Stock Markets Archives - Page 57 of 170

January 29, 2016

Brief retracement

My newsletters on December 10th and January 14th warned of the approaching storm across global markets. Last week the Dow Jones Industrial Average broke support at 16000, signaling a primary down-trend. Buyers remain present in numbers, however, and this week we have observed a test of new resistance levels. But the weight of the market has shifted to the sell side and a successful breakout is unlikely.

Dow Jones Global Index retraced to test resistance at 290. Respect is likely and would suggest another decline. 13-Week Twiggs Momentum below zero continues to indicate a primary down-trend.

Dow Jones Global Index

* Target calculation: 290 – ( 320 – 290 ) = 260

Dow Jones Industrial Average recovered above 16000 but follow-through above the previous week’s high at 16600 is unlikely. Reversal below 16000 would signal another decline, with a target of 14000*. A 13-week Twiggs Money Flow peak below zero would warn of long-term selling pressure.

Dow Jones Industrial Average

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

The S&P 500 is consolidating around 1900. Rising 21-day Twiggs Money Flow indicates short-term buying pressure. Upward breakout is unlikely and reversal below 1860 would signal another decline, with a (medium-term) target of 1700*.

S&P 500 Index

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) oscillating between 20 and 30 reflects a “vigilant” market that would react quickly to bad news. A prolonged period of stability would be needed to restore calm.

S&P 500 VIX

Canada’s TSX 60 is retracing to test resistance at 750. The primary down-trend, which commenced with breach of 800, is well under way and respect of resistance is likely. Breach of 700 would indicate another decline, with a target of 600*.

TSX 60 Index

* Target calculation: 700 – ( 800 – 700 ) = 600

Europe

Dow Jones Germany Index is retracing to test resistance at 350. Respect is likely and reversal below 325 would confirm the primary down-trend signaled by 13-week Twiggs Momentum below zero.

Dow Jones Germany Index

* Target calculation: 330 – ( 390 – 330 ) = 270

The Footsie is retracing to test resistance at 6000. Respect would further strengthen the primary down-trend signaled by 13-week Twiggs Momentum below zero. Target for another decline is 5000*.

FTSE 100

* Target calculation: 6000 – ( 7000 – 6000 ) = 5000

Asia

Support has given way on the Dow Jones Shanghai Index, strengthening the primary down-trend signaled last August when 13-week Twiggs Momentum crossed below zero. Target for the decline is 300*.

Dow Jones Shanghai Index

* Target calculation: 400 – ( 500 – 400 ) = 300

Dow Jones Japan Index continues to test primary support at 90. Breach would confirm the primary down-trend signaled by 13-week Twiggs Momentum below zero.

Dow Jones Japan Index

* Target calculation: 94 – ( 106 – 94 ) = 82

India’s Sensex is testing the bottom of the trend channel at 24000. Expect retracement to test long-term resistance at 26000. Respect is likely and would suggest another test of the lower channel border.

SENSEX

* Target calculation: 26500 – ( 30000 – 26500 ) = 23000

Australia

Having breached primary support at 5000, the ASX 200 has shown surprising resilience, retracing to test the new resistance level. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure. But the weight of the global bear market is likely to ensure that any attempted rally fails and reversal below 4900 would confirm another decline. Target for the decline is 4600 (medium-term), or 4000* in the long-term.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now – not tomorrow. The reason can wait. But you must act instantly or be left.

~ Jesse Livermore

January 25, 2016

China’s commodity demand has barely begun its fall – MacroBusiness

These four charts, posted from Investing in Chinese Stocks by David Llewellyn-Smith, illustrate China’s failure to rebalance their economy and the challenge that economies reliant on Chinese real estate and infrastructure investment, like Australia, face.

….China now accounts for fully a third of global industrial production (up from only 5% as recently as the 1990s)–see Exhibit 5.

When you are that big, it becomes increasingly difficult to grow exports and production at a pace materially faster than growth in final global demand, which has averaged about 3% for the past few decades.In addition, since the Great Recession, the relationship between global trade and output (GDP or IP) seems to have changed, with trade no longer growing faster than the overall global economy (Exhibit 6).

For those economies where growth models have tended to be focused on external support like China, this change has introduced substantial new challenges as they try to overhaul their growth models.These structural factors, along with the fact that external demand has remained mediocre since the crisis, has meant that China is attempting to “rebalance” its economy against a backdrop of dramatically weaker export growth, as evidenced in Exhibit 7.

