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On January 3rd 2019, we posted an article titled It Looks scary. but it is time to buy equities and short the Japanese Yen, at a time where I was panic in the world equity markets and the Japanese Yen had a mega move of four points in one day as massive liquidation of short positions was taking place.

Since then, the world equity markets have turned and we had one of the sharpest rally in history in US equities.

The World equity indexes are up 6 % on average and American equities are outperforming on the upside once again.

US – China Trade War easing sends stocks flying

Different sets of news coming out of China and the US sent stocks flying this week with the world indexes adding 2.2 % on average.

China announced that it would make a commitment to buy in excess of 1.1 Trillion of US goods over the next five years with the objective of bringing the Chinese Trade surplus with the US to zero and there were rumors that Steve Mnuchin was pushing for a lifting of all trade tariffs on Chinese imported products.

However, the speed of the retracing in the US – 50 % of the fall in 14 sessions – the quickest in history – leads us to be prudent going forward.

In less than three weeks, the US equity indexes regained 50 % of their losses since their September peak and are now trading at a very important Fibonacci, Moving averages and resistance levels.

As our readers know, it is our view that the US equity secular bull market ended in September and that we are in the middle of a significant A – B – C cyclical bear market.

Considering the astonishing lack of volatility of the past two years, it is only normal that the turning point should be extremely volatile and we are 60 % through the first Bear leg, the A leg, itself a volatile ABC or five waves leg. 

We expect US equities to peak in the coming days / weeks before a new bear phase unfolds over February/ March and we will probably see new lows in the main indexes, and, if not, at least a re-test of the December 27 low.

And risks are building in the markets again…

A US President that does not respect democracy…

For the first time in the history of the United States of America, the Federal Government has been shut down for 28 days, imperiling many fundamental services of America.

What is striking is that the cause of this shut down is a rapport de force between a President that has made electoral promises – building a wall at the Mexican border – that are of very little importance when taken into the global picture and and elected House of Representatives – We The People – who refuses to fund his electoral campaign promises.

Democracy is about building consensus and finding solutions collectively and the primary responsibility of a President is to ensure that the institutions function properly.

Never in the history of the United States of America has a President used his prerogatives to blackmail the Representatives of the People who disagree with him by a vast majority. On the contrary, he should respect democracy and the expression of the opinion of the majority of the Representatives of the People.

Bullying tactics can become extremely dangerous when the weapons used are your very institutions and your opponents are the essence of the democracy. 

The economic and military consequences of the current shutdown could be catastrophic. In this environment, any incident could take dramatic proportions with unintended consequences.

Donald Trump is endangering America and accelerating its decline on the International scene.  His stubbornness and propensity to go “All-In” on every fight are causes for concern by themselves, and, as we have seen in the last three weeks December, when the markets panic, there is no exit.

As the partial government shutdown drags on, the political cost is mounting for the White House, and the domestic consequences — from uninspected food to long airport security lines — are accumulating. 

With global concerns about the stability of the U.S. government rising and liberal democracy being challenged by liberal authoritarianism, the shutdown is one more sign of a political dysfunction that America can little afford. 

In 2013, President Obama canceled a key diplomatic trip to the
Asia-Pacific because of the Obamacare shutdown, already leading to
worries that the U.S. was forfeiting its leadership in the

This time around, most of the major departments and agencies that make up the national security establishment — particularly the Pentagon and the intelligence community — had already received their full budgets for the fiscal year and have kept operating with minimal or no disruption.

The State Department though has been significantly affected: 42 percent of domestic employees and 26 percent of those stationed abroad are furloughed. 

Others — presumably including those who staffed Secretary of State Mike Pompeo’s recent trip to the Middle East — are working without pay. 

The real damage is surging international concern about the stability and basic functionality of the U.S. government.

Countries around the world are always trying to measure those qualities, because international peace and security depend on them. Yet American political dysfunction has been on the rise for decades, and over the past two years in particular, the world has witnessed an alarmingly erratic turn in U.S. policy.

A president who threatens war by tweet and reverses policy on a dime, unprecedented turnover among top foreign policy advisers, and alarmingly high levels of infighting and leaking are standard in the Trump administration. 

