Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Wall Street fell sharply overnight to a new two month low as the Farcebook/Instagram dropout sent NASDAQ lower as wider concerns over stagflation also dominated. European shares couldn’t get out of their rut either with a lack of newsflow not helping while bond markets were range traded around recent yield lows. Currency markets diverged as risk currencies were contained as commodity currencies like Loonie and Aussie lifted against what is still a strong USD trend. Commodities went ever higher with the Bloomberg Commodity Index pushing past its 2008 high as oil jumped nearly 2% while copper rose another 1% as gold also lifted slightly.

Bitcoin continued its surge out of its recent holding pattern at the $44K level, pushing through $49K and the previous weekly highs as it barrels in on $50K, with short term momentum definitely on its side:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese markets remained closed for a holiday while the Hang Seng Index responded harshly to the trading halt in Evergrande shares with a 2.2% loss down to just over the 24000 point level. The very small potential for a breakout above the high moving average has evaporated and now a return to the former lows is pointing to yet another capitulation trade below the 23500 level instead:

Japanese markets were also in sell mode with the Nikkei 225 closing 1.1% lower to 28447 points. Futures are indicating a big drop on the reopen, not helped by Yen which continues to strengthen against USD. Support has evaporated here as well with trailing ATR and weekly support at 29000 points wiped out as momentum readings go into oversold mode swiftly and the August lows beckon for a wider selloff:

Australian stocks have re-engaged to the upside, with the ASX200 lifting almost 1.3% to start the week with a bang at 7278 points. Another violent whipsaw is imminent however with SPI futures indicating at least a 1% drop on the open due to the reverse in risk sentiment on Wall Street overnight. As I said yesterday, the small blip higher was nowhere near enough to arrest the decline in risk sentiment on local stocks as the daily chart is poised to break below monthly support at the 7000 point level:

European markets were unable to get any momentum as negative sentiment continued to weigh, the German DAX lost another 0.7% to finish at 15036 points. The overall picture remains quite bearish and the move lower to weekly/monthly support at the 15000 point level is setting up a proper selloff/wipeout lower with daily momentum remaining oversold and the price pattern almost completing a rounding top:

Wall Street’s dead cat bounce had a meow on Friday night but was kicked into the gutters overnight, with the NASDAQ suffering the most on Facebook’s failure, losing more than 2% while the S&P500 took back all of its gains to lose 1.3% to close at 4300 points exactly. The four hourly chart clearly showed that the previous fill was quite meek given overhead medium term resistance at 4470 points and even short term ATR resistance had not been thwarted with overnight price action now back to the previous intraweek low. This is not yet over:

Currency markets were relatively mixed with risk currencies falling back with commodity currencies moved higher as commodity prices spiked to new multi year highs. Euro had been finding a base at the 1.16 handle after weeks of selling pressure but that has turned into a minor swing trade that has yet to push through overhead trailing ATR resistance at the 1.1650 mid level, so watch for another close above the high moving average to get things moving proper:

The USDJPY pair continued its own minor reversal, crossing below the 111 handle overnight in a tepid start to the trading week. This will remain a big headwind effect on Japanese shares as four hourly momentum gets into the oversold zone as volatility remains low, as signs are building of a proper here on a risk off trade:

The Australian dollar was able to continue its move higher after bouncing off the recent monthly lows below the 72 handle as commodity prices gave it a strong tailwind even against USD strength.  Price pushed through resistance at the ATR four hourly 72.70 level with momentum readings now properly overbought, which is indicative that this trend can continue higher, the next target being last week’s intrasession high at the 73 handle proper. This could be a big bear trap with iron ore trading potentially flipping it back over later in the week, so we must be cautious:

Oil prices are getting very frothy now as the commodity index zooms higher with WTI and Brent crude futures lifting nearly 2% with the latter finishing above the $81USD per barrel level, nearly matching its 2018 high. Price action is pushing well above the medium term downtrend with momentum readings about to blow out again to overextended oversold levels. While support at the low moving average level is still a good uncle point, I expect a mild retracement here as volatility boils:

Gold continues its mild bounceback, moving to the $1768USD per ounce level and getting above the high moving average on the daily chart. Daily momentum is no longer oversold and the conditions are ripe for a swing play here that could turn into a semi rally back up to the previous highs. A failure to build support here however will otherwise move to 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. Hugh PavletichMEMBER

    China …

    Evergrande eyeing $5 bln property unit sale; rival Fantasia misses payment … Tom Westbrook and Donny Kwok … Reuters

    • Trading in Evergrande, Evergrande Property Services halted
    • Shares of Chinese property developer Hopson also suspended
    • Hopson to buy 51% stake in property services unit – report
    • Smaller rival Fantasia misses bond payment, Fitch slashes rating
    • Broader market nervousness returns, offshore yuan slips

  2. Hugh PavletichMEMBER

    New Zealand …

    Barfoot & Thompson’s September sales volumes down 40% on September last year, prices also tumble … Greg Ninness … Interest Co NZ

    NZIER Quarterly Survey of Business Opinion shows the building sector has gone from being the most optimistic to the most pessimistic sectors surveyed … David Hargreaves … Interest Co NZ

    Building consents issued: August 2021 … Statistics NZ

    • In the year ended August 2021, the number of new dwellings consented per 1,000 residents was 9.1, compared with 7.4 in the August 2020 year.
    • In August 2021, 4,490 new dwellings were consented