Finally, after a period of “rebalancing” away from investment toward consumption in the mid-2000s, the Great Recession was a tremendous setback to the ultimate objective of more balanced growth. Indeed, the main policy mechanism for fighting the slowdown in 2008 and 2009 was a massive increase in investment, which we now know occurred at just the time that the export-driven growth model was breaking down. Unfortunately, despite the substantial growth slowdown of recent years, there is little evidence that investment as a share of GDP has fallen substantially from the post-stimulus highs. Indeed, at least through to 2014–the latest comparable data available–all that has happened is that the investment share has stopped going up (Exhibit 8).

Source: China’s commodity demand has barely begun its fall – MacroBusiness

January 25, 2016

PBOC hits impossible trinity brick wall – MacroBusiness

From David Llewellyn-Smith:

….China is up against the “impossible trinity” here, that a country cannot control floating interest rates, the currency and capital flows all at once.

Like its ad hoc capital controls, I expect that liquidity injections will prove inadequate after a while and the PBOC will be forced to ease again. And if it has any brains it’ll know that. This is about spreading the pain over a manageable period of time – the glide slope as I call it – not preventing the adjustment from happening. The alternative of no easing and a supported yuan will simply bring on the hard landing all the quicker.

It’s called the impossible trinity for a reason.

It really comes down to common sense: there are no free lunches. One of the most frequently overlooked rules in macroeconomics.

Source: PBOC hits impossible trinity brick wall – MacroBusiness

January 21, 2016

Dow breaks support

My newsletters on December 10th and January 14th warned of the approaching storm across global markets. The Dow Jones Industrial Average has now broken primary support at 16000, signaling a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero, indicating selling pressure, strengthens the warning. Target for the decline is 14000*.

Dow Jones Industrial Average

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

S&P 500 breach of primary support at 1870 confirms the Dow signal. The long tail on the latest candle indicates the continued presence of buyers (highlighted by rising 21-day Twiggs Money Flow). Expect retracement to test the new resistance level but respect is likely and follow-through below 1850 would be the final nail in the coffin. The medium-term target is 1700* but long-term, expect a test of 1500.

S&P 500 Index

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) testing 30 suggests elevated risk.

S&P 500 VIX

Gold and Treasury Yields

Bonds have benefited from the flight to safety, with 10-year Treasury Yields closing below 2.0%. Follow-through below 1.90% would suggest a test of the 2015 low at 1.65%.

10-Year Treasury Yields

Gold likewise rallied to $1100 per ounce. But falling oil prices and low inflation are likely to undermine any long-term demand for gold as a store of value.

S&P 500 VIX

January 20, 2016

Electricity production falling

In November I observed that US electricity production had remained stagnant since 2008. Basically, manufacturing had stalled. The December 2015 decline to 95 shows a far more worrying event: manufacturing is now shrinking.

Electricity Production Index

Decline of the ISM Manufacturing PMI Composite Index below 50 tends to bear this out. But a secular decline would be far more serious than your common-or-garden-variety cyclical contraction.

ISM Manufacturing: PMI Composite Index

January 20, 2016

Dow breaks support

Dow Jones Industrial Average

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

S&P 500 Index

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) testing 30 suggests elevated risk.

S&P 500 VIX

Gold and Treasury Yields

Bonds have benefited from the flight to safety, with 10-year Treasury Yields closing below 2.0%. Follow-through below 1.90% would suggest a test of the 2015 low at 1.65%.

10-Year Treasury Yields

Gold likewise rallied to $1100 per ounce. But falling oil prices and low inflation are likely to undermine any long-term demand for gold as a store of value.

S&P 500 VIX

January 19, 2016

How far will the S&P 500 fall?

Prompted by a question from Hailoh on IC forum:

“Down for sure, but in what stages? Without a Lehman failure there may not be the impetus for a dramatic plunge towards the end.”

The S&P 500 is testing primary support at 1850/1870. Decline of 6-month Twiggs Momentum below zero warns of a primary down-trend. I am a great believer in chart symmetry and breach of 1870 would most likely result in a decline to 1500, the next major support level.

S&P 500 Index

This could still prove to be a false alarm — as in 1998, 2010 and 2011 — but charts like bellwether transport stock Fedex suggest otherwise.

Fedex

Also the 10% year-on-year declining profit margins for Q3 2015. A 20% year-on-year fall for Q4 2015 would confirm.

Profit Margins

January 14, 2016

China storm

My newsletter on December 10th, warned of The Gathering Storm across global markets. A month later, concern over China is sapping investor confidence. Several exchanges signal a primary down-trend and more are approaching the tipping point.

