Category: China & HK

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ASX and Asian selling pressure

Japan’s Nikkei 225 Index respected support at 12500 and its long-term rising trendline, but another test is likely in the week ahead.  Follow-through above 13500 would indicate the correction is over, suggesting a re-test of resistance at 16000. Breach of 12500, however, is more likely, with bearish divergence on 13-week Twiggs Money Flow warning of a reversal.

Nikkei 225 Index

Shanghai Composite Index is falling sharply. So far the down-trend has been gradual, with the PBOC looking to manufacture a soft landing. But 13-week Twiggs Money Flow crossing below zero warns of rising selling pressure. Breach of support at 1950 would offer a target of 1600*.

Shanghai Composite Index

* Target calculation: 2000 – ( 2400 – 2000 ) = 1600

India’s Sensex breached its rising trendline, warning that the primary up-trend is weakening. Failure of support at 18000 would signal a primary down-trend. Declining 13-week Twiggs Money Flow indicates trend reversal is likely. Recovery above 19000 is unlikely, but would suggest a fresh primary advance.

BSE Sensex Index

Apart from Japan, the outlook for Asia is bearish.

The ASX 200 is headed for a test of support at 4400, bearish divergence on 13-week Twiggs Money Flow having warned of a reversal. Failure of support at 4400 would re-test the 2011 lows, while respect would be bullish — suggesting another attempt at 5000.

ASX 200 Index

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Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.
Spot Gold

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of  primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

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ASX: Following China into a down-trend

The S&P 500 is testing resistance at 1650, but declining 21-day Twiggs Money Flow warns of continued selling pressure. Breakout would signal an advance to the upper trend channel, around 1700. Reversal below 1600, however, remains likely and would indicate a correction to 1500.
S&P 500 Index

China’s Shanghai Composite Index broke primary support at 2170 on Thursday. Follow-through below 2150 would signal a decline to the 2012 low of 1950*.
Shanghai Composite Index

* Target calculation: 2150 – ( 2350 – 2150 ) = 1950

The ASX 200 is retracing to test its new resistance level at 4900. Respect would confirm the primary down-trend — as would a peak below zero on 21-day Twiggs Money Flow.

ASX 200 Index

The ASX Small Ordinaries Index, reflecting retail investor interest in the market, continues its primary down-trend. Breach of the 2012 low at 2040 warns of a decline to 1700*.

ASX Small Ords Index

* Target calculation: 2050 – ( 2400 – 2050 ) = 1700

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Gold and Dollar fall

Gold retreated below support at $1400, indicating the end of the bear rally. Expect a test of primary support at $1320/$1340. Yesterday’s long tail is evidence of short-term buying pressure, so breach of primary support is not a certainty. Respect would suggest another test of $1400.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Dollar Index

The Dollar Index is retreating after a false break above 84 on the monthly chart. Breach of support at 79 would complete a double top, signaling reversal to a down-trend. Fall of 13-week Twiggs Momentum below zero would strengthen the bear signal. Respect of the rising trendline remains as likely, however, and would signal a long-term advance to 89/90.

Dollar Index

Crude Oil

Crude is consolidating, with Brent likely to continue the down-trend after breaking support at $100/barrel. Respect of resistance at $106 would strengthen the signal. Nymex WTI, however,  is headed for resistance at $98. Breakout would signal an advance, but reversal below $90 is as likely and would test support at $85/barrel. The spread between the two is likely to narrow as the European economy under-performs the US.

Brent Crude and Nymex Crude

Commodities

A weakening Shanghai Composite Index is being followed lower by the Dow Jones/UBS Commodity Index. Breach of medium-term support at 130 would signal a test of  primary support at 125/126. Commodities remain in a primary down-trend and are likely to stay there unless China resumes major infrastructure investment. Not good news for Australian resources stocks.

Dow Jones UBS Commodities Index

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Europe & Asia: Widespread selling pressure

Germany’s DAX respected support at 8000 on its recent retracement. Follow-through above 8500 would confirm a fresh primary advance. Bearish divergence on 13-week Twiggs Money Flow, however, warns of strong selling pressure. Retreat below 8000 would test the rising trendline around 7500.
DAX Index

The FTSE 100 also encountered resistance at its 2007 high, bearish divergence on 13-week Twiggs Money Flow signaling selling pressure. Expect a test of support at 6000. Recovery above 6750 is unlikely but would signal a fresh primary advance.

