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1433 dati del pomeriggio Pentothal | 01 mag : 14:31

Commenti: 1795

Utente 20 ago : 15:45
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commento settimanale:
While main equity indices struggle to find direction, some European sectors continue to trend positively. On the currency front the GBP is giving a long term sell signal.
EQUITIES

DAX

The index has been stalling around its first resistance level at 12500-12600. The oscillator has fallen, giving the index the possibility to rally more in the coming weeks. While macro drivers continues to be supportive, markets are now approaching the last part of the favourable seasonal period so we need to see something happening sooner rather than later to continue to be positive on an *index level*.

S&P 500

The S&P continues to stall around current levels, with a bit more weakness coming through more recently. While the head and shoulder pattern I mentioned previously is still intact and points to higher prices (2800), we are now trading close to levels that would invalidate it, leaving us into a no mans land.
If we focus on the longer term, we can appreciate how the SPX has been tracing a large triangle pattern, which so far fits well with my conviction that we are trading in wave 4, ie a correction before the last leg up to complete the movement that started in 2016. At this stage potential objectives are the previous highs at 2900 and 3200. Round numbers (3000) tend for some reason to act as magnets and therefore the targets I mentioned seems meaningful to me from a technical analysis perspective.

NIKKEI

The Japanese benchmark has finally started to move higher, once again propelled by the weaker currency. This is a relationship that we know well historically but is not something we can rely on indefinitely, as we have seen towards the end of last year and in the first part of 2018.
All in all makes this make this market less interesting from an international retail perspective, given the need to fully hedge the currency exposure to gain some returns.
Having said that, price action has been strong last week, with prices trading well into the key resistance zone and a very overbought oscillator. In order to have a continuation of the current trend we definitely need to see prices that consolidate above this area.

In early March I discussed some European sectors that have created long term accumulation patterns that could offer opportunities. The reason behind this research is based on my expectation for a volatile 2018 and 2019, and therefore I am interested in markets that have not being in the spotlight and may offer some respite in this environment.

EUROPEAN UTILITIES

The first sector analysed was European Utilities, where the entire price action since 2008 shows a clear secular accumulation. This period coincides with the relative bear market of value vs growth stocks; a change in this relationship should see Utilities move to a more proactive stance.
The sector has since then rallied strongly, cutting through its first short term resistance level at 280. The monthly oscillator is very close to give a long term buy signal while the weekly timeframe shows a strong trend in action. While we need to see a move above 350 to consider the accumulation phase finished, it is clear that this kind of defensive allocation is being considered by some investors at the moment and this fits very well with my core scenario of a transition from a bull to a bear market.

EUROPEAN TELECOMS

Telecoms are another sector that has been completely forgotten after the index retraced almost completely the bull move in 2013-2015. The index has traced a large triangle pattern since the top in 2008 and it has now completed a buy signal on the monthly chart, with the month of April creating a strong green candle which closed at the high of the period.
This market is now encountering its first test which is the resistance area that sits around 280. A break above would confirm its strength and open the door to higher targets, with 308 being the most immediate. Selected stocks may offer even more upside in a sector that has been ready for consolidation for years and that has suffered for a complete lack of pricing power.

FX

DXY

The Dollar has find some strength lately, after building a small base around 89. The basket is now encountering its first resistance area now and a successful test will open the door to a move towards 94 or higher. Given the prolonged bear move that we have witnessed throughout 2017 and the fact that we are now entering a less supportive phase for risky assets, it makes sense to re consider an allocation to the USD. In my opinion it would be better to trade single crosses rather than the basket since they offer clearer pictures with the JPY and GBP being the main candidates.

GBP

I have been discussing the secular picture of Sterling multiple times in the past. From a technical analysis perspective the two key factors to consider were and still are the secular resistance area between 1,37 and 1,42 and the reliability of the monthly oscillator to give us an indication of potential weakness for the currency.
During the last 10 days Sterling has failed once again to move above the upper boundary of its secular resistance area, creating what is now a double top at 1,42.
The subsequent reaction has been very violent and the cross has been pushed all the way towards the bottom of the formation. The macro drivers are very clear and unchanged since I first started to discuss them, namely the lack of credibility of a monetary policy that was signalling an increase in rates for an economy that has been slowing for months.
Even if we leave the potential impact of Brexit on the side (or the lack of direction towards this key event from the current government), from a cyclical perspective the UK economy has normally been leading (together with the US of course) relative to their European counterparts. It makes sense that if we expect a transition towards a less supportive economic environment or an outright recession that the UK should be slowing down at the present time and therefore hiking rates has very little credibility.
Going back to the technical side, GBP has now broken the lower boundary of the channel that has sustained the entire advance after the Brexit bottom. This has happened after the double top discussed above, which gives it even more weight.
On top of that, the monthly oscillator has now given a sell signal by closing back below 80. As you can appreciate from the monthly chart, this combination after 1986 has been always followed by a fall in the currency or at least by a very choppy sideway move. In both cases it makes very little sense to hold an outright exposure here because statistically the only thing we would achieve is to add volatility (if not losses) to the portfolio.
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1433 dati del pomeriggio lucadrag \| 02 mag : 00:10
Commenti: 1643 Utente 10 nov : 10:04 Replica a questo	Grazie; DX e GBP praticamente già ai bordi delle loro rispettive aree critiche.