Saturday, 4 March 2017

Weekend update - World monthly indexes

World equity markets remain broadly bullish, with net February changes ranging from +4.8% (USA), +2.6% (Germany, China, Spain), +0.4% (Japan), to -5.9% (Russia). Mid term outlook is powerfully bullish, as most indexes look due a further 10/15% by year end.

Lets take our monthly look at ten of the world equity markets

USA - Dow

The mighty Dow climbed for a fourth consecutive month, +948pts (4.8%) to 20812. Already this March, we've seen a new historic high of 21169. Underlying MACD (green bar histogram) cycle continues to tick upward, and we're at levels not seen since May 2011. The key 10MA is now in the 19100s, and at the current rate, will be around the giant psy' level of 20k this June.

Best guess: upside to the 22000s by May/June, then a 5-7% retrace... before resuming upward to 23/24k by year end.  No monthly closes <20k for the rest of 2017.

Equity bears have nothing to tout unless the Dow has a monthly close <20k in June.. or beyond. Things really only turn super bearish if the election/Nov' lows (17883) are taken out, and that is a massive 3122pts (15%) lower.


The economic powerhouse of the EU - Germany, managed a significant Feb' gain of 299pts (2.6%) to 11834. The April 2015 high of 12390 is set to be exceeded. The 13000s look probable this summer, with 14/15k a viable hyper-bullish target by year end. Core support is at 8k, and that will be the natural downside target once the grand rally from 2009 concludes.

For the wave counters out there, the DAX has exceptionally clear price structure. We're very possibly in the final fifth wave. However, if you believe the next bear market will see a 50% retrace, and that 8k won't be broken, then 'minimum upside' target has to be around 15/16k.


The BoJ fuelled Nikkei managed a minor 77pt (0.4%) gain in Feb', settling at 19118. Short term price structure could be argued is just a bull flag/pennant. First target is a monthly close >20k, and then the 2015 high of 20952. In theory, considering other equity markets, 22/23k seems a valid target by year end.


The Shanghai comp' was +82pts (2.6%) in Feb' to 3241. Price action since April 2016 has been positive, but narrow range. Its probably fair to say the communists leadership is 'managing' their market particularly tightly since the collapse wave seen in the latter half of 2015. First soft upside target are the 3500s. The 4500/600s look a valid target for year end.


The Bovespa continues to power upward, +1992pts (3.1%) to 66662. First big target is the 2008 historic high of 73920. That seems very viable by July/August. Things only turn bearish with a monthly close under the Dec'2016 low of 56828. The Brazilian market will especially benefit if commodity prices can rally across the year.


The Russian market had a rough February, settling -68pts (5.9%) at 1099, having maxed out at 1196.99. Indeed, the 1200 threshold is very important. Despite the net monthly decline, keep in mind the RTSI has climbed 57% since Jan'2016. Like the other commodity/resource based economies, Russian equities will need commodity prices (esp' oil and nat' gas) to climb, in order to achieve a monthly close >1200. From there, the 1700s seem probable within a year. The 2011 high of 2134 looks out of range for at least another 18-24 months.


The FTSE climbed 164pts (2.3%) to 7263, an important third consecutive monthly close above multi-decade resistance of 7k. Indeed, that resistance is now turning to core support. Its notable that early March has already seen a new historic high achieved. The 8000s are a valid target by late summer. 

The UK will clearly be affected by any geo-political upset in neighbouring France this spring/early summer. Things would only turn bearish with a break back under the 7k threshold.. where the 10MA is already close to.


The CAC gained a solid 109pts (2.3%) to 4858. March has already seen some further sig' gains to near the giant psy' level of 5K. Key multi-year declining resistance/trend is currently around 5100. 

Considering the looming presidential election, a break above resistance will not be easy. Even if achieved ahead of the election (round'1 is due mid/late April), the CAC could be expected to rapidly cool (at least initially) with a Le Pen victory.

The situation in France is much like the recent US election. For the record, I'm leaning on a Le Pen victory. That would naturally shock the mainstream, but I'd imagine (just like the US), the market would quickly adapt, and resume upward.


One of the ugly EU-PIIGs - the Spanish market climbed 240pts (2.6%) in Feb' to 9550. The trend since the June 2016 low of 7579 has been very consistent. At the current rate, the IBEX will be challenging the giant multi-year resistance of 12k by year end. Any monthly closes >12k would be extremely bullish, and would then offer further hyper-upside to 15/16k in 2018.


The Aus' market gained 86pts (1.5%) to 5761. There was an intra month high of 5880, but cooling (much like January) took the market back under declining trend/resistance. However, its notable that early March has seen renewed upside to the 5800s. The April 2015 high of 5963 is clearly within range in the near term.

The Australian economy/market is very commodity dependent, and a sustained break into the 6000s is going to require things like Copper >$3, and Gold in the $1300s. On balance, I do expect such inflation, although the Nov'2007 historic high of 6873 will be a tough challenge before year end.

All world equity markets continue to broadly climb from their 2016 lows.

The USA, Germany, UK, and Brazil are leading the way higher.

Many markets now have downside buffer of 10%, before testing their mid term upward trends, with key higher lows from Nov'2016.

Equity bears are going to find it very difficult to see a multi-week down cycle greater than 10% this year. 

All equity markets (inc' the USA) look to have further upside of 10/15% this year.

Looking ahead

The US market will be particularly focused on the next set of jobs data. If Feb' net job gains are >200k, there will be extremely high expectations for the fed to raise rates at the FOMC of March 15th. On balance, I'm still guessing the next hike will instead be May 3rd. Employment data is regularly coming in reasonable, but Q4 GDP sure wasn't 'great', and that will be a valid excuse for the fed to wait a little longer.

M - factory orders
T - intl' trade, consumer credit 
W - ADP jobs, product/costs, wholesale trade, EIA report
T - weekly jobs, import/export prices
F - monthly jobs, US Treasury budget

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For those with an interest in the precious metals - and the related miners, I have a Gold Miners report available.

 Have a good weekend

*the next post on this page might appear next Monday at 7pm

A sixth weekly gain

US equity indexes closed moderately mixed, sp +1pt at 2383. The two leaders - Trans/R2K, settled +0.5% and -0.1% respectively. VIX settled -7.2% at 10.96. Near/mid outlook remains bullish, although price action is likely to be more choppy, with some sector rotation, with funds especially leaning into energy.




It was a pretty subdued end to the week, but that is arguably just the market consolidating after another record breaking week.

VIX is naturally subdued, still unable to reach the low teens. Even if the fed raise rates at the FOMC of March 15th, its difficult to see the VIX sustainably >15.

Economic/market chatter from Schiff

For those with the time, this is worth listening to, especially for the retrospective to 2007.

One particular point of note, the notion of 1oz of Gold equalling the Dow. I could see it happening, but as I don't see the Dow trading under 14000 ever again, you can thus extrapolate I expect somewhat higher gold prices.

Goodnight from London

*the weekend post will appear Sat'12pm EST, and will detail the World monthly indexes... which remains my most important post of the month.