Macro Morning

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The hawks are circling on Wall Street with yet another selloff overnight, the fifth in a row for European equities as risk markets anticipate the forthcoming FOMC meeting. The bond market actually slipped a little although the 10 year Treasury yield only lifting slightly, up to 1.47% level while the USD continued to firm against everything, especially Euro and other risk currencies in anticipation of a hawkish Fed. Commodity markets remain under stress too with oil prices falling nearly 2%, gold off by more than 1% while copper was down just over half a percent.

Bitcoin finally found some life overnight, as it tries to get out of last week’s starting slump that had put continued pressure on all crypto currencies. The four hourly chart shows price pushing solidly higher (a bullish engulfing candle) to bounce off the slump lows at the $47K level to almost breach the $50K level this morning. Remember however that the next support levels are quite far away at the September lows around $43K, with daylight below to $30K next, unless a rabbit can be pulled out here somehow:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares put in another weak session with the Shanghai Composite down 0.4% to 3647 points while the Hang Seng Index was looking to put in a scratch session but sold off heavily at the close to finish nearly 1% lower at 23420 points. This dead cat bounce is turning into a route but it remains to be seen if it can be translated into a fightback due to overnight stock markets putting in reversals. I’m still watching for further price moves below the 23000 point level:

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Japanese markets were looking to be a bit more bullish and while the TOPIX was up 0.5%, the Nikkei 225 only managed a meagre 0.1% lift closing at 28459 points. Futures are indicating a bounceback given the upside volatility overnight, with the potential to meet the previous daily highs at just below the 29000 point level but note that daily momentum is still negative and there’s a lot of resistance to clear overhead here:

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Australian stocks stood out with falls across the board, with the ASX200 losing 0.7% to close at 7327 points as the 7400 point level turns into stiff resistance. SPI futures are up 0.5% or so but this could be frittered away due to the higher Australian dollar because resistance is extremely heavy here at the previous highs around the 7400 point level. This may require a bigger catalyst than just the Fed meeting overnight to get things moving as the daily chart does not look pretty:

European markets were quite mixed going into the FOMC meeting with the FTSE falling sharply on their own high inflation print and OMICRON troubles while the German DAX managed a tiny little lift higher, finishing up 0.1% at 15476 points. This remains a classic dead cat bounce setup that will only be negated if price can get clear of the former trailing ATR resistance level at around 15800 points. I’ll continue to watch the low moving average here which must firm as short term support, but notably daily momentum remains negative:

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Wall Street loved the Fed, despite it taking the punchbowl away and we could in be for a late Santa rally as a result! The NASDAQ zoomed more than 2% higher while the S&P500 gained more than 1.6%, taking back its losses for the week to close at 4709 points. The four hourly chart shows a big bullish candle wiping out those losses and returning the market back above the 4700 point level in one fell swoop. Do we stand in the way and call this a new rally? Prudence would dictate watching for a clearance of the former highs instead of relying on a one session reaction:

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Currency market volatility was extremely high with wide ranging sessions leading up to and post the FOMC meeting and press conference with the eventual outcome seeing USD lose a lot of ground versus other currency pairs. Euro is almost out of its downtrend again but not before getting smacked down to the 1.12 handle and then rebounding sharply to almost cross the 1.13 level.Its still not a very clear result with only a small break above the four hourly downtrend evident here with short term momentum really unchanged and still oversold. I’m waiting for a proper crossover of the 1.13 handle before getting excited about being long Euro:

The USDJPY pair pushed higher without much resistance overnight, lifting right through the 114 level before settling just above there this morning in a well overdone move on the back of the Fed meeting. Momentum readings are extremely high and should result in a pullback as we head into the end of the trading week, but with resistance cleared there’s more medium term upside potential before hitting further resistance at the 115 level in line with longer term charts:

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The Australian dollar had a similar ride to Euro but a much more bullish result, pushed down below the 71 handle before zooming back to last week’s intrasession high, albeit not clearing it. I said yesterday that despite the failed breakout at the start of the week which ended up in a sharp reversal, support seemed very firm at the 71 level and that’s where the buyers stepped in overnight following the FOMC meeting. The next level is stark and obvious – the 71.80 area – so watch for any breach there to get things going again alongside an equity market Santa Rally:

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Oil prices are still failing to bounce back properly from their recent setup with both WTI and Brent crude retreating slightly, the latter however getting back above the $74USD level later in the session. The former monthly resistance level at $77 and then former support at the $80 level remain the targets to get back to in any bounceback, but so far this has turned into a dead cat bounce as daily momentum inverts and price moves down towards the psychologically important $70 level:

Gold has had a volatile week and capped it off with a volatile session overnight due to the Fed’s machinations with a dip down to the $1750USD per ounce level and then back up to $1780. While wide ranging for one session, taking a step back the market overall remains fairly flat and unchallenged to the upside. Short term momentum remains flat at best, as the inability to punch through overhead resistance and create a new significant daily high continues to weigh on sentiment. Watch for a potential break above trailing overhead ATR resistance at the $1790 level though:

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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!