Please note this is the last Macro Morning/Afternoon report for a month or so as I’m off on holiday – good luck, markets always get juicy when I’m away!
Markets are ignoring macro risks, geo-political risks, monetary risks – all the risks – and focusing on the fact that the US Federal Reserve will cut rates at its upcoming September meeting, sending Wall Street higher again. Meanwhile this risk on mood has seen a shift in USD sentiment with a slight reversal of fortune for the dethroned “King” dollar which made up some gains against most of the majors. The Australian dollar pulled back from its nearly two month high to retreat below the 66 cent level but looks firm in the wake of higher iron ore prices.
Looking at stock markets from Asia from yesterday’s session, where mainland Chinese share markets slid back going into the close with the Shanghai Composite down 0.5% but still holding above the 3800 point level while the Hang Seng Index was up more than 1% to close at 25938 points.
The daily chart shows a complete fill of the March/April selloff with momentum reversing back into overbought territory to try get back to its recent highs. Resistance at the 25000 point level has turned into a breakout play here with support at the 24000 point level as the springboard but this short term reversal was able take heat out of the market for a solid consolidation. Watch for a breakout above the 26000 point level here:
Japanese stock markets made new record highs but then pulled back with the Nikkei 225 actually closing 0.4% lower at 43459 points.
Daily price action was looking very keen indeed as daily momentum has accelerated after clearing resistance at the 36000 point level with another equity market that looks very stretched and breaking out a bit too strongly here. ATR support has been ratcheting up for awhile with a breakout able to send it higher:
Australian stocks were the odd ones out and sold off with the ASX200 closing 0.5% lower to 8801 points. SPI futures are flat again despite the solid finish from Wall Street overnight.
The daily chart pattern was suggesting further upside still possible with a base built above the 8500 point level as daily momentum tried to maintain its overbought status but this decline was worrying but so far short term support is just holding on:
European markets were able to flight back slightly after their poor showing on Friday night with some meagre returns across the continent with the Eurostoxx 50 Index finishing 0.1% higher at 5368 points.
Weekly support has been respected after a brief touch below the 5200 point level as the recent rebound on Euro weakness shows a complete fill. However this market is again failing to make headway on too high valuations (mainly defense stocks) so watch for any falls taking out short term support:
Wall Street wants the put, it needs the Fed put as the AI bubble continues with the NASDAQ finishing 0.4% higher while the S&P500 was able to get back above the 6500 point level, lifting 0.3% higher to finish at 6512 points.
The daily chart still looks like a stairway to heaven while the four hourly chart shows the 6500 point barrier as the area to overcome as short term momentum wants to get back into overbought mode. This attempt at getting back on trend is working well here as we enter what looks like the last stages (which could last months or another year) of this bubble:
Currency markets were fully swinging away from the recently stronger USD as they play catchup to the continued poor economic malaise in the US, but a slight reversal on overexuberant short selling has seen Euro pull back to just above the 1.17 level, with other undollars having mild reversions as well.
The union currency had been building strength continuously as bad domestic economic news from the US overshadowed any continental slowdown but had reversed that trend in recent weeks. Short term momentum was suggesting a proper rout with a new weekly low at the 1.14 handle, but weekly support held fire before the Friday night reversal and has held here:
The USDJPY pair gapped higher over the weekend due to the resignation of Japanese PM Ishiba but subsequently gave up those gains and then heading back to the 147 level before rebounding again in what looks like a decent dead cat bounce!
The previous price action was sending the pair beyond the March highs and had the potential to extend those gains through to start of year position at the 158 handle but the jobs surprise puts this all on the backburner. USD weakness was weighing on Yen for awhile here but this reversal has given the pair more strength to possibly return to the previous weekly high:
The Australian dollar had been largely unchanged by the recent but well expected RBA but has been finding more strength due to USD weakness and higher iron ore prices following the bad jobs report on Friday with a surge up through the 66 cent level, although it gave up some gains overnight.
This could become a more sustained breakout if the calls for more cuts from the Fed eventuate as the US economy slides into recession, but the Pacific Peso is not out of trouble so I’m wary of a lot of upside potential here:
Oil markets were trying hard to get positive momentum going but both WTI and Brent crude are being pushed around by Israeli attacks throughout the Middle East and Ukrainian strikes on Russian oil refineries, which is not stabilising at all on top of the usual Saudi manipulations. The latter market “steadied” around the $66USD per barrel level overnight without a resolution here.
The daily chart pattern shows the post New Year rally that got a little out of hand and now reverting back to the sideways lower action for the latter half of 2024. The potential for a rally up to the $80 level after making new substantive daily highs was gaining traction but has lot all support in the short term so watch for a rollover here:
Gold continues to look much stronger – maybe a little too strong – as it blows through the previous record highs on the daily and weekly charts and was able to extend those gains overnight again, pushing up through the $3620USD per ounce level. But this is looking toppy!
Short term support had been under threat most of the last three weeks with price almost returning to the late June lows as the USD gained strength. Daily momentum was getting back into the positive zone, as support was being somewhat built but that series of new lows was too telling. This is looking very solid indeed as more central banks indicate more gold purchases:
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/wrong on your position, so cry uncle and get out!