Macro Morning

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Friday night saw Wall Street stand out as it fumbled over Fed Chair Powell’s hawkish comments over inflation. European and Asian markets however had solid finishes to the week, helped along by lower domestic currencies as USD strength continues to firm. Commodity markets were still rather bullish as oil prices made a new seven year high, while gold punched through the key $1800USD per ounce level on Powell’s comments in a strong rally but failed to make it stick and closed just below.

After making a new historic high during the week, Bitcoin couldn’t hold on to the gains and the first signs of a pump and dump where exhibited with a flash crash that sent the crypto currency down shaprly on Thursday. It ended the week just above the $60K level, losing 10% or so from the top. Short term momentum has inverted from its overbought phase, although daily ATR support is a long way away, watch for any action below the low moving average on the daily chart for signs of a wider breakdown:

Looking at share markets in Asia from Friday’s session, where the Shanghai Composite whipsawed but eventually closed 0.3% lower at 3582 points, while the Hang Seng Index built on early gains to finish 0.4% higher at 26126 points. Price action is slowing down its upside moves here in the past few sessions as it begins to hit a solid level of resistance at the key 26000 points level, equating to the previous September level. While daily momentum is now overbought, levels may matter more here:

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Japanese markets also lifted slightly with the Nikkei 225 closing nearly 0.4% higher at 28834 points, not enough to clawback the previous session losses. The daily chart showed price had nearly completed a fill of the previous corrective phase that took the market down to monthly support at the 27000 point level, but trailing ATR resistance overhead at 29300 points is proving too strong as daily momentum remains negative:

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Australian stocks were largely unchanged with the ASX200 closing above the 7400 point level again, struggling with a lot of internal resistance and lack of momentum as it ends the trading week. SPI futures however look much more promising, up at least 30 points despite the wobbles on Wall Street, with daily momentum now switching to positive readings and possibly turning this swing trade into something more sustainable. I still note that the 7400 ATR resistance level still may prove too hard to clear:

Most European markets lifted in modest fashion to finish the trading week with the German DAX closing 0.4% higher at 15542 points. The daily chart is still showing that this bounce off the key 15000 point level remains a classic swing play only that has yet to turn into a re-engagement of the major trend, which would requires a proper clearance of overhead trailing ATR resistance at the 15800 point level. Short term price action is setting up for a breakout however, with the low moving average proving a good uncle point from here:

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Wall Street was unable to punch through with an end of week rally with the NASDAQ slumping nearly 1% while the S&P500 eventually finished 0.1% lower at 4544 points. The daily S&P chart shows price wanting to exceed the August highs and while intrasession it did so, its the close that matters. This rally maybe too far too fast with momentum rolling over as we head into the end of the month and the key corporate earnings releases coming out this week:

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Currency markets had slightly lower volatility post the mid week reversal in USD which continued to push higher against almost everything (except Yuan and gold) on Friday night, mainly on inflation concerns. The four hourly chart of Euro is still showing a potential double top pattern but Friday’s price action was more supportive that expected with the 1.16 handle still providing that short term uncle point as traders consider the medium term uptrend not yet over. Watch short term momentum readings for signs of a breakout:

The USDJPY pair was pushed lower, indicating not all is well outside of Wall Street in terms of risk taking with that retracement below the mid 114 level turning into a new weekly low position below the 114 handle at the mid 113 level instead. While the overall technical picture was quite bullish, short term momentum readings had retraced fully from their overbought settings, with the subsequent move down to and through ATR trailing support. The key level to watch now is the mid 113 zone for signs of a proper follow through:

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The Australian dollar was also pushed lower on the inflation concern trade although it held on strongly at short term support at the mid 74 level even as momentum dived into negative readings. On the opening this week, continue to watch four hourly momentum and ATR support which must hold here or it will return to the 74 level promptly:

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WTI and Brent crude futures pushed aside any oversupply concerns and pushed both markers up to seven year highs, the latter finishing well above the $85USD per barrel level. I’m still a little concerned about divergent daily momentum readings, and nominally lower daily lows which continue to indicate a rounding top pattern is beginning to form, but overall price action is still very bullish:

Gold had a wild ride as it held on all week to the stronger USD train with internal support building and then finally translating into a strong moves right through the $1800USD per ounce level on Friday night due to Powell’s inflation comments. This was quickly walked back though for a final session and weekly finish just below the key level. Sentiment remains somewhat muted for gold, with daily momentum now pushing into the positive zone, a double bottom pattern at the $1730 level giving rise to a potential medium term uptrend but this requires a very solid close above $1800:

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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

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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)

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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!