Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street finished Friday with another whimpering session as risk spirits abated through most of the trading week. All eyes remain on currency and interest rate markets instead, with 10 year Treasury yields again pushing through the 1.3% level, pulling up peripheral bonds as well, while the USD fell back sharply as the Australian dollar broke out significantly. Commodities were very mixed oil took extended breathers with Brent and WTI crude falling back nearly 2% while copper jumped to another new yearly high and precious metals were largely unchanged.

Having broken through the magical $50K level, Bitcoin is zooming higher again, now breaking through the $55K level this weekend after stabilising in a very tight trading range late last week. The doubling is turning into a tripling since Christmas and everything remains awesome:

Looking at share markets in Asia from Friday’s session where the Shanghai Composite was down halfway through the session before rebounding at the close, lifting 0.5% to 3696 points while the Hang Seng Index did the same, having been down nearly 1% before finishing up 0.1% or so at 30644 points.The minor pullback to the 30000 point level has seemingly finished with this rally, wiht support obviously very firm here, but its not that surprising given the overblown nature of the market. This level should act as support going forward for another upleg:

Meanwhile Japanese markets also continued to selloff, with the Nikkei 225 finishing 0.7% lower at just over the 30000 point barrier. Futures are relatively stable despite the unclear lead from Wall Street stumble, while daily ATR support continues to firm higher, its still about that trendline in recent weeks that is slowly coming back to the the mean so I would expect a slow start to the week from here:

The ASX200 was the biggest loser, down over 1.3% to cross below the 6800 point resistance level again. SPI futures are down over 10 points due to the wavering confidence on Wall Street, with Friday’s session showing a break below the low moving average and the zooming Aussie dollar providing big headwinds for the market as its tries unsuccessfully to build some medium term momentum, likely range bound again:

European markets had minor gains again across the continent to finish the week on a better note as the German DAX stabilised and then some, putting on 0.7% but still remaining below the 14000 point level again at 13996 points. Price just can’t back above that level as those former highs in early January continue to firm as strong resistance, so again another market I’m looking at closely, with that low moving average the key area to watch tonight:

Wall Street had a weak finish, but didn’t fall completely over with the S&P500 closing 0.2% lower to 3906 points. The daily chart shows a modicum of stability here at the 3900 point level but the lack of new daily highs is really weighing on the market. I’m watching the low moving average and 3900 points as the point of control going forward this week:

Currency markets reversed direction yet again as the USD bears took control, sending Euro back above the 1.21 handle after its mid week fall down and rebound. This firm bounce takes price above former trailing ATR resistance but not the previous weekly highs which might be a sticking point here technically, with the 1.2150 level the key area to beat:

The USDJPY pair has extended its pullback due to the overall USD weakness to remain well below the 106 handle. Short term momentum was considerably overbought on the four hourly chart and has not yet crossed into negative territory, but note price action in recent sessions with long tails above, noting that bears remain in charge with Yen buyers stepping in. ATR support here at the 105.30 level is crucial:

The Australian dollar remains the enigma, now the star, after hovering all week without a care as USD strength and weakness swung like a pendulum, it broke out decisively to end the week way -way above – the 78 handle. A real easy trade but can it hold above these new highs?

Oil prices came back once more with Brent crude pulling back sharply below the $62USD per barrel level on Friday night, finally breaking the high moving average, signalling a possible end of trend. The first sign of trouble were the reversion in overextended momentum readings so this is not a surprise, with the upside target at the $70USD per barrel at the 2019 highs perhaps too high a short term goal. Watch for stability around trailing ATR support at the now psychologically important $60 level:

Gold continues to remain very weak even with a weaker USD as it remains depressed here below the key $1800USD per ounce level, right on the November low at $1775USD per ounce. Momentum is considerably oversold so there is the potential for a swing back higher, but there’s no medium term buyers here:


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. An essential read … a masterpiece …

    The American City’s Long Road to Recovery … Joel Kotkin … American Affairs Journal
    h/t PH
    limit one free copy … long read
    google search title if blocked

    Even before 2020, America’s great cities faced a tide that threatened to overwhelm them. In 2020, the tsunami rose sud­denly, inundating the cities in ways that will prove both troubling and trans­formative, but which could mark the return toward a more hu­mane, and sustainable, urbanity. The two shocks—the Covid-19 pandemic in the spring, followed by a summer punctuated by massive social un­rest—have undermined persistent fantasies of an inevitable “back to the city” migration.

    Before the pandemic, cities were already experiencing a huge class divide, slackening population growth, rising crime, and dysfunctional schools. Their white-collar-dominated economies were clearly vul­nerable to technological changes, and they were presided over by a political class increasingly out of touch with reality and often hostile to middle-class concerns. Now, the urban white-collar employment and tourism economies have been devastated, while other sectors such as manufacturing, port development, and logistics had already de­parted. … read more via hyperlink above …

  2. Barrick looked precarious for several weeks…. then finally fell through the floor last week. Will it revisit the 2015 low?

    Elon Musk nailed it;

    “Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company.
    when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.
    Bitcoin is almost as bs as fiat money. The key word is “almost”.”

    The key word here is “liquidity”. Elon said “a less dumb form of liquidity”, not “a less dumb form of money”.

    Gold is money, but gold does not have enough liquidity. The world economy is simply too large for the total amount of gold above the ground to provide enough liquidity.

      • That is a great question. It really depends on the gold price. Barrick has quite a large debt so if the gold price falls from here it can be in a bad situation.

        Rick Rule articulated the fundamentals of gold, which is still moderately bullish. So, I would say the current share price may be good for opening a small initial position if one does not already have an exposure to Barrick. It will be a reasonable insurance.

        Miners are capital intensive businesses, so I would personally prefer to enter when the fundamentals are more one-sidedly favorable.

          • My pleasure.

            A commodity cycle is quite long, about 20 years on average. Sooner or later there will come a time when the fundamentals of gold miners become more one-sidedly bullish, like back in 2015.

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