Turning Point in the US Dollar
Last week’s price action in the DXY, EUR, AUD and NZD confirms what we have been announcing in the past coulpe of weeks; the 2018 bull phase in the USD is over. Investors should reduce their exposure to the Greenback and increase their exposure to the Euro and to emerging markets currencies.
Coming Breakout in Chinese equity Indexes
Chinese equities were the only equity markets to rise last week as almost all other equity markets were still falling. This relative strength confirms that the 2018 bear phase in Chinese equities is over and that a significant breakout is about to happen. The disconnect between Asian equities and Western equities is clear with India, Indonesia and Hong Kong leading the way.
Most other equity indexes are also marking a higher low pointing to the unfolding of a year-end rally very soon in global equities.Some Technology stocks are putting in a tactical bottom that marks the beginning of a bear market rally.
DXY – US Dollar Index
AS expected and as heralded by the significant turn in the AUD/NZD and some emerging currencies, the US Dollar is turning and marked an important hanging hammer last week. The 2018 rally in the USD is ending and we expect a tactical pull-back towards 92/93 in the next few months
EUR – Euro
A strong close above 1.14 after having tested 1.121 confirms the reversal in the fortunes of the EUR.
We expect the EUR to rise towards 1.18 in the next few months
JPY – Japanese Yen
The Japanese Yen marked a double top ( bottom ) last week and should test the 111 / 110.5 levels in the coming months. It should underperfom the EUR however
EURJPY – Euro Yen
The EURO – YEN pair is trading on a significant support and the uptrend in place since 2016. Last week recorded another lower high in what looks like a lengthy rounded bottom that indicates the underperformance of the JPY against the EUR in the coming weeks and months.
CNY – Chinese Yuan
The Chinese Yuan is confirming its bottom at 6.95 and is delivering several signals that it is ready to start appreciating again. Besides the political will not to let the Yuan fall beyond 7, a more serene approach to the Trade War and the current negotiations may lead to the resumption of the structural advance of the YUAN. BUY
AUD – Australian Dollar
As we predicted inn the past few weeks, the AUD completed its bottom and rose sharply last week, confirming that the entire 2018 uptrend of the US dollar is over. BUY
NZD – New Zealand Dollar
The best performing currency against the US dollar last week confirms the move of the AUD and the coming downtrend in the US dollar. BUY
GBP – British Pound
The BREXIT negotiations hard last mile are putting pressure on the British pound but this week should see the crucial vote of the British Parliament approving the draft agreed with the EU. BUY
BRL – Brazilian Real
The BRL weakened last week but still managed to close marginally higher.
The technical position is Neutral.
TRY – Turkish Lira
Last week’s appreciation in the Turkish Lira is positive and indicates more strength ahead towards our final target of 4.5. HOLD
RUB – Russian Ruble
A very positive bullish reversal last week for the Russian currency that is marking an important lower high. BUY
INR – Indian Rupee
A very positive move last week for the Indian currency pointing to more appreciation ahead with a final target at 68. BUY
Cl1 – CRUDE OIL
Oil’s sharpest decline in 5 years yielded an almost 30 % fall in oil prices, illustrating that Oil prices were hyped up artificially by massive speculative long positions. Oil is plentiful, inventories are at record highs and the Usa have become the world largest producer with 12 million barrels/day.
Black Gold is now trading on its moving averages and should rebound tactically. We covered our shorts but remain strategically bearish
XAU – GOLD
Last week’s rebound in Gold marks the first higher low since the 2018 bear phase started and the correlation between the price of Gold and the behavior of the US dollar is amazing. STRONG BUY
XAG – SILVER
Silver rebounded strongly from its long term support at 14$ marking a double bottom and pointing to a sharp rise ahead . STRONG BUY
HG1 – Copper
The entire metals and commodity complex should perform positively if, as we expect, the US dollar weakens ahead. Copper’s sharp move up last week negated the negative bias of the week before but the technical picture remains neutral until we have clear break above 287.