DJ Europe Index

The Nikkei 225 found support at 12500. Reversal below this level would warn of a decline to 10000. Bearish divergence on 13-week Twiggs Money Flow warns of strong selling pressure. I was interested to read that George Soros was buying Japanese stocks. To me it seems premature.

Nikkei 225 Index

India’s Sensex is headed for a test of medium-term support at 19000. Breach would test primary support at 18000. Respect would indicate another advance, but bearish divergence on 13-week Twiggs Money Flow continues to warn of reversal to a primary down-trend. Failure of primary support at 18000 would confirm.

BSE Sensex Index

Singapore’s Straits Times Index reversed below its new support level at 3300, warning of a bull trap. Follow-through below last week’s low would indicate a test of the long-term trendline around 3000.

Straits Times Index

The Shanghai Composite Index retreated sharply last week and is headed for another test of support at 2150. Breach would signal a fall to 1950. Declining 13-week Twiggs Money Flow warns of selling pressure. A weakening Shanghai Index is bearish for Australian resources stocks.

Shanghai Composite Index

The ASX 200 found support at 4750, while bearish divergence on 13-week Twiggs Money Flow warns of strong selling pressure. The falling Aussie Dollar is forcing a retreat of offshore investors from the market, but the eventual boost to export earnings is likely to present a buying opportunity later. Expect a weak rally followed by decline to 4500.

ASX 200 Index

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Nikkei, ASX find support but India & China weaken

Dow Jones Japan index found support at its long-term rising trendline.  Follow-through above 77 would indicate the correction is over, suggesting an advance to 100*. Breach of the trendline, however would warn that the primary trend is weakening.

Nikkei 225 Index

* Target calculation: 85 + ( 85 – 70 ) = 100

The ASX 200 also encountered buying pressure, with a hammer candlestick at the primary support level of 4900. Recovery above 5000 would indicate the correction is over, but breach remains as likely and would confirm the primary down-trend suggested by bearish divergence on 21-day Twiggs Money Flow.

ASX 200 Index

India’s Sensex is testing medium-term support at 19600. Breach would signal a correction to test primary support at 18000. Bearish divergence on 21-day Twiggs Money Flow warns of selling pressure. Recovery above 20000 is unlikely, but would suggest an advance to 22000*.

BSE Sensex Index

* Target calculation: 20 + ( 20 – 18 ) = 22

Dow Jones Shanghai Index broke its rising trendline, warning that the rally is running out of steam. Failure of support at 294 would signal another test of primary support at 275. Respect of support is unlikely, but would indicate a test of primary resistance at 314.

Shanghai Composite Index

The overall outlook for Asia remains bearish apart from Japan.

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Bearish signs for stocks

10-Year Treasury yields respected support at 2.05/2.10% with a key reversal (or outside reversal) on Friday, signaling a primary up-trend and possible test of 4.00% in the next few years. The tall shadow on Friday’s candle, however, warns of another test of the new support level before the trend gets under way. Only breakout above 4.00% would end the 31-year secular bear-trend.

10-Year Treasury Yields

The S&P 500 is headed for a test of the lower trend channel at 1600,  declining 21-day Twiggs Money Flow indicating medium-term selling pressure. Breach of support at 1600 would warn of a correction.

S&P 500 Index
The VIX is rising, but only breakout above 20 would indicate something is amiss.

S&P 500 Index

Japan’s Nikkei 225 Index ran into huge selling pressure, falling to 13400 by midday Monday. Expect a test of support at 11500, but the primary trend remains upward. Rising industrial production indicates that Abenomics is starting to take effect.

Nikkei 225 Index

The UK’s FTSE 100 also ran into selling pressure — at its 2007 high of 6750 — with bearish divergence on 13-week Twiggs Money Flow. Expect a correction to test 6000, but the primary trend remains upward.
FTSE 100 Index

Bearish divergence on the Shanghai Composite Index (21-day Twiggs Money Flow) indicates medium-term selling pressure. Expect another test of primary support at 2170. Penetration of the rising trendline would confirm. Breakout above 2460 would complete an inverted head and shoulders reversal (as indicated by orange + green arrows), signaling a primary up-trend, but that appears some way off.

