Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Risk aversion roared back on Wall Street on Friday night as sentiment soured once again due to Fed tapering and tax hike concerns domestically, while the Chinese Evergrande saga overshadowed Asian equities. The USD came back stronger against many of the risk currencies as a result, with the Euro and Aussie dollar putting in new weekly lows while Treasury bond yields spiked, the 10 year almost hitting the 1.4% level. Commodities fell back slightly mostly in line with each other, while iron ore made a new low which will way on Aussie markets as we start a new trading week.

Bitcoin was able to hold on to its mid week gains but could not get past the $48K level as short term momentum flatlines. There is a potential move lower here to daily ATR support at the $42K level if this consolidation doesn’t eventuate into more upside risk taking:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite was down 0.6% mid session before recovering to finish 0.2% higher, getting back above the 3600 point level while the Hang Seng Index finally stopped falling with a 1% bounce that almost saw it get back above the 25000 point level, closing at 249205 points. The daily chart shows price unable to get out of this medium term downtrend with momentum remaining nicely oversold and news lows still being made here despite Friday’s rally. The 25000 point level remains the key area to watch as the Evergrande catalyst rolls on for both swing trades higher and what could be a big collapse below:

Japanese stocks were able to put in some minor gains with the Nikkei 225 finishing 0.5% higher to 30500 points. The daily chart continues to show a very overextended rally with the 30000 point level still turning into a probable resistance level, with futures indicating a pullback as we start a new trading week. Deceleration is quite obvious now so watch for a potential move to the lower moving average that has been short term support so far:

Australian stocks were the standout in the region by falling sharply, with the ASX200 closing 0.7% lower to remain just above the 7400 level as medium term support is wiped out. SPI futures are down nearly 1% so this rout is going to continue and likely take out the 7300 point level as the double top pattern on the daily chart comes to fruition:

European markets were relatively mixed but the general thrust was one of selling off yet again with the German DAX finishing more than 1% lower at 15490 points. The daily chart is building on its previous bearish picture, with ATR support at the 15500 point level barely holding on with short and medium term momentum also still in the negative zone:

Wall Street could not hold on to its mid week jitters which saw it finish the trading week in poor fashion, with both the NASDAQ and S&P500 closing 0.9% lower, the latter at 4432 points. The daily chart is seemingly forming the right hand shoulder of a large bearish head and shoulders pattern with the neckline at the 4400 point level coming under pressure next. Daily momentum has switched to negative for the first time since early June where that minor dip was filled much more quickly. Is a proper correction brewing here:

Currency markets continued to pick up in volatility with Euro breaking decisively through the 1.17 level for a new weekly low with previous price action – save some false breakouts – showing a lot of tired support fading. Momentum is considerably oversold so we could see a mild lift higher but without much potential to turn into a proper swing position with shorts adding to any rallies for the last two weeks:

The USDJPY pair was able to hold on to its mid week move higher with a finish right on the 110 handle on Friday night. Nominal overhead ATR resistance at the 109.80 level has been taken out but short term momentum is not yet overbought and price action indicates no new weekly high for two weeks here so this may not yet be a new trend after all:

The Australian dollar continues its iron ore led deflation as it is pushed well below the 73 handle proper after failing to go anywhere on the unemployment print. It’s clear that strong resistance continues to form with overhead ATR resistance showing lovely step downs back to previous weekly support and this is likely to continue this week as iron ore continues to dive:

Brent crude finished 0.3% lower, unable to substantially continue its follow through on the recent breakout with resistance slowly building here at the $75USD per barrel level. Price action continues to suggest some small amount of exhaustion is settling in here with momentum clearly overbought, but upside targets should still be upgraded to the June highs with a note that longer term resistance level above remains in play:

Gold remains in the hands of the bears (or dollar bulls) with the key $1800USD per ounce psychological level a distant memory, but at least Friday saw a staid session with no real change, finishing at the $1754 level. With daily ATR support broken too, the next stage could be a full retracement to the previous flash crash lows at the $1700USD per ounce level:



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. DJIA has broken 10,20, and 50 day MA’s. Not the 200 day MA yet. Technically there’s still room for a RH shoulder. I don’t see the BTFD crowd piling in yet, but this is where they normally show up. The RH shoulder needs them but I have felt that they are getting exhausted. The Advance Decline ratio has been a worry for a while, especially given retail use of leverage on the long side. Exciting stuff.