In recent weeks, there have been dueling statements about whether and how the U.S. is withdrawing from Syria, and dueling indications from the
president about whether Washington will hand the counter-ISIS fight over to Turkey or devastate that country’s economy. 

Amid all this came the resignation of James Mattis, the secretary of
defense in whom many U.S. allies and partners placed so much

The longest shutdown in U.S. history, triggered by the whim of a president increasingly captive to the most radical parts of his electoral base, can only worsen the growing doubts among allies and friends about whether America can still be counted upon. 

The second worrying thing, and we have written extensively about it is the intensifying “contest of systems” between liberal democracies and the Chinese liberal authoritarianism that we have very often compared to our own private corporations system of Governance.

The U.S. rivalry with China is not just about economic might, military power and diplomatic influence. 

It is about which system of government can best meet the needs of its people and operate effectively on the global stage. 

America’s competitors have been quite explicit about this. In 2017, President Xi Jinping advertised China’s system — which blends a partially free market with authoritarian political control — as “a new option for other countries and nations” around the world. 

The U.S. inherent advantages in this contest, is that its political system is far more open, inclusive and transparent. 

Yet the Chinese leaders often rightly argue that liberal democracies are chaotic, undependable and prone to failure, and this is precisely the message that the US Government shutdown sends. 

While China is pursuing a trillion-dollar geo-economic project in the
Belt and Road initiative, and Russia is re-emerging as the key player in the Middle East, the U.S. cannot even keep its government open. 

The Trump administration has promised to make America respected again; it has touted its willingness to engage in great-power competition. 

The current Government Shutdown is causing massive damage to the US system.

Another Vacuum on the International scene for China to take advantage of…

Donald Trumps’ fight for the Mexican Wall has led him to cancel the presence of the entire US delegation at Davos’s World Economic Forum next week, leaving a massive vacuum for the Chinese delegation to fill.

Davos is indeed a private and informal gathering but it has become the place where all the key economic and political players meet, rub shoulders and discuss the world issues informally.

The absence of Donald Trumps’ administration will be costly for America.

Besides the fact that it reveals Donald Trump’s real lack of sense of what the real priorities should be, it reinforces the global feeling that America has lost its role as world leader.

China by opposition, is sending a strong official delegation led by the Vice President himself and it is highly likely that they will position China as the real promoter of multilateralism and of a globalized world.

Expect positive news on the China Trade War next week as well as a probable resolution of the Government shutdown as Donald Trump back down.


Russia, Argentina, Brazil and the Nasdaq are leading the pack having recovered 9 to 19 % in the past 20 days and all equity indexes are up for the year apart from Dubai.

The technical picture for equities is very diverse with North American and Japanese markets over-extended in the rebound and prone to a new down leg very soon, European markets more hesitant and not yet on a solid footing while Asia, China, Hong Kong, Singapore, Korea and Taiwan are delivering strong BUY signals. India and Vietnam are less appealing.

World Indexes

MXWO – MSCI World Equity Index

The MSCI World rebounded strongly and has retraced 50 % of its September December fall. It is now trading at an important accumulation zone and the two moving averages will act as a resistance level.  REDUCE

MXEF – MSCI Emerging Markets Index

Emerging markets have risen less and offer a much better technical picture with a strong double bottom and a major BUY signal at the MACDs. There is more mileage to the upside than in the largest markets. BUY

MXAP – MSCI Asian Pacific All countries Index

Asia is even more positive than emerging markets in general. The rebound is yet to come and the upside remains important. The BUY signal was just confirmed in the MASCDs.  BUY


USA – Dow Jones Industrial Index

In less than 20 days, the Dow Jones has recovered more than 50 % of its Q4 decline and powered through a major resistance line last week. However, it will now hit both its long term moving average and the uptrend that has become a resistance.  REDUCE

USA – SP500 Index

The SP500 has retraced 50 % of its Q4 decline and went through major resistance levels last week. WE would not chase this rally that we expect to Peter out in the coming two weeks before at best a retest of the December lows and at worst a test of the 2200 level.  SELL

USA – Nasdaq 100 Index

The rebound in the Nasdaq has been less powerful than in the larger market indexes and we still see technology stocks as highly overvalued. The Index has retraced 50 % of its Q4 decline and should soon hit a resistance at the long term moving average and the 2016 uptrend.

