Monday, 6 April 2020

Light at the end of the tunnel

US equity indexes closed very powerfully higher, sp +175pts (7.0%) at 2663. Nasdaq comp' +7.3%. Dow +7.7%. The Transports settled +7.3%.

sp'daily5



VIX'daily3



Summary

US equities opened powerfully higher, inspired by a rather positive US President.. from Sunday evening, whom believes he can see the proverbial 'light at the end of the tunnel'. On that note, my early title for Monday's post was indeed 'light at the end of the tunnel'.

Shortly after... the US President...



The afternoon saw considerable chop, with the closing hour seeing SPX spiking upward.

Volatility was in cooling mode, the VIX settling -3.3% at 45.24. Tuesday will offer a turnaround, and in theory, the mainstream should have another 'reality check' before the Easter break.
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Bullish moon.... 97.1%
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Goodnight from London
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Saturday, 4 April 2020

Weekend update - World equity markets

It was a fiercely bearish month for world equity markets, with net monthly declines ranging from -29.9% (Brazil), -23.0% (India), -21.9% (Russia), -21.5% (Australia), -16.4% (Germany), -16.1% (South Africa), -13.7% (USA), -10.5% (Japan), -9.7% (Hong Kong), to -4.5% (China).


Lets take our regular look at ten of the world equity markets.

USA - Dow


The mighty Dow swung from a high of 27102, to settle lower for a third consecutive month, -3492pts (13.7%) to 21917. The intra low of 18213 was the lowest since July 2016.

Note the 10MA at 26600, and the technical divergence - that stretches back to Jan'2018, which has played out. Next key fibs' of the gains from 2009, are the 50% at 18019, and the 61.8% at 15293. Considering the current collapse into an economic depression, a back test to near/at the Oct'2007 high of 14198, is a very valid m/t target.


Germany – DAX


The economic powerhouse of the EU - Germany, saw the DAX fall for a third month, settling -1948pts (16.4%) to 9942. Note key price threshold of the 8000s... the old double top of 2000/2007. Note the 200MA, which was where the market floored around in 2011. Note the technical divergence (see red dashed line) that stretches back to mid 2015.


Japan – Nikkei


Japanese equities fell for a third month, settling -2225 (10.5%) to 18917. Note the technical divergence that stretches back to 2015. Next major support is around 12k, which appears a given before the Olympics, now delayed to July 2021.


Brazil – Bovespa


The Brazilian market imploded, settling -31151pts (29.9%) to 73019. Momentum has turned negative, as the giant ramp from Jan'2016 has concluded. Collapsing oil/nat' gas prices are going to be a major problem for the Bolsonaro administration. Key stock: Petrobras (PBR).


Russia - RTSI


Russian equities declined for a third month, settling -285pts (21.9%) to 1014. Momentum has turned negative, as the 600/500s look viable. The oil/economic war against the house of Saud continues, and Putin can be expected to win.


India – SENSEX


Indian equities imploded, settling -8828pts (23.0%) to 29468. Next support is the Feb'2016 low of 22.5K, with massive support in the low 21000s.


China – Shanghai comp'


Chinese equities cooled for a third consecutive month, settling -130pts (4.5%) to 2750. No doubt, the PBOC are massively meddling to prevent sustained/powerful downside.


South Africa – Dow


The South African market fell for a third month, settling -256pts (16.1%) to 1337. Note the spike from the 200MA.


Hong Kong – Hang Seng


The Hong Kong market declined for a third consecutive month, settling -2526pts (9.7%) to 23603. Note the spike from the 200MA, which was a key floor in early 2016.


Australia – AORD


Australian equities fell for a second month, settling -1400pts (21.5%) to 5110. Note the settlement from around the 200MA... as was the case in late 2008/early 2009.



Summary

All ten world equity markets settled net lower for March.

Brazil and India lead the way lower, whilst Hong Kong and China were most resilient.

All ten markets settled below their respective monthly 10MA, making for a bearish monthly close.

None of the March candles offer any definitive sign of a floor.

April, or somewhat beyond, could be expected to test, if not exceed the March lows.
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Looking ahead

It will be a short four day trading week, as the US and most other world markets will be closed for 'Good Friday'. The market will clearly have to absorb another truck load of Corona related news.

