Weekly Multi Market Technical Analysis – “Take Profits” 25th Feb14 …
Here the weekly multi market technical analysis from the award winning Swiss team.
First up, although they see the likelihood of a possible near term extension to 1885 on the sp500 they are in the “take profit” camp here in the near term across extended sectors and indexes like the Hangseng and Euro indexes.
‘All eyes to the Shanghai’ which is showing a bearish tone and a likely retest of her key supports.
Commodities have bounced and are over bought in the near term but are a ‘buy the dip’ though still within a cyclical bear corrective move, according to the team.
If i can add one point here it would be around this quote:
“Emerging Markets remain weak relative to the world and this is clearly disappointing given the momentum rally
we have in the commodity space underway as well as it is also interesting to see that despite the aggressive rally in
the commodity area, the US inflation expectations remain very weak and flattish, which is suspicious!”
The team are attempting to correlate demand and price around em demand for commodities. This is not necessary and even unhelpful in my view. Monetary demand can be more than enough at times. As the world economy struggles and the data weakens whilst currencies are debased and equities appear to be topping out it is entirely logical for capital (and especially hot money capital) to flow to commodities for purely speculative and debasement reasons. The team are great at what they do. They look at cross correlations between asset markets and interpret technical indicators to determine likely direction and relative value. This can be enough. To overlay historic and fundamental rational over these disciplines is something I advocate but it can lead to more questions than it answers unless you take a broad historic reference point.
The recent decade long super secular commodities cycle was propelled forward by the twin pillars of high growth in the EM world and Western monetary debasement. But to use this recent correlation alone as a reference for all future commodity bull markets would be a grace mistake, in my view.
In the 1970s the world economy in real terms slumped. Equities did disastrously. EM economies weren’t on the economic map due to their size yet commodities boomed in price and were the choice asset to hold far out stripping equity returns over the decade. How did this occur when economic demand and growth was so low? Very simply, commodities boomed for monetary debasement reasons in the 1970s and were only finally brought under control by nearly double digit interest rates by the FED.
This is history and as we know in the world of speculation history often rhymes.
I agree with the team’s reading completely, even this final extension due to momentum. I have flagged 1875 though its entirely possible we do arrive to 1885 as they outline on the sp500. Quite how deep this correction extends I am less certain as the scars of technical damage run deeply. Multi instruments are looking for new trends here and now, as commented. This would suggest this near term correction may run deeper than many consider possible although we are not quite at the hedging/shorting moment quite yet would be my comment. Also as a final note, JPM have been very vocal in briefing clients that gold is about to turn and resume her bear market. Near term the asset is over bought so some sort of push back should be expected but it will likely be a ‘buy the dip’ moment as the technical chart has greatly improved to sustain a few more higher high attempts in the medium term.
Without any more delay, here the report:
All the best
Rich
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Weekly Multi Market Technical Analysis – “Take Profits” 25th Feb14 …
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