Category: Countries & Regions

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ASX banks and iron ore drag the index lower

Last week I wrote: “I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.” This week the ticker tape backs up my bearish sentiment, so I am a lot more comfortable.

Iron ore continues to fall, headed for a test of 50.

Iron Ore

Banks’ bear market rally also petered out, with the ASX 300 Banks index headed for a test of support at 8000. Breach would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 broke support at 5700. Declining Twiggs Money Flow signals selling pressure. Breach of primary support at 5600 would warn of a primary down-trend.

ASX 200

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China: Stay clear

“Never trade against the central bank” is a golden rule of trading. Rule #2 should be: “When the central bank behaves erratically, stay clear.” The PBOC announced a crackdown on wealth management products in May but alarm at the rapid contraction elicited a quick retraction.

The Shanghai Composite Index broke support at 3050/3100 signaling a primary decline. But the PBOCs sudden reversal spurred a recovery, with the index now likely to test resistance at 3300. Rising Twiggs Money Flow indicates buying pressure. Reversal below 3050 is unlikely but would confirm a primary down-trend.

Shanghai Composite Index

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India’s Sensex consolidates

India’s Sensex is consolidating above its new (medium-term) support level at 31000. Bearish divergence on Twiggs Money Flow indicates medium-term selling pressure. Target for the advance is 32000* but further testing of the new support level is likely.

BSE Sensex

* Target: 29000 + ( 29000 – 26000 ) = 32000

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Footsie stalls, Sterling weakens

Political uncertainty, with a hung parliament, increased downward pressure on Sterling which is testing primary support at 1.13/1.14 against the Euro. Breach would signal a test of the 2016 low at 1.10.

GBPEUR

The FTSE 100 stalled at 7600, with bearish divergence on Twiggs Money Flow indicating medium-term selling pressure. Retracement that respects support at 7400 would re-affirm the target of 7700*. But breach of the rising trendline is as likely, which would warn of a test of primary support at 7100.

FTSE 100

* Target: 7400 + ( 7400 – 7100 ) = 7700

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DAX renews advance

Germany’s DAX is advancing after retracement respected its new support level at 12400/12500. Rising Twiggs Money Flow signals long-term buying pressure. Target for the advance is 13400*.

DAX

* Target calculation: 12400 + ( 12400 – 11400 ) = 13400

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UK election throws up new uncertainties | Bond Vigilantes

From Jim Leaviss:

The UK has a hung parliament, with Theresa May’s Conservative Party losing seats and likely ending up 8 short of an overall majority. It looks as if young people voted in large numbers, mainly for Jeremy Corbyn’s Labour Party. The Conservatives remain the single largest party however, and together with the Conservative-leaning DUP on 10 seats, they will likely form the new government. The Prime Minister is holding a press conference at 10am – it is possible that she resigns at that time. This is an extremely poor result for her personally, having gambled that another General Election would significantly boost her majority. For an election designed to deliver a “Strong and Stable” government, we face the possibility of a new Conservative Party leadership battle (perhaps beginning later today) and even another General Election later this year.

This renewed uncertainty seems likely to be unhelpful to the UK’s Brexit negotiations, due to start on 19th June. The Conservatives did especially badly in “Remain” constituencies…… Finally, some good news for those fed up with election campaigns: the poor performance of the SNP in Scotland reduces the likelihood of a new Scottish independence referendum in the next few years.

Source: UK election throws up new uncertainties for markets – Bond Vigilantes

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Upside Possibilities Look More Likely Than Downside Risks | Bob Doll

From Bob Doll’s latest weekly update:

Investors remain highly focused on global political issues. Emmanuel Macron’s victory in France has reduced some political risk in Europe, but investors are growing increasingly skeptical about President Trump’s ability to deliver on his pro-growth agenda. The growing scrutiny over White House ties to Russian operatives, escalating risks of global terrorism and rising uncertainty around North Korea are all negatives for investor confidence.

But these negatives have not offset positive global macroeconomic conditions. Global economic growth is hardly robust, but looks better than it has in several years, especially in Europe. Manufacturing activity is improving and global trade appears to be recovering. Corporate profits are also trending higher across most markets and industry sectors. Financials remain a weak spot in many areas of the world, but we expect global bond yields will rise as economic growth solidifies, which should help this sector. Finally, monetary policy remains growth- and equity-friendly. The Fed is in the midst of a rate-hiking campaign, but should continue raising rates slowly and predictably…..

Source: Weekly Investment Commentary from Bob Doll | Nuveen

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S&P 500, Nasdaq, Fedex bull signal

Bellwether transport stock Fedex [FDX] broke resistance at $200, signaling an increase in economic activity.

Fedex

The S&P 500 followed through above 2400, offering an immediate target of 2500. Recovering Twiggs Money Flow signals medium-term buying pressure.

S&P 500

The Nasdaq 100 has gained more than 20% in the last 3 months, since breaking resistance at its Dotcom high of 4800. With Amazon breaking through $1000, I am concerned that tech stocks are over-heating.

Nasdaq 100

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Europe consolidates

Dow Jones Euro Stoxx 50 appears unruffled by Donald Trump’s visit and withdrawal from the Paris Accord, consolidating above support at 3500. Respect is likely and would signal a further advance to the 2015 high at 3800*.

DJ Euro Stoxx 50

* Target calculation: 3650 + ( 3650 – 3500 ) = 3800

An unintended consequence of Trump’s failure to re-affirm NATO’s Article V, may be that European states learn to rely less on an external party and draw closer together to support each other.

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Footsie stalls as Pound weakens

Sterling continues to test primary support at 1.140 Euro. Breach would signal a decline to the 2016 low at 1.100.

GBPEUR

The FTSE 100 advance stalled, signaled by a doji on the weekly chart, with bearish divergence on Twiggs Money Flow indicating medium-term selling pressure. Retracement that respects support at 7400 would re-affirm the target of 7700*.

FTSE 100

* Target: 7400 + ( 7400 – 7100 ) = 7700

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