Stock Markets Archives - Page 71 of 170

November 23, 2014

Markets rebound except for ASX

US stocks continue their bull-trend
European stocks strengthen
China likewise
ASX Energy and Materials sectors under pressure

The S&P 500 broke through the upper border of its broadening wedge formation, signaling a fresh advance with a target of 2300*. Rising 13-week Twiggs Money Flow indicates medium-term buying support. Reversal below 2000 is unlikely, but would warn of another correction.

S&P 500 Index

* Target calculation: 2050 + ( 2050 – 1800 ) = 2300

CBOE Volatility Index (VIX) at 13 continues to reflect low risk typical of a bull market.

S&P 500 VIX

Germany’s DAX broke through resistance at 9400/9500, signaling another test of 10000. Rising 13-week Twiggs Money Flow refllects medium-term buying pressure. Reversal below 9400 is unlikely at present, but would warn of another test of primary support at 9000.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie is also headed for a test of its long-term high at 6900/6950. The sharp rise on 13-Week Twiggs Money Flow indicates strong medium-term buying pressure. Reversal below 6500 is unlikely.

FTSE 100

China’s Shanghai Composite Index respected support at its 2013 high of 2440, signaling a fresh advance. 13-Week Twiggs Money Flow respect of its rising trendline confirms (medium-term) buying pressure.

Shanghai Composite Index

* Target calculation: 2400 + ( 2400 – 2300 ) = 2500

The ASX 200 is weaker, undergoing another correction. Respect of support at 5250/5300 would indicate the primary up-trend is intact — as would a 13-week Twiggs Money Flow trough above zero. Penetration of primary support at 5120/5150, however, would signal a primary down-trend.

ASX 200

* Target calculation: 5650 + ( 5650 – 5300 ) = 6000

ASX 200 Materials (15.7%) and Energy (6.0%) sectors have commenced a down-trend. This is in sharp contrast to the Financial (46.2% including REITs) and Health Care (5.2%) sectors which continue in a healthy up-trend. It is possible for the first two sectors, with a combined weighting of 21.7%, to reverse the broad index, but is not likely unless the contagion spreads to the Industrial and Financial sectors. Increased risk-weightings for home mortgages and stronger capital ratios for major banks are likely recommendations of the Murray inquiry. These will improve the long-term strength and growth prospects for Financials, but a negative reaction in the short-term could tip the sector into a down-trend.

ASX 200 sectors

November 20, 2014

ASX under pressure

The S&P 500 continues to test resistance at 2050, the upper bound of the broadening wedge. Rising 13-week Twiggs Money Flow suggests buying pressure. Breakout would offer a target of 2250*. Reversal below 2000 is less likely, but would warn of another correction.

S&P 500

* Target calculation: 2050 + ( 2050 – 1850 ) = 2250

The CBOE Volatility Index (VIX) indicates low risk typical of a bull market.

S&P 500 VIX

Dow Jones Euro Stoxx 50 is testing resistance at 3140. Breakout would indicate an advance to 3300. 13-Week Twiggs Money Flow oscillating around zero suggests indecision. Respect of 3140 would test primary support at 3000.

Dow Jones Euro Stoxx 50

The Shanghai Composite Index retraced to test support at 2440, while declining 13-week Twiggs Money Flow indicates medium-term selling pressure. Reversal below the rising trendline at 2400 would warn of a correction, while respect would suggest trend strength.

Shanghai Composite

Hong Kong’s Hang Seng Index is weaker. Reversal below 23000 would warn of a test of primary support at 21200/21500. Twiggs Money Flow (13-week) reversal below zero would also be a strong bear signal.

HSI

The ASX 200 is undergoing another correction. Respect of support at 5250/5300 would indicate reasonable trend strength, but declining 21-day Twiggs Money Flow suggests medium-term selling pressure. With both Energy and Metals & Mining sectors under pressure, a test of primary support at 5120/5150 is likely.

ASX 200

The Aussie Dollar is also falling, having reversed below primary support at $0.8650 to signal a decline to $0.80*.

Aussie Dollar

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

November 16, 2014

A quiet week in the markets

US stocks continue their bull-trend
European stocks strengthen
China likewise
ASX retraces to test support

The S&P 500 is testing the upper border of a broadening wedge formation. Retracement that respects support at 2000 would enhance the bull signal and offer a target of 2280*. Rising 13-week Twiggs Money Flow indicates buyers are in control. Reversal below 2000 and the rising trendline is unlikely, but would signal another correction.

S&P 500 Index

* Target calculation: 2040 + ( 2040 – 1820 ) = 2280

Dow Jones Industrial Average has already broken above a similar broadening wedge formation, offering a long-term target of 19000*.

Dow Jones Industrial Average

* Target calculation: 17500 + ( 17500 – 16000 ) = 19000

CBOE Volatility Index (VIX) continues to reflect low risk typical of a bull market.

