 finished 2.5% lower to 3750 points. The daily chart shows price failing to push through the 3850 point level and now breaking below the post presidential election trend line, almost through key daily ATR support as well. One day doesn’t make a trend but price really needs to stabilise here fast before confidence breaks:

Currency markets wavered around USD weakness and strength again with a big round trip in Euro as it broke below the 1.21 handle overnight in the wake of the FOMC meeting and comments from the ECB. The four hourly chart shows a return to the very short term downtrend but there’s still support at last week’s intraweek session at the 1.21 handle proper:

The USDJPY pair however had a proper breakout overnight that stalled once it hit the 104 handle. The four hourly chart shows price attempting to breach the long held downtrend from the 2020 highs (upper black sloping downtrend line) after clearing overhead ATR resistance but those tails indicate a lot of resistance going ahead so watch for a minor pullback in todays session as Yen safe haven buying may reduce this move:

The Australian dollar slumped as USD strengthened, making a new weekly low and finishing at the 76.60 level this morning. The Pacific Peso has been following the dominant downtrend from the start of year high with yesterday’s CPI print turning a small blip into a stall and then this risk off reversal which could see a big move lower:

Oil prices were relatively steady overnight as trade wobbled around the fortunes of the USD with Brent remaining above the $55USD per barrel level again. Price remains stalled just above the pre COVID February 2020 level (upper horizontal black line) with strong medium term support firming more than expected here even as momentum wanes:

Gold prices remain somewhat messy here on the daily chart with the previous breakout still not sticking above short term resistance at $1870, despite making a two week high with the daily price moving back down to the $1843USD per ounce level. There was potential for another breakout above $1875 or so to get back to the previous monthly highs at $1950 but it all depends on short term support at $1830 holding:

 

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

    • WSB shut down for now. Its the craziest thing I have ever seen in trading.
      I feel like people will be reading about this day, 20 years from now as the mark of the top; The day GME hit 3000% on the month, AMC hit 2000%, BB hit 300%, NOK hit 160%……..NASDAQ down 2.6%

      • The Traveling Wilbur

        Nah. Not the top. But a great opportunity to load up on the market indexes (once VIX settles down a bit).

        The catchphrase of the year might be: Robin Hooders do it with leverage, but they don’t have enough to bet against an entire marketplace – but more than enough to expose lots of entities swimming naked on whatever stocks they can find something dirty on. Usually cheaply traded ones only at that.

        What I don’t think people realise is that if really big genuine puts get burned en mass, then there are a few trading *platforms* people are joining this party through that are going to be the first against the wall if the revolution is successful. Good luck getting profits out then!