XPT – Platinum
Last week’s confirms the positive bias of Platinum. BUY
XPD – Palladium
Palladium rose sharply last week, breaking decisively above its previous all-time high. BUY
SB1 – Sugar
Sugar is digesting its 40 % rise since the October bottom but the long term trend is positive. BUY at 12
KC1 – Coffee
Coffee’s hanging hammer recorded last week indicates that the corrective move after the October 30 % advance is over and the commodity is ripe for a new unplug. BUY
LB1 – Lumber
The bear market that we timed to the day is over and time has come to re-enter Lumber. ACCUMULATE
S 1 – Soybeans
Soybeans have been art the heart of the Chinese retaliation in the US trade war and US soybean producers have been cut-off from the Chinese market – the largest in the world – and have been stocking the commodity in the hope that a resolution would come soon.
This is highly likely and the technical picture is positive. BUY
MXWO – MSCI World Equity Index
The long term picture is very much one of the first leg of the bear market and last week’s higher low and hanging hammer indicates that it has probably ended. The technical picture is more positive but we are not overly excited. Emerging Markets and Asia will outperform strongly the western markets. SELL ON STRENGTH
MXEF – MSCI Emerging Market Index
The entire 2018 bear phase is over ! A sharp bullish reversal followed by a higher low and the MACDs delivering a BUY signal with positive divergence indicate that a sharp rally is about to unfold once the downtrend is broken.
We expect a 50 % retracement of the entire bear phase in the next few months with a target at 1107/ 1110. BUY
MXAP – MSCI Asia Pacific Index
Last week’s higher low and hanging hammer confirm the bottom of the 2018 bear phase. Expect a 50 % retracement of the bear phase with a target at 169. STRONG BUY
DJII – Dow Jones Industrial Index
The Dow Jones Industrial is probably the only American index that has a change to make an attempt aye a new high in the coming year-end rally, although we doubt that it will be sustainable. SELL ON STRENGTH
SPX – SP 500 Index
The bottom of the first bear phase is in place and the SP500 should climb back above the 2016 uptrend soon. However, we doubt that the index il make new highs. SELL ON STRENGTH
CCMP – Nasdaq Composite
A clear higher low confirms the end of the first leg of the bear market in technology and a rebound is likely in the coming weeks. However, we doubt that the NASDAQ will make new highs. SELL ON STRENGTH
RTY – Russell 2000 Index
Same formation than most US indexes. Tactical BUY with an upside that will be contained by the 2016 uptrend. SELL ON STRENGTH
Canada – TSX Index
Canadian stocks are rebounding from their long-term support and will rebound in the coming weeks. However the bull market is over and a massive rounding top is forming. SELL ON STRENGTH
Brazil – IBOVESPA Index
Brazil is the only equity market that is challenging is all-time highs. Last week’s strong advance is a positive sign. BUY
Mexico – MEXBOL Index
Mexican equities are now finding a support at their long term accumulation levels. A confirmation is needed before Buying. WATCH
Europe – EUROSTOXX 50 Index
European large caps are bottoming out but the process is less clear than in other markets. The economic contraction of Germany in Q3 2018 weighted on the index last week and the picture is not yet clear enough to jump blindly into European equities. ACCUMULATE
Europe – BE 500 Index
There again, the technical picture of European equity markets is less convincing than in the rest of the world. A quick rebound is needed to turn the negative tone of the market. The downside is limited though. WATCH
UK – FT100 Index
The UK stock market trades on a long term support and last week’s fall did not challenge the October low. Long term the picture is bleak with a major rounding top but a short term positive reaction is likely depending on the BREXIT outcome. WATCH
Germany – DAX 30 Index
German equities are oversold but there seems to be no end to their ordeal.
