Last week was an important week in terms of technical analysis as both equities and currencies recorded important turning points.
In equities, the correction we had been expected is finally here with Friday’s price action clearly indicating that the entire Bull phase that started on December 27th has ended.
In currencies, the whipsaw in the US dollar and Friday’s sharp moves in the EUR and the Japanese Yen indicate that the US dollar should appreciate from now after an extended period of sideways trading.
To be fair, many analysts will point out to the fact that the US dollar had one of its longest stretch above its 200 day moving average in history and that last week’s test was a negative sign, but we see last week’s move as a wash out of record long speculative positions in the US dollar paving the way for a new and extended advance in a few weeks time.
EQUITIES
MXWO – MSCI World Equity Index
Global equity have now completed a traditional there-legged rally which is losing momentum. The divergence between the direction of the MACDs and the Index also points to weakness ahead. SELL
MXEF – MSCI Emerging Markets Index
The picture is less negative than the one of the main markets and the downside more limited.
BUY ON WEAKNESS
MXAP – MSCI Asia Pacific All Countries Index
Asia was closed the the markets turned sharply down in Europe and the US on Friday. Last week’s Asian close was still constructive but next week’s opening will be key. In Any case, the picture is less negative then in the main markets. BUY ON WEAKNESS
AMERICAS
USA – Industrial Dow Jones Index
A truly negative close last week for the main US Index with a significant double or even lower top. SELL
USA – Standard and Poor’s 500 Index
A sharp reversal with a complete three stages bull market and a negative divergence of the MACDs. SELL
USA – Nasdaq Index
Hanging hammer in the Nasdaq after a failed break out ! STRONG SELL
USA – RTY Russell 2000 Index
Very negative reversal with a lower top pointing to much lower levels ahead. STRONG SELL
Canada – TSX Index
Hanging hammer and loss of momentum. If this is the beginning of a down leg, then this will be the first lower high since 2016, a very negative omen for Canadian stocks. SELL
Mexico – MEXBOL Index
A hanging hammer is never a positive configuration, however, Mexican stocks are string on an important support level. HOLD and Watch
Brazil – IBOV Index
A sharp and negative reversal after an attempt to breakout to new highs. The MACDS are delivering a SELL signal. SELL
EUROPE
Europe – EUROSTOXX 50
A clear reversal at the Long Term Moving Average and a close just at the Short Term Moving Average. The downside “should” be limited though. HOLD
Germany – DAX 30 Index
A clear reversal. SELL
France – CAC 40 Index
A clear reversal that negates the previous week’s BUY signal. SELL
Switzerland – SMI Index
A clear reversal and loss of momentum while challenging the previous highs – SELL
UK – FT100 Index
A hanging hammer and a close below the two moving averages are not positives. SELL
Spain – IBEX Index
The SELL signal is there. but the downside is limited – BUY on WEAKNESS
Italy – FTSE MIB 30 Index
A hanging hammer that marks a failure to pass the long term moving average is a clear Sell signal. SELL
Portugal – PSI 20 Index
REDUCE
Greece – ASE Index
Greece remains unfazed by the global sell-off and the Greek economy is on a strong recovery path. Greece is the world cheapest market of a Cyclically Adjusted P/E ratio and trades at a low Price to book ratio. BUY ON WEAKNESS
Turkey – TR 20 Index
STRONG SELL
Russia – IMOEX Index
Russian equities were not moved by the global sell-off for now but a SELL signal is developing at the MACDs. SELL
MIDDLE EAST
Saudi Arabia – TADAWUL Index
Saudi Arabia was closed on Friday and did not reflect the fall in US equities, However the index should remain relatively immune to the global sell-off and more correlated with Oil prices. HOLD
Dubai – DFMGI Index
Dubai is extremely cheap and should remain relatively immune to the global selloff. BUY
ASIA
Asian equity markets were closed when the European economic number scare out and European and US markets tumbled. The follow up will probably happen on Monday’s opening so there is not much point in making conclusions based on Fridays close.
We do not expect China to tumble but are more wary of the other markets and Japan in particular considering the strong move in the Japanese Yen.
COMMODITIES
CL1 – CRUDE OIL
Crude is still going up for now and a clear reversal is need to short again. HOLD
XAU – GOLD
Gold is not making headways yet and the correction is probably not over. BUY ON WEAKNESS
XAG – Silver
Silver is not making headways yet and the correction is probably not over.
BUY ON WEAKNESS
XPD – Palladium
Finally Palladium recorded a significant top. SELL SHORT
XPT – Platinum
Platinum is consolidation at low levels. ACCUMULATE
W 1 – Wheat
ACCUMULATE
SB 1 – Sugar
ACCUMULATE
S 1 – Soybeans
BUY
KC 1 – Coffee
ACCUMULATE
CURRENCIES
DXY – US Dollar Index
The strong rebound in the US dollar last week is a positive sign and should point to a challenge of the previous high at 97.5. BUY
CNY – Chinese Yuan
The Yuan is clearly in wait and see mode in anticipation of a resolution of the Grade War with the US. We expect a positive outcome and a significant rise in the Yuan against all currencies
EUR – Euro
SELL. Lasting interest rate differentials between the US dollar and the Euro and extremely weak economic numbers in Europe will send the Euro testing the lower boundary of the descending channel.
JPY – Japanese Yen
The sharp move in equities and the Japanese Yen cals for more flight to quality and a stronger Yen in the short term. BUY
GBP – British Pound
Strong reversal last week in tune with the other currencies. SELL
CHF – Swiss Francs
In times of market turbulences, the CHF tends to act as a refuge currency and the technical picture seems to indicate that. However, we see the upside limited and would SELL ON STRENGTH
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