The Dow Jones Global Index broke primary support at 300, warning of a decline to 260*. Follow-through below 290 confirms the signal — and a primary down-trend. A 6-month Twiggs Momentum peak below zero strengthens the signal.

DJ Global Index

* Target calculation: 300 – ( 340 – 300 ) = 260

North America

Declining profit margins proved a reliable indicator of recent recessions. The 10% year-on-year decline in Q3 is an early warning. Data for Q4 2015 is not yet available. A year-on-year fall of 20% would suggest that recession is imminent.

Profit Margins

The S&P 500 is headed for a test of primary support at 1870. Declining 21-day Twiggs Money Flow below zero warns of selling pressure. Breach of 1870 would confirm a primary down-trend. Respect of support is unlikely but would suggest another bear rally.

S&P 500 Index

* Target calculation: 1900 – ( 2100 – 1900 ) = 1700

CBOE Volatility Index (VIX) is rising. Breakout above 30 would warn of elevated risk.

S&P 500 VIX

Canada’s TSX 60 broke support at 750, confirming a primary down-trend. 13-Week Twiggs Momentum peaks below zero strengthen the bear signal. Target for the decline is 700*.

TSX 60 Index

* Target calculation: 800 – ( 900 – 800 ) = 700

Europe

Germany’s DAX is headed for a test of primary support at 9400. Reversal of 13-week Twiggs Money Flow below zero warns of selling pressure. Breach of support would signal a decline to 7500*.

DAX

* Target calculation: 9500 – ( 11500 – 9500 ) = 7500

The Footsie again breached 6000, warning of a primary down-trend. Declining 13-week Twiggs Money Flow below zero strengthens the signal. Follow-through below 5800 would confirm. Target for the decline is 5000*.

FTSE 100

* Target calculation: 6000 – ( 7000 – 6000 ) = 5000

Asia

The Shanghai Composite Index crossed below 3000 for the first time since August. Declining 21-day Twiggs Money Flow warns of medium-term selling pressure. Follow-through below 2900 would confirm another (primary) decline, with a target of 2400*.

Dow Jones Shanghai Index

* Target calculation: 3000 – ( 3600 – 3000 ) = 2400

Japan’s Nikkei 225 is back testing primary support at 17000. The peak at zero on 13-week Twiggs Momentum warns of a primary down-trend. Breach of support would confirm.

Nikkei 225 Index

* Target calculation: 17500 – ( 20000 – 17500 ) = 15000

India’s Sensex breached primary support at 25000. 13-Week Twiggs Money Flow peaks below zero indicate a primary down-trend. Expect retracement to test the new resistance level at 25000 but respect is likely. Target for the decline is 23000*.

SENSEX

* Target calculation: 26500 – ( 30000 – 26500 ) = 23000

Australia

The ASX 200 breached primary support at 5000, signaling another decline. Follow-through below 4900 would confirm. Declining 13-week Twiggs Money Flow below zero indicates selling pressure. Target for a decline is 4600 (medium-term), or 4000* in the long-term.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

January 11, 2016

Fedex warns of slowing economy

Bellwether transport stock Fedex, in a primary down-trend, warns of slowing economic activity in the US. The 6-month Twiggs Momentum peak below zero flags a strong down-trend. Breach of support at 130.00 would warn of another decline — and worsening economic climate.

Fedex

European equivalent Deutsche Post AG (DPW.DE), owner of DHL, also warns of declining economic activity. Breach of support at 23.00 would warn of another decline.

Deutsche Post AG

January 11, 2016

ASX wagon follows China engine

The ASX wagon is clearly hitched to the Chinese growth engine. When China slows and commodity prices fall, the ASX is sure to follow.

The Shanghai Composite Index is simply a barometer of the main show, which is Chinese real estate and infrastructure investment. Chinese stocks are again falling, with the index headed for a test of primary support at 3000. Rate rises in the US are likely to increase capital outflows from China. The PBOC’s massive foreign currency reserves act as a buffer but have already been depleted by half a trillion Dollars. Loosening the peg against the Dollar may soften the immediate impact on reserves. But a falling Yuan is likely to further encourage capital outflows.

Shanghai Composite Index

The ASX 200 broke primary support at 5000. Reversal of 6-month Twiggs Momentum below zero signals a primary down-trend. Follow through below 4900 would confirm the decline, with long-term support at 4000*.

ASX 200

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000