Macro Morning

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Wall Street put in another record high, but it was European stocks that flew the highest overnight despite a fall in German retail sales, while the latest US ISM manufacturing print surprised with its robustness. Bond markets were range traded with the 10 year Treasury flopping between the 1.5% and 1.6% levels while commodity markets were quite mixed again, as oil lifted over 1% while industrial metals lost ground, gold again was unable to get back above the $1800 barrier.

Bitcoin had a very tepid start to the week with a relatively narrow band of trading around the $61K level, with a lack of support building overnight. Short term momentum has maintained a positive setting but price action remains below the previous record high, let alone the new record high which is where its likely to return in the week ahead:

Looking at share markets in Asia from yesterday’s session, where Chinese shares were again mixed with the Shanghai Composite putting in a scratch session to finish at 3544 points while the Hang Seng Index lost nearly 1% as it continued its rollover from last week, closing at 25154 points. Price action continues to show a complete rollover, as the solid level of resistance at the key 26000 points level at the previous September highs remains well out of reach. Further downside rollover is likely, returning to the dominant downtrend, but daily momentum is not yet negative so watch for a close below the 25000 point level next as confirmation:

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Japanese markets rebounded sharply on the election with the Nikkei 225 shooting more than 2.5% higher to close at 29615 points. Overhead trailing ATR resistance at 29300 points has been taken out in one swift stroke, with daily momentum spiking into the positive zone, so watch for a follow through close above this level to seal the deal and a possible return to the former highs above 30000 points:

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While Australian stocks had a very solid session, the ASX200 was only able to clawback about half of its Friday losses, finishing 0.6% higher to remain below the 7400 point level. SPI futures are up 0.2% so we could see another attempt at breaching that natural resistance zone, but we’re more likely to see hesitation due to Melbourne Cup and the RBA meeting where punters will be out in force. While daily momentum is now positive its not yet overbought indicating that the previous uptrend is short term in stature only, despite a desire to return to the former highs in August:

European markets all had very solid starts to the trading week with both the FTSE and German DAX lifting 0.7% higher, the latter closing at 15806 points. The daily chart is now showing a near completion of the fill back to trailing ATR resistance which has been clearly breached as momentum readings pull into the overbought zone, suggesting a return to the 16000 point level:

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Wall Street again put in yet another new record highs, with the NASDAQ again making the biggest gains, up 0.6% while the S&P500 finished only 0.2% higher at 4613 points. The four hourly chart shows the market pushing higher ever again, building above the 4600 point level but price action is a little messy, with some hesitation possibly settling in here as we head into the FOMC meeting this week:

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Currency market volatility again came back in spades with Euro pushed back towards the 1.16 handle following its swift reversal on Friday night, with this start of week action trying to provide some calmness. The union currency obviously has a point of control at this level despite inflation oscillations continuing to spill over from bond markets to currencies, so again I’m taking a seat back here, waiting for more directional certainty and consolidation here:

The USDJPY pair tried to follow through on its swing play from Friday night, getting past the previous intrasession weekly high, but was unable to make it stick, settling just below the 114 handle this morning. This again keeps it on a downward path with a muted series of lower highs, so again watch levels of support in the short term at the low moving average that could push it further lower to the 113.40 level:

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The Australian dollar couldn’t find anymore strength as it again failed to engage to the upside, finishing just above the 75 handle overnight. As I said yesterday, while price action nominally looks strong, momentum readings and the lack of punch through overhead resistance is likely to weigh as traders try to determine if the RBA is ready to pull that interest rate lever:

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WTI and Brent crude futures were able to translate the quiet action on Friday night with a solid 1% gain overnight with the latter pushing up through the $84USD per barrel level. There is still the potential for rounding top pattern here but its slowly disappearing as support is quite evident at the $81 level:

Gold still can’t clear that key $1800USD per ounce level even as short term sentiment still builds into a bullish case for gold, with daily momentum well into the positive zone as price action pushes ever higher. The big problem is the actual resistance level at $1830 or so that needs proper clearance first – watch for continued support here at the $1780 level that must hold for another chance to zoom higher:

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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!