S&P 500 VIX

Germany’s DAX is testing resistance at 9400/9500, but 13-week Twiggs Money Flow remains weak. Reversal of TMF below zero would warn of another correction. Reversal below 9000 would confirm a primary down-trend. Follow-through above 9500 is less likely, but would suggest another test of 10000.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie proved more robust, breaking resistance, at 6500/6560 to signal a test of 6900. 13-Week Twiggs Money Flow is rising strongly, signaling buyers are in control.

FTSE 100

China’s Shanghai Composite Index broke resistance at its 2013 high of 2440, signaling an advance. 13-Week Twiggs Money Flow reversal below its rising trendline, however, would warn of (medium-term) selling pressure.

Shanghai Composite Index

* Target calculation: 2400 + ( 2400 – 2300 ) = 2500

The ASX 200 retraced to test support at 5440/5450. Respect would signal another test of the August high at 5650/5660. Failure of support would indicate a test of 5250/5300 and a weaker up-trend. Reversal below 5250 remains unlikely, but would warn of another test of primary support. A 21-day Twiggs Money Flow trough above zero would signal long-term buying pressure.

ASX 200

* Target calculation: 5650 + ( 5650 – 5300 ) = 6000

November 12, 2014

Will the stock market collapse when QE is withdrawn?

This chart in Westpac’s Northern Exposure chart summary implies that US stocks rely on Fed balance sheet expansion (QE) for support.

Fed Securities Held Outright v. S&P 500

The curve shows an almost perfect fit. There are just two things wrong with it. First, the scales on the left and right sides of the chart are not proportionate: the scale on the left compares a 9 times increase to a 3 times increase on the right. Second, while the Fed has expanded its balance sheet to more than $4 Trillion, a large percentage of that money has washed straight back to the Fed — deposited by banks as excess reserves.

Fed Total Assets and Excess Reserves

The impact on the working monetary base (monetary base adjusted for excess reserves) is far smaller: a rise of 66% (or $544 billion) over the past 7 years.

Fed Total Assets minus Excess Reserves compared to Working Monetary Base

A chart since 1985 shows nominal GDP (GDP before adjustment for inflation) normally expanded between 5% and 7.5% a year outside of recessions. But NGDP has not recovered above 5% after 2008. This may be partly attributable to lower inflation, but the Fed would clearly want to see NGDP above 5% — roughly 3% real growth and 2% inflation.

Working Monetary Base Growth compared to NGDP

We can also see that growth of below 5% in the working monetary base is often precursor to a recession, 1995/1996 being one exception. The second is when the Fed took their foot off the gas pedal too early, after QE1 in 2010, but were able to resume in time to head off a major contraction. They have been far more circumspect the second time and are likely to maintain monetary base growth North of 5%. Too sharp a slow-down would be cause for concern.

When we calculate the ratio of total US stock market capitalisation to the working monetary base [blue line] it is apparent that market response to the increase in monetary base is far more cautious than it was in 1998/1999.

Working Monetary Base Growth compared to NGDP

With Forward Price to Earnings Ratios for the S&P 500 and Nasdaq close to their long-term average (Westpac Northern Exposure, Page 118), I consider the likelihood of the QE taper precipitating a major market collapse to be remote.

November 10, 2014

Sensex narrow consolidation

India’s Sensex displays narrow consolidation below resistance at 28000, suggesting continuation of the up-trend. Reversal below 27000 and the secondary trendline is less likely, but would warn of a correction. Troughs above zero on 13-week Twiggs Money Flow indicate buying pressure.

Sensex

* Target calculation: 28000 + ( 28000 – 27000 ) = 29000

November 10, 2014

Dow, Nasdaq advance

Broadening wedges are not patterns on which I place a great deal of reliance, but you can depend on them to generate false signals — in both directions. Dow Jones Industrial Average broke resistance at 17300 and has now penetrated the upper border of the broadening wedge. Follow-through above 17600 would confirm a primary advance with a target of 19000*. Rising 13-week Twiggs Money Flow indicates long-term buying pressure. Reversal below 17000 is unlikely, but would warn of another test of primary support and the rising trendline at 16000.

Dow Jones Industrial Average

* Target calculation: 17500 + ( 17500 – 16000 ) = 19000

The Nasdaq 100 offers a target of 4500*, having broken resistance at 4100. 13-Week Twiggs Money Flow drifting sideways reflects a lack of enthusiasm, but recovery above 35% would flag renewed buying pressure. Reversal below 4000 is unlikely.

Nasdaq 100

* Target calculation: 4100 + ( 4100 – 3700 ) = 4500

November 8, 2014

S&P 500 bullish but Europe and China encounter resistance

Retracement of the S&P 500 respected its new support level at 2000, confirming a primary advance with a target of 2150*. Recovery of 13-week Twiggs Money Flow above the declining trendline indicates buyers are back in control. Reversal below 2000 and the rising trendline is unlikely, but would signal another correction.