Shanghai Composite Index

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Gold: Two elephants in a lifeboat

There are currently two players destabilizing global financial markets — like elephants in a lifeboat. One is the Bank of Japan, with markets uncertain as to how massive expansion of the monetary base will play out. The second is the Fed, where hints of a taper were enough to send the market into a panic, forcing the Fed to tone down its rhetoric. Emphasis now is on marginal rather than sizable decreases in QE.

Gold broke resistance at $1400, respecting primary support at $1320 and headed for another test of $1500. Uncertainty is high with the metal as likely to break resistance at $1500, signaling a primary up-trend, as to break primary support, which would offer a target of $1200*.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Treasury Yields

Ten-year treasury yields broke resistance at 2.10%, signaling a primary up-trend. First, expect retracement to test the new support level at 2.00/2.05 percent. Breach of that level would warn of another test of primary support at 1.60%. I do not believe that rising yields indicate a resurgence of inflation expectations, but rather anticipation of the Fed taper of quantitative easing. No one wants to be left holding bonds when yields start rising.

Dollar Index

Crude Oil

Brent Crude is headed for another test of resistance at $106/barrel. Respect would indicate a down-swing to $92*, while failure would signal reversal to an up-trend. Nymex WTI respected resistance at $98 and is expected to re-test resistance at $85/barrel. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.

Brent Crude and Nymex Crude

Commodities

Commodity prices continue to fall, with the Dow Jones/UBS Commodity Index headed for primary support at 125/126. But signs of a base forming on the Shanghai Composite Index are likely to lift commodity prices. A Shanghai breakout above 2500 or penetration of the declining trendline would indicate a test of 150 for $DUBS.

Dow Jones UBS Commodities Index

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Shanghai rising but Nikkei, ASX selling pressure

Germany’s DAX is retracing to test the new support level at 8000. Respect would confirm a primary advance, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure — a fall below zero would warn of a reversal. Breach of 8000 would test the rising trendline around 7500.
DAX Index

Dow Jones Europe encountered strong resistance at 290, but remains in a primary up-trend. Penetration of the rising trendline would warn that the trend is losing momentum, while failure of support at 270 would signal a reversal.

DJ Europe Index

The Nikkei 225 ran into massive selling between 15000 and 16000. The gravestone on the monthly chart, supported by bearish divergence on 13-week Twiggs Money Flow, warns of a reversal.

Nikkei 225 Index

India’s Sensex is headed for a test of long-term resistance at 21000, but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Respect of resistance would indicate another test of primary support at 18000.

BSE Sensex Index

The Shanghai Composite Index respected support at 2150 and is headed for another test of resistance at 2500. Breakout above 2500 would complete an inverted head and shoulders reversal (as indicated by orange + green arrows), signaling a primary up-trend. That is still some way off but would be good news for Australia’s beleaguered resources stocks.

Shanghai Composite Index

The ASX 200 is headed for a test of primary support at 4900. Breach would also penetrate the rising trendline, indicating reversal to a primary down-trend. Bearish divergence on 13-week Twiggs Money Flow has been warning of strong selling pressure. The falling Aussie Dollar is forcing a retreat of offshore investors from the market, but the boost to export earnings is likely to present a buying opportunity for Australian investors when the correction is over.

ASX 200 Index

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China hints at bottom while S&P 500 reverses

10-Year Treasury yields are testing resistance at 2.05/2.10%. Breakout above 2.10% would signal a primary up-trend and possible test of 4.00% in the next few years. Only breakout above 4.00%, however, would end the 31-year secular bear-trend.

10-Year Treasury Yields

The S&P 500 completed a key reversal (or outside reversal), indicating selling pressure. Expect a test of the lower trend channel at 1600.

S&P 500 Index
There is no great movement in the VIX and this so far looks like a normal retracement. A June quarter-end below 1500 looks unlikely, but would present a long-term bear signal.

S&P 500 Index

The UK’s FTSE 100 Index is headed for a test of its year 2000 high at 7000. Expect a correction or consolidation below this level. Breakout remains doubtful but would signal a long-term primary advance.
FTSE 100 Index

Penetration of its descending trendline indicates correction on the Shanghai Composite Index has ended and we can expect another test of resistance at 2500. Breakout above 2500 would complete an inverted head and shoulders reversal (as indicated by orange + green arrows), signaling a primary up-trend. That would be good news for Australia’s beleaguered resources stocks.

Shanghai Composite Index

As traders we follow the trend, but in times like this it is important to remain vigilant.

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