Canada – TSX Index

The Toronto Stock Exchange index rebounded extremely sharply and is back above the 15’000 level that had acted as a major support since 2016. It needs too hold above that level to indicate a change of trend. The Moving Averages are delivering negative “Death Cross” signal.  REDUCE

Mexico – MEXBOL Index

Mexican stocks have risen sharply but with less momentum than their North American counterparts.  REDUCE

Brazil – IBOV Index

The Brazilian stock market is amongst the best performing this year and it recorded another record high on continued optimism following Bolsaneros victory. We would not chase this rally though and the market is getting overextended.  HOLD


Europe – EUROSTOXX 50 Index

The rebound in European stocks has been less vibrant than in the US and there is probably more mileage to the upside. Another test of the lows in the coming two months is possible but the downside remains limited,  HOLD

Germany – DAX Index

German stocks are just starting their bottoming out process and the bad economic news out of Germany is not helping. German equities are in a negative trend after a clear head and shoulder and a re-test of the December lows is highly likely.  HOLD

France – CAC 40 Index

French Equities are just starting the bottling out process for this leg and another test of the December lows is likely before we get a fully change of trend.  REDUCE ON STRENGTH

Switzerland – SMI Index

Swiss equities have been amongst the best performing European stocks and managed to close last week above the 2016 uptrend and the two moving averages, both clear positive signs. However, we are now reaching the resistance level that has contained the market for most of 2018. REDUCE

UK – FT 100 Index

The UK stock market has rebounded exactly on its long term accumulation zone and is just starting its basing process. A re-test of the December lows is highly likely. 

Spain – IBEX 35

Spanish stocks are rebounding strongly and have probably completed their cyclical bear market, even if a re-test of the lows is likely before we move into a stronger advance phase. ACCUMULATE 

Italy – FTSE MIB 30 Index

Italian stocks are rebounding strongly and have probably completed their cyclical bear market, even if a re-test of the lows is likely before we move into a stronger advance phase. ACCUMULATE 

Greece – ASE Index

Greek stocks are amongst the few stock markets that have not participated in the January rebound but they also not participated in the panicky Q4 2018 liquidation phase. A solid base has been built at 600 and the cyclical bear market is probably over.  BUY

Russia – IMOEX Index

Russian stocks are attempting at recording new highs on the back of strong Oil prices.  HOLD

Turkey – DJ Titans 20 Index

A very strong performance of the Turkish stock market last week and the completion of a final double bottom indicating that the next trend is up. BUY

Middle East

Dubai – DFMGI Index

Dubai equities are basing after their five years bear market. Pessimism is at an extreme but stocks have stopped falling.  ACCUMULATE

Saudi Arabia – TADAWUL Index

A strong performance of Saudi Stocks last week on the back of strong oil prices. We would not chase the rally at this stage though. HOLD


China – CSI 300 Index

Chinese equities are forming a significant bottom and have risen less than their US counterparts. Economic news coming out of China are mixed but the market has exhausted the selling pressure. BUY

China – Shanghai Composite Index

A strong basing process in Chinese equities. Selling pressure has been exhausted.  BUY

China – FT50 China Index

Last week’s strong performance of the Chinese large cap index is a strong positive for Chinese equities as it is climbing back above the 11’000 level. The next target is 12’000 and a significant rally may be in the making. BUY

China – HSCEI Index

Last week’s strong performance of the Chinese Hong Kong H-shares index is a strong positive for Chinese equities as a clear double bottom has been completed. The next target is 12’000 and a significant rally may be in the making. BUY

Hong Kong – HSI Index

Hong Kong shares are displaying a text book BUY configuration with a double bottom, a slightly higher low, a strong advance afterwards and a confirmation of the NACDs BUY signal. STRONG BUY

Taiwan – TWSE Index

Taiwanese stocks are delivering a strong BUY signal. BUY

Korea – KOSPI Index

The cyclical bear market in Korean stocks is over. STRONG BUY

Japan – Nikkei 225 Index

Japanese stocks are just starting their rebound but the bear phase is not over. A re-test of the lows or even a lower low are highly likely before this bear phase is over. REDUCE