Earnings: LEVI (Tues')

Econ-data: 

M -
T - JOLTS, consumer credit (3pm)
W - EIA Pet', FOMC mins' (2pm)
T - Weekly jobs (consensus 5.0M, vs 6.6prior), PPI, consumer sent', wholesale trade, Fed' bal' (4.30pm)
F - CLOSED*

*Data scheduled: CPI, US T-budget, although those might brought forward a day, or delayed until w/c Apr'13th.
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Final note

These remain the most bizarre of times, in almost every sense. April is an economic write-off. The issue is whether May will see an attempt - by at least a few countries, to return to semi-normalcy. I'm not particularly optimistic of that, as the original projections I saw in late Jan/early Feb', were often suggestive of a peak in Corona cases, no earlier than mid May. If correct, most will remain on lockdown into June.

A grander issue is whether Q3 will offer a 10/15% recovery of a likely Q2 GDP of -25/35%. Can we expect a hyper V shaped recovery, or a more drawn out U into 2021? If we see a second wave of Corona related issues into winter 2020/21 - as I'm guessing, then the recovery will drag out into spring/summer 2021.

Considering February broke a new historic high, I count April as month'3 down. The notion March saw a key floor from 2191... no. No way, not least when you consider price action and structure in other world equity markets.

At some point, equities will find a mid/long term floor, and begin another multi-year ramp. My best guess is for a key floor from within the sp'1700/1500 zone.

For the next cycle, we all know the good names by now, right?

The Dow components

Tier 1: $MSFT $JPM $AAPL $DIS $PFE
Tier 2: $INTC $V $HD $JNJ $MRK
Tier 3: $CSCO $AXP $CAT $PG $UNH
Tier 4: $MCD $GS $CVX $WMT $KO
Tier 5: $MMM $VZ $XOM $NKE $RTX
Tier 6: $TRV $DOW $BA $IBM $WBA

You could argue for days about whether INTC should be ranked above CSCO. The key point is that these are (mostly) fine companies with a global customer base, that will be around for the very long term. I say mostly, as Boeing remains problematic, not least as its still intent on trying to get the 737MAX back into the skies.

There are many other valid targets of course, not least AMD, NVDA, GILD, BMY, and the tier'1 gold miners of GOLD and NEM.

In the meantime, try to enjoy these wild market days within the twilight zone. One day, we'll be back to sustained and mind-numbing algo-bot upward melt. Whilst you won't likely miss the lockdown, you will miss the crazy price action of 2020!

Yours... bullish four day weeks.

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Have a good weekend
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*the next post on this page will likely appear 5pm EDT on Monday.

Thursday, 2 April 2020

Bad News Thursday

US equity indexes closed on a positive note, sp +56pts (2.3%) at 2526. Nasdaq comp' +1.7%. Dow +2.2%. The Transports settled +1.3%.


sp'daily5



VIX'daily3



Summary

The latest weekly jobless claims data made for a classic 'Bad News Thursday', printing 6.648M vs 3.307M prior week (revised). Equity futures swung lower from SPX +40pts to -30pts, opening in chop mode.

The US President appeared...


That tweet helped give oil and the main equity market a very significant kick upward in mid morning. Whilst a supply cut is necessary - not least as global storage capacity is near 100%, it will do little to stall the looming bankruptcy of most of the US energy industry.

Yes, I would agree its possible the US Govt/taxpayer will also issue a bailout to this sector. Again though... extracting a resource - in this case WTIC and Nat' Gas, at a perpetual loss, is sheer madness, and is NOT. SUSTAINABLE.

... but hey, we're in the twilight zone, and in these times, loss making companies are still something that many think is 'fine'.

The afternoon saw considerable chop, leaning

Volatility remains extremely elevated, with the VIX settling -10.8% at 50.91. A major drop, but we're still talking about VIX in the FIFTIES!
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A fair number of you won't listen, but it merits hearing...



Denniger just calling the monsters... for what they ARE.

Its fascinating to see how most of those whom have long touted 'freedom and liberty' act like little sheep to the political hacks, who are using the Corona virus to quietly pushing through some very dark sided legislation. Disagree? Well, I'm guessing you were the one panic buying in early/mid March, as you've never seen anything coming further than your next Dominoes pizza delivery.

To the rest of you... hang in there, the collective can't stay 100% insane forever. At some point, semi-normalcy will return... if only for a few months until the second wave, from October onward.
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Sunset in the city of Corona
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Extra charts in AH (usually around 5pm EST) @ https://twitter.com/permabear_uk

Goodnight from London
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If you value my work, subscribe to my intraday service. 
For details and the latest offers, see: Permabeardoomster.com