S&P 500 Index

* Target calculation: 2000 + ( 2000 – 1850 ) = 2150

CBOE Volatility Index (VIX) at 13 indicates low risk typical of a bull market.

S&P 500 VIX

Germany’s DAX found resistance at 9400 and retracement to test support at 9000 is likely. Failure of the former primary support level at 8900/9000 would confirm a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would also indicate that sellers dominate.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie also encountered resistance, at 6500/6560. Respect of this level would warn of a primary down-trend, but rising 13-week Twiggs Money Flow suggests medium-term buying pressure.

FTSE 100

China’s Shanghai Composite Index is testing its 2013 high of 2440. Declining 13-week Twiggs Money Flow warns of (medium-term) resistance.

Shanghai Composite Index

* Target calculation: 2400 + ( 2400 – 2300 ) = 2500

Hong Kong’s Hang Seng Index also found resistance, at 24000. Reversal below 23000 would confirm a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would strengthen the bear signal.

Hang Seng Index

The ASX 200, influenced by both the US and China, is testing resistance at 5550. Rising 13-week Twiggs Money Flow (above zero) indicates medium-term buying pressure. Expect a test of 5650/5660. Reversal below 5380/5400 is less likely, but would warn that sellers have resumed control. I have lowered the target to 6000* because of constant back-filling in recent months.

ASX 200

* Target calculation: 5650 + ( 5650 – 5300 ) = 6000

November 4, 2014

ASX rallies while Aussie Dollar finds support

The Australian Dollar is consolidating between (primary) support at $0.8650 and resistance at $0.8900. Respect of support suggests another test of $0.89, while a failed swing (reversal below $0.8850) would warn of a downward breakout. Continuation of the primary down-trend is likely and breach of $0.8650 would signal a decline with a target of $0.80*.

AUDUSD

* Target calculation: 0.87 – ( 0.94 – 0.87 ) = 0.80

The ASX 200 is headed for a test of 5660. Retracement is likely, but respect of support at 5440 would strengthen the bull signal. Rising 21-day Twiggs Money Flow continues to indicate medium-term buying pressure. Reversal below 5440 is unlikely, but would warn of a test of 5250.

ASX 200

The ASX 200 VIX continues to indicate low risk typical of a bull market.

ASX 200

November 4, 2014

Asia: Governor Kuroda bets on QE

Aggressive asset purchases by the Bank of Japan shows Governor Kuroda’s willingness to back his QE policy to the hilt. The Yen has weakened significantly against the Dollar over the last two years and this trend is likely to continue.

USDJPY

The Nikkei 225 surged through 16300, signaling a fresh advance. The long-term target is 18000*. Reversal below 16000 is unlikely, but would warn of another correction. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure.

Nikkei 225

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

Hong Kong’s Hang Seng Index is testing resistance at 24000. Reversal below 23000 would warn of a primary down-trend. Breach of 21200 would confirm. Reversal of 13-week Twiggs Money Flow below zero would strengthen the bear signal. Follow-through above 25000 is unlikely, but would signal another primary advance.

Hang Seng Index

China’s Shanghai Composite Index respected support at 2250, strengthening the bull signal. Follow-through above 2450 would confirm a primary up-trend. 13-Week Twiggs Money Flow remains in an up-trend, signaling medium-term buying pressure. Reversal below 2250 is unlikely, but would warn of trend weakness.

Shanghai Composite Index

* Target calculation: 2250 + ( 2250 – 2000 ) = 2500

India’s Sensex continues in a primary up-trend, testing resistance at 28000. Troughs above zero on 13-week Twiggs Money Flow indicate buying pressure. Short retracements rather than stronger corrections also suggest buying pressure. Breakout above 28000 would indicate an advance to 29000. The index is becoming over-extended, but may remain so for some time. Reversal below 27000 and the secondary trendline is less likely, but would indicate a correction to the primary trendline around 25000.

Sensex

* Target calculation: 27000 + ( 27000 – 26000 ) = 28000

November 4, 2014

DAX and Footsie weakness

Having signaled a primary down-trend with a break below 8900, Germany’s DAX recovered above 9000 to warn of a potential bear trap. After finding resistance at 9400, reversal below 8900 would confirm the down-trend, while follow-through above 9400 would suggest another test of 10000. 13-Week Twiggs Money Flow recovered above zero, but reversal (below) is likely and would indicate long-term selling pressure.

DAX

* Target calculation: 9000 – ( 10000 – 9000 ) = 8000

The Footsie found resistance at 6550. Reversal below 6200 would confirm a primary down-trend, while follow-through above 6550 would indicate another test of 6900. Oscillation of 13-week Twiggs Money Flow largely above zero, however, suggests long-term buying pressure.

FTSE 100

* Target calculation: 6500 – ( 6900 – 6500 ) = 6100