Saturday 1 February 2014

Weekend update - World monthly indexes

Many of the world equity markets have closed the first month of the year with some borderline significant declines. No doubt, a major reason is the US Federal Reserve tapering QE. World markets may have already peaked for the first half of this year.

Lets take our monthly look at ten of the big world indexes


The Greek economy remains propped up by money being funneled via the ECB to keep basic govt' services functioning. Underlying structural issues remain severe, and in many ways, the economic depression is now in its seventh year.

As for the Athex itself, we can see it has got stuck at natural resistance in the 1250/1350 zone. If this is a multi-month peak, then downside is the rather obvious big 1000 level. Any break of that, will open up 900/850. Long term upside into late 2015 though, still looks to be 2500/3000.


Brazil is one of the weakest indexes (at least that I follow), having slipped -7.5% this past month. Even worse, critical support is around 45k..which is already being tested. A break under 45k..will open up a further 10% downside to 40k.


As a number of finance sites noted this week, foreign investment in France collapsed in 2013, as the Hollande leadership continued to scare away capital. France has serious problems ahead this year, not least in terms of the underlying societal split, especially seen in the larger cities.

The CAC looks vulnerable to 4000, if not 3500, as early as the late spring. Long term upside looks to be 5000 by late 2015.


The economic powerhouse of the EU, Germany saw the first monthly decline since last August. The decline of -2.6% was certainly not dramatic, but still, the giant 10k threshold now looks in danger of not being attained until late 2014..if not early 2015. Natural downside would be to re-test the old double top declining resistance..around 8000.


The UK FTSE has really struggled, and has still to break above the Dec' 1999 high of 6950. There is clear rising trend support in the 6400s. If that fails, then 6000s look a given, and that is a clear 6% lower from current levels.


The biggest (if not also ugliest) of the EU PIIGS, Spain was fractionally higher in January, but well below the earlier high of 10500s - so..its lost around 5/6% since mid January. Downside would be 9000/8750 by late spring/early summer. Long term upside target remains 15k or so.


The mighty Dow lost 877pts (-5.3%) in January, the biggest monthly decline since May 2012. There is near term support in the 15250/000 zone. A monthly close <15k will open up a multi-month decline to around 14000/13500 by late spring/early summer. From there, the market should battle back upward - with increased QE (what else will Yellen do?), end 2014 target would be 15/16k. A net yearly gain seems..difficult.


One of the stronger markets is the second of the giant EU PIIGS, Italy, which gained 2.4% in January. Underlying price momentum is still strongly positive, but there is a very viable rollover about to begin on the MACD (green bar histogram) cycle. There is strong trend support in the 17500s.


It was a lousy month for the Nikkei, sliding a very powerful -8.45%. Most important, we're back below the old trend-resistance. Near term downside looks to be 14000. If that fails to hold, then 12k will be tested this spring.


Despite posting relatively good GDP data for Q4, the Shanghai index slipped -3.9%, and is now again in danger of losing the hugely important 2000 level. If Asia - and other world markets, get spooked this spring, then there is downside to the 1700s for this index - back to the lows of 2008.

Can you imagine how Mr Retail investor in China is feeling? Six years since the collapse wave, and the market is still lower by around -65%. Maybe they just need to hire the Bernanke for a few years?


So, we saw many indexes break new highs in first half of January, only to be followed by a rather significant pull back in just about all world indexes. With even the stronger markets of USA and Germany on the slide, it would seem we have a possible multi-month top.

Looking ahead

Next week will likely be about renewed concerns about broader macro issues, not least currency changes and capital outflows from the emerging markets.

For the US markets, there will be particular focus on the next monthly jobs report. With the December net gain of just 74k, any similar number would no doubt really start to concern many. How will the equity market cope with the notion of weak jobs growth, whilst the Fed are cutting back on the QE fuel?

*There is sig' QE-pomo, Tuesday $2-3bn, Wed' $3-4bn

Seeking a break under taper'1 low

As most should remember, when the Fed announced Taper'1 in December, the market very briefly dropped to sp'1767, but then launched into another few weeks of upside. Without question, a break under the 100 day MA (currently 1769), but more importantly 1767, will open the door to a further fast and consistent downside move.

sp'weekly7b - H/S outlook

Primary downside target for those on the short side, should be the sp'1710/1690 zone - where the 200 day MA, and the lower weekly bollinger, will both be next week. With volatility on the week will not be boring!

Back on Monday :)

Weekly charts remain bearish

The weekly index charts closed outright bearish for a second consecutive week - the first time since Nov' 2012. The fact that January closed with net monthly declines, is a mere added bonus to those holding on the short side across the weekend.

sp'weekly7b - HS, bearish outlook

Dow, weekly


*I should note, when I say 'outright bearish', I am deeming it, in terms of two red candles on the 'rainbow' (elder impulse) weekly index charts.

I do think two red candles merit some serious consideration by those still looking for one final wave higher into March/April. It will of course be imperative for the equity bears to break <1767 next week, otherwise, there remains the chance of a renewed push into the low 1800s...and beyond.

Goodnight from London
The weekend post, will be on the World monthly indexes

Daily Index Cycle update

US equities saw a latter day recovery after opening sharply lower (sp-22pts), the sp' closed -11pts @ 1782. The two leaders - Trans/R2K, settled lower by -0.2% and -0.7% respectively. There looks to be another opportunity to break <1767 (taper'1 low), next week.





Perhaps the most important thing to be mindful of right now, are the daily index charts. We have very clear bear flags on most indexes. Baring a break >sp'1820 (even 1800 now looks difficult), the indexes are bearish on a daily and weekly cyclical basis. We even have initial signs of a rollover on the monthly charts.

Anyway, first things first. Equity bears need to see a break of the taper'1 intraday low of 1767. If that is achieved, it will confirm the bear flags, and open downside to 1710/ early as the end of next week - when we have the big monthly jobs report.

Closing update from Mr TopStep

a little more later...