Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Well that was an interesting night. Wall Street fell out of bed, tumbled down the stairs, threw up in the kitchen sink and then crawled its way back up, falling asleep with its chin on the edge of the bed. A wild ride that saw an intrasession loss of nearly 4% before finishing 0.3% higher for the day. This sort of volatility is going to continue and may not yet signal a bottom, with similar moves recorded just before full-on crashes. Insert Ukraine/inflation/The Fed/earnings as reason thereof. The USD continued to firm against all the major currency pairs in a run to safety, but they all then bounced back alongside equities, while moves in bond markets are still expecting a surge in interest rate rises starting in March. Gold remained resilient and indeed put in a new daily high above the $1840USD per ounce level while oil and other commodity markets wobbled.

Bitcoin did not miss out on the epic volatility with a major selloff in the Asian session seeing it breakdown past the 50% retracement levels to fall below $33000 before rebounding late last night to the $37000 level. This happened across the Ponzi board, I mean crypto complex, with other coins hit as well and either sets up for a new bottom here that could shoot back above the $40K level or completely rollover and head down to zero:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were quite resilient, helped by another PBOC interest rate cut with the Shanghai Composite slightly up at 3524 points, while the Hang Seng Index pulled back, closing more than 1% lower at 24656 points.  The previous breakout above the 24000 point level remains in a holding pattern and as I saiy previously I remain cautious here of potential upside at the previous monthly highs near 26000 points with price action seeing a retracement back to daily support that must hold:

Japanese markets finished slightly higher eventually with the Nikkei 225 closing up 0.25% at 27588 points. Futures are extremely uncertain here with a wide ranging price volatility as can be expected given the huge moves overnight. Momentum is extremely oversold with price action retreating to monthly support having taken out the November lows so probability says expect lower soon:

Australian stocks had suffered a milder selloff than expected with the ASX200 closing only 0.5% lower but still making a new monthly low at 7139 points. SPI futures are down more than 1% despite the very late recovery on Wall Street, but who knows with this sort of volatility. The futures chart is saying a break below the 7000 point level so prepare for the worst, as the lows from October last year (lower black line) are taken out with momentum off the charts:

European shares started off very badly and continued selling throughout the session with major falls across the continent, the Eurostoxx 50 index finishing more than 4% lower to retreat back to the November lows. Post close futures saw it catch up marginally with the Wall Street recovery but this is looking precarious in the wake of the Ukraine fracas, with stability nowhere to be seen yet:

As I said on the opener, that was a fun night with all three bourses on Wall Street having very bad sessions with epic “never before seen” (actually several times, notably during the 2008 crash) volatility sending the S&P500 down nearly 4% before recovering just above the 4400 point level. The daily chart shows this is nowhere near over with momentum is extremely oversold although short term conditions are ripe for a potential bounceback here but that would be a brave move to go long right now:

Currency markets had lower volatility (thank Dog below) but the USD continued to hold against everything overnight, with a faint echo of moves on Wall Street seeing it lose some ground later in the session. Euro pulled back below the 1.13 handle briefly but then had a small bounce back, again failing to make a new session high in the process. The four hourly chart shows this clearly with momentum still negative, although a small swing play is setting up:

The USDJPY pair found some support at the mid 113 level after almost looking like rolling over here in the wake of Yen safe haven buying which had offset the broader run to the USD. Price stabilised and pushed up towards but not through former trailing ATR support at the 114 handle. Momentum was heavily oversold but is now broadcasting a swing move higher with a crossover after staving off making a new weekly low:

The Australian dollar had a much steeper curve given its risk currency proxy status, falling through the 71 handle before bouncing back late alongside Wall Street to almost get back to the mid 71 level this morning. Today’s inflation print will be very interesting indeed after this setup so watch for a potential move back above the high moving average here on the four hourly chart, but there’s so much overhead resistance to clear, a poor print could see it fall further, swiftly:

Oil markets are still taking some heat out of their recent big surge, with futures pulling back as Brent markers oscillate around the $87USD level. Daily price action was suggesting a potential top (note the failure to make a new daily high, then an intrasession new high that was sold off to the close) and this may still come to pass, but daily momentum still remains in overbought territory with price above the previous highs at the highest horizontal black line:

Gold is proving remarkably resilient here in the wake of risk and bond market selloffs and runs to USD as it not jsut consolidates but moves higher above the $1830USD per ounce level, closing with a new daily high at $1842 overnight. The daily chart is looking more promising with the potential for a run up to the November highs at $1875:

 

 

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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Comments

  1. PalimpsestMEMBER

    “either sets up for a new bottom here that could shoot back above the $40K level or completely rollover and head down to zero” – true across everything. We’re all wondering “now what”. I had hedged my main portfolio, of course now I wish that I’d overhedged.