A quick reversal is needed to negate the bearish trend. WATCH
France – CAC 40 Index
France is holding up bu testing of the 5020 support. Failure to hold the level would send the index straight down to 4’500, another 10 % downside form here. WATCH
Switzerland – SMI Index
Switzerland is faring much better than Europe with a succession of higher lows and last week’s close above the moving average is a positive signal.
Spain – IBEX Index
Spanish equities seem to have completed their bear phase and the bottom recorded in October has all the characteristics of a trend-ending climax. Last week’s ability to close higher is a positive sign. BUY
Italy – FTSE MIB30 Index
Italian equities lost 25 % of their value in the past 12 months and are trading on a long term support. They are heavily oversold but a catalyst is needed to renter the market. Last week’s close was not yet convince ng enough. A quick rebound is needed to turn them into a clear buy. WATCH
Portugal – PSI 20 Index
Last week’s close was negative as the index failed to climb back above its long term moving average. However, the index is trading very close to a major long term support for which it should rebound. WATCH
Greece – ASE Index
Greek equities are confirming their bottom and the MACDs are starting to turn. ACCUMULATE
Turkey – Titans 20 Index
Turkish stocks are marking a succession of Higher lows, a positive development for a rebound towards 100’400. HOLD
Russia – MICEX 10 Index
Russian stocks are trading sideways but a succession of lower lows and the sharp fall in oil prices are not positive while a weaker Dollar and stronger commodity space should be a positive. The inability of the index to hold above its moving averages is negative. AVOID
Dubai – DFMGI Index
Dubai equities are holding above their long term support and selling pressure seems to be exhausted after a four-year bear market that has taken the index 47 % lower than its 2014 peak. ACCUMULATE
Saudi Arabia – TADAWUL Index
Saudi stocks are trading sideways while still holding above their long term moving average. The technical picture is neutral but the fundamentals of oil prices are clear negatives. WATCH
Japan – Nikkei 225 Index
The inability of Japanese stocks to regain ground above their 2016 is a clear negative and may be indicating that a significant top was made at 24’200.
As long as the index trades above 20’340, the environment remains constructive and a rebound should take place in the year end.
But last week’s price action tells us that the second leg of the Japanese secular bull market has probably ended in September. HOLD
Japan – TOPIX Index
The inability of Japanese stocks to regain ground above the 1680 level is a negative and may be indicating that a significant top was made at 1’900.
As long as the index trades above 1500, the environment remains constructive and a rebound should take place in the year end.
But last week’s price action tells us that the second leg of the Japanese secular bull market has probably ended in September. HOLD
Japan – JASDAQ index
Last week’s fall must be reverted soon to confirm the October bottom. Otherwise Japanese small caps have further to fall towards the 140 level.
China – SHCOMP Index
Last week’s price action confirms the bottom in Chinese equities. A break of the 2018 downtrend will send the Shanghai composite sharply higher for a 50 % retracement of the entire bear phase. BUY
China – CSI300 Index
The larger Shanghai Shenzen 300 Index has already broken its 2018 downtrend confirming that the bottom made in October on the long term support completes the bear trend. BUY
China – FT50 China Index
The large cap and financially weighted index FT50 China is holding the support. A clear break above the long term moving average would signal the start f the rally. BUY
A clear bottoming out process, a higher low and a BUY signal at the MACDs all indicate that the next trend is up. BUY
Hong Kong – HANG SENG Index
The sharp move up last week as most equity markets were down testifies of the coming disconnect between Asian and Chinese markets on one hand and western markets on the other. The Hang Sent is delivering a strong BUY signal. BUY
India – NIFTY Index
India, like China is disconnecting form the other equity markets and last week’s price action is resolutely bullish. BUY
Indonesia – JCI Index
Resolutely positive close last week for Indonesian stocks, confirming the positive disconnect between Asian and the rest of the world. Relative strength is always and indicator that the outperformance will be with the early leaders. BUY
Asia – S&P 50 APEC Index CME
This S&P Asia 50 index confirms the relative strength and disconnect of Asia with a clear bullish reversal at the ned of October and a higher low last week. BUY