Japan – TOPIX Index

Japanese stocks are just starting their rebound but the bear phase is not over. A re-test of the lows or even a lower low are highly likely before this bear phase is over. REDUCE

India – SENSEX Index

Indian stocks are on a positive trend but the momentum is weak and the damage to the long term trend is significant. REDUCE ON STRENGTH

Singapore – STI Index

Singapore stocks are delivering a massive BUY signal with all the ingredients of a trend change. BUY

Indonesia – JCI Index

As expected Indonesian stocks are powering ahead in a significant uptrend. However the previous all-time high could prove to be a significant hurdle to pass. Get ready to take profits.

Malaysia – KLCI Index

Malaysian stocks are bottoming out and delivering a strong BUY signal. BUY

The Philippines – PCOMP Index

Filipino stocks have risen strongly and are ready to pause, BUY on weakness

Vietnam – VNI Index

Vietnamese stocks are not participating in the rebound and are testing the 900 support with declining highs. SELL


The beginning of the year saw extreme volatility in the Japanese Yen and a strong reversal in the Chinese Yuan.

DXY – US Dollar Index

Last week the US dollar strengthened slightly but the trend is definitely down at least towards 94 and probably even lower.

EUR – Euro

Traders are trying to push the EUR lower but the trend is rather up with a target at 1.16 and then 1.18 in the coming few months. BUY

JPY – Japanese Yen

As expected, after the massive liquidation of short positions at the beginning of January, the Japanese Yen climbed back above the long term triangle and should start a new phase of depreciation, despite the numerous calls for a mush stronger Yen. SELL

CNY – Chinese Yuan

The Yuan is digesting some of its strong advance of the past few weeks but the log term trend is up with a significant double bottom recorded over the past two years. BUY

GBP – British Pound

Uncertain British Pound, but ready to fly still. Even the crushing rejection of Theresa MAY’s draft accord with the EU did not send the British =h currency tanking. Technically, the picture looks rather positive.

CAD – Canadian Dollar

The sharp appreciation of the CAD since the beginning of the year should have some leg in the coming weeks with a target at 1.305

AUD – Australian Dollar

The Australian Dollar is going through a major trend reversal against the US dollar with a clear double top and a trend-ending hanging hammer. SELL


Another strong week for Oil, up 4 % for an 18 % advance since the beginning of the year, while precious metals are correction some of their recent advance. Palladium, already up + 9.5 % this year is marking an important top.

CL1 – Crude Oil

After its 61.8 % retracing of the entire 2016 – 2018 bull phase oil is on the rise again and should reach US$ 58 before turning down again. SELL ON STRENGTH

XAU – Gold

Gold is in corrective mode after its strong rally of the past three months but the correction should be limited and Gold exposure increased on weakness for the coming unplug and test of the all-important 1375 level.

XAG – Silver

Silver is in corrective mode after its extremely strong BUY signal delivered over the past few weeks. With a significant Long term double bottom and the extensive consolidation of the past four years, SILVER is about to start a significant rally in 2019. ACCUMULATE

HG1 – Copper

A trading rebound last week from an important support level at 260, but the trend is down and the break of the 260 level should send copper prices towards 200. SELL

XPT – Platinum

Platinum is trading on a crucial support level after an extended multi-year bear market. Its fate is linked with the fate of Silver. The technical picture is neutral but a STRONG MOVE WILL TAKE PLACE VERY SOON ONE WAY OR ANOTHER.  FOR CHOICE WE ARE BUYERS

XPD – Palladium

A trend-ending vertical acceleration at highly overextended levels indicates the end of the bull trend for Palladium. SELL SHORT

KC1 – Coffee

Coffee has completed an important double bottom and is rising again. A new long term uptrend should be developing in the coming weeks. BUY

SB1 – Sugar

Sugar has completed a higher low and the new uptrend is in place. BUY


US Bond yields have broken their uptrend and the will probably hover marginally lower over the course of the next few months.

Yield curves are still positive in the three main areas of the world, meaning that there is no recession on the horizon for now