Saturday 2 February 2019

Weekend update - World equity markets

It was a powerfully bullish month for world equity markets, with net monthly gains ranging from 13.9% (Russia), 10.8% (Brazil), 7.2% (USA), 6.0% (Spain), 5.8% (Germany), 5.5% (France), 4.0% (Australia), 3.8% (Japan), 3.6% (China), to 3.5% (Greece).

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

USA - Dow

The mighty Dow rebounded by 1672pts (7.2%) to 24999.67. Note the key 10MA at 24967, which (as of the Feb'1st close) has climbed to 25057. MACD (green bar histogram) cycle remains on the low end, as broader price momentum still favours the equity bears.

Keep in mind the Dec'2018 high of 25980. Unless the bulls can break/hold above 26k (to be decisive), the bulls should be concerned the January gain is just part of a bounce.

Best guess: February will be a fierce battleground, and on balance, should settle somewhere <25k. A break under the Dec' low of 21712 will be very difficult, and looks out of range until at least mid/late March.

The Fed appear set to announce a cut/adjustment to the QT program, perhaps as early as the FOMC of March'20th. Whilst that can be seen as a s/t upward kick to equities, it bodes badly for the mid/long term. A cut/suspension in QT is a precursor to a rate cut, the latter of which would be the ultimate equity sell signal. Right now, a rate cut appears no earlier than the FOMC of June 19th.

Germany – DAX

The economic powerhouse of the EU - Germany, powered upward by 614pts (5.8%) to 11173. The January settlement was still far below the key 10MA of 11937. The break of l/t trend in Sept'2018 remains a very serious issue. Technically, the DAX is m/t bearish. Key supports psy'10, and then 8k.

The first print for Q4 GDP is due Feb'14th, and if that is negative, it will deem the German economy as officially in recession. Where Germany goes... the rest of the EU can be expected to follow.

Japan – Nikkei

The Japanese market saw a net monthly gain of 758pts (3.8%) to 20773. This was notably under the key price threshold of 21k, and far below the key 10MA. Still m/t bearish.

China – Shanghai comp'

The Chinese market settled +90pts (3.6%) to 2584. The m/t declining trend remains intact. Price momentum remains negative. Note the key 10MA at 2771, until that is cleared, the communists have no justification to be bullish.

Brazil – Bovespa

The Brazilian market broke a new historic high of 98405, settling +9506 (10.8%) at 97393. Price momentum continues to increasingly favour the bulls, as the giant 100k threshold is viable in the near term. I have to wonder, as the Bovespa approaches the monstrous psy' threshold of 100k, would the exchange not want to do a 10-1 split on this index?

Russia - RTSI

The Russian market was the strongest of the ten markets I regularly highlight, with a net January gain of 148pts (13.9%) to 1214. The January candle does have a little spike from around what is a very key price threshold. The Russian bulls (or should that be bears?) need to see slightly higher levels to make for a decisive breakout.

France – CAC

The French market climbed 262pts (5.5%) to 4992, notably still under giant psy'5K, and the key 10MA. The bulls need >5300s to negate the m/t bearish trend.

Spain – IBEX

*ignore the spike, its an incorrect high end print. The correct intra month high was 9117.10.
The Spanish market saw a net January gain of 516pts (6.0%) to 9056. The m/t trend remains bearish. That will only change if >9500.

Australia – AORD

The Australian market bounce 227pts (4.0%) to 5937, but that was notably still under the key 10MA. Aussie bulls should be desperate for >6150, to make for a decisive bullish break.

Greece - Athex

The economic and societal basket case of the EU - Greece, gained 21pts (3.5%) to 634. The m/t trend remains bearish, only negated if >700.


All ten markets were net higher for January.

Russia, Brazil, and the USA are leading the way back upward, with Japan, China, and Greece lagging.

Brazil was the only market to break a new historic high.

Despite powerful gains, most markets remain m/t bearish.

Looking ahead 

A busy week is ahead, not least with another truck load of earnings...


M - Factory orders
T - Intl' trade, PMI/ISM serv'

Tuesday 9pm EST: President Trump will give the State of the Union Address to a joint session of congress. That will last around an hour. Its very possible Trump will once again suggest an infrastructure bill, which would have (at least s/t) implications for some of the resource/industrial stocks.

W - Product/costs, EIA Pet' report
T - Weekly jobs, EIA NG report, consumer credit (3pm)
F - Wholesale trade

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Have a good weekend