Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

The big fill in the recent dip in equity markets continued overnight with European shares outshining Wall Street, although the latter is almost back to where it started. Oil played catch up with a 4% rise in Brent futures while gold fell back despite a rise in undollar assets as Euro and the Australian dollar bounced back. Treasury yields showed some relief with a slight rise in the absence of any economic news. The good news should continue here locally in Asia with stock futures pointing to very solid opens across the region.

Bitcoin has zoomed back into favour, helped along by the dump and pump King Elon overnight with a surge up through the start of year position at the $30K level to break $32K but it has run out of puff this morning. This may well be another dead cat bounce amid the ongoing downtrend, as a sustained move higher requires a daily close above $33K or more:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composite closed 0.7% higher at 3562 points while the Hang Seng Index couldn’t take a trick, again finishing lower to be down 0.3% to 27178 points. The daily chart shows price action possibly putting in a double bottom pattern with long tails of buying support intrasession suggesting this may not be a dead cat bounce after all as long term support at the previous lows below 27000 points is firmer than expected. Momentum remains heavily oversold however so this may prove illusory:

Japanese stocks were able to bounceback after being in near-freefall with the Nikkei 225 closing 0.6% higher at 27548 points. Daily futures are suggesting a further advance today but concerns around COVID at the Olympics are not going away so I expect this to be short lived short covering, although a close above the high moving average will negate that position and turn this into an interesting swing move higher:

Australian stocks had a solid move higher despite the poor retail sales print, with the ASX200 lifting nearly 0.8% to close just above 7300 points. SPI futures are again pointing to another solid open with a 40-50 point gain likely, so this bounce off of ATR support at the 7150 point level could turn into a new daily or weekly high as momentum pops back in the positive zone, but I remain cautious:

European markets did even better with selling exhaustion turning into outright dip buying with the German DAX lifting more than 1.3% to climb to 15422 points. Price action has been pushed back above previous daily ATR support at the 15300 point level with momentum now inverting into a classic swing trade higher with a target around the 15600 point level. However, like all other equity markets I remain cautious of such a move which still smacks of short covering:

Wall Street also had solid sessions, with all three markets moving nearly 1% higher with the S&P500 almost filling in the dip completely to finish at 4358 points. The four hourly chart shows this bounce having nearly finished filling in that deep crack, with price suggesting a return to the previously exhausted levels around the 4380 zone. No surprises that the BTFD crowd filled this in:

Currency markets saw a slight inversion of ongoing US strength with Euro pushing back up towards but unable to break through the 1.18 handle as the potential short term bottom I suggested yesterday slowly forms. Price remains unable to get above the downtrend line since last week’s high so this is likely short lived as momentum remains in the negative zone:

The USDJPY pair was able to get a little higher alongside stocks and broke through the key 110 level later in the session. It will be interesting to see on the Tokyo open if this momentum – now decently positive on the four hourly reading at least – can be sustained to breakthrough the recent weekly high at the 110.50 level:

The Australian dollar was able to stabilise once more overnight helped by the big bounceback in oil prices with a slight uptick to the mid 73 level as a result. The four hourly chart had been putting in a possible bullish falling wedge pattern but as I said previously, this would require an explosive move above the high moving average at the 73.50 level, so while this stage is set its still quite anemic:

Oil resurged overnight with a very strong rally by both WTI and Brent crude with the latter returning to just above the $72USD per barrel level as they play catch up to other risk markets. The breakdown was beginning to spell more trouble but internal buying support at the psychologically important $70USD per barrel level and co-ordinated risk taking has seen a return above the ATR support level. The question is can this hold so watch for a second close above the high moving average at $73:

Gold was just able to cling onto the $1800USD per ounce level overnight after being pushed down all session as the resurging USD is suggesting an inversion below is imminent. Daily and four hourly momentum is nowhere near positive, with a lack of buying support turning this stabilisation into a possible leg down alongside other undollars:

 

 

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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