S&P 500 bullish but Europe and China encounter resistance
By Colin Twiggs
November 9th, 2014 10:30 a.m. AEDT (6:30 p.m. ET)
Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.
- US stocks confirm their bull market
- European stocks encounter resistance
- China and Hong Kong likewise
- ASX is rising but the Aussie Dollar falls
Retracement of the S&P 500 respected its new support level at 2000, confirming a primary advance with a target of 2150*. Recovery of 13-week Twiggs Money Flow above the declining trendline indicates buyers are back in control. Reversal below 2000 and the rising trendline is unlikely, but would signal another correction.
* Target calculation: 2000 + ( 2000 - 1850 ) = 2150
CBOE Volatility Index (VIX) at 13 indicates low risk typical of a bull market.
Germany's DAX found resistance at 9400 and retracement to test support at 9000 is likely. Failure of the former primary support level at 8900/9000 would confirm a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would also indicate that sellers dominate.
* Target calculation: 9000 - ( 10000 - 9000 ) = 8000
The Footsie also encountered resistance, at 6500/6560. Respect of this level would warn of a primary down-trend, but rising 13-week Twiggs Money Flow suggests medium-term buying pressure.
China's Shanghai Composite Index is testing its 2013 high of 2440. Declining 13-week Twiggs Money Flow warns of (medium-term) resistance.
* Target calculation: 2400 + ( 2400 - 2300 ) = 2500
Hong Kong's Hang Seng Index also found resistance, at 24000. Reversal below 23000 would confirm a primary down-trend. Reversal of 13-week Twiggs Money Flow below zero would strengthen the bear signal.
The ASX 200, influenced by both the US and China, is testing resistance at 5550. Rising 13-week Twiggs Money Flow (above zero) indicates medium-term buying pressure. Expect a test of 5650/5660. Reversal below 5380/5400 is less likely, but would warn that sellers have resumed control. I have lowered the target to 6000* because of constant back-filling in recent months.
* Target calculation: 5650 + ( 5650 - 5300 ) = 6000
Japan's central bank has signaled more asset purchases (QE). The Government Pension Investment Fund (GPIF) announced that they are reducing their exposure to JGBs (government bonds) and will increase their exposure to Japanese and overseas stocks. Other pension funds are likely to follow suit to reduce their vulnerability to future bond yield fluctuations. Governor Kuroda has effectively 'gone nuclear' on inflation. The BOJ as the major holder of JGBs means the government is effectively printing money to fund its deficit. A dangerous path to follow. But if anyone has the discipline to pull this off without risking hyperinflation, it would be the Japanese.
The Yen fell sharply against the Dollar and is likely to maintain a primary down-trend for some time. Effective devaluation of the Yen is likely to lead to concern amongst Japan's trading partners, notably the US and China. Counter-measures, especially by China, are likely. The US, committed to maintaining the Dollar's reserve currency status, may be more tolerant. But I doubt that Washington will passively accept their Asian counterparts undermining US trade competitiveness.
Japan's Nikkei 225 Index broke resistance at 16300, signaling an advance with a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of another correction.
* Target calculation: 16000 + ( 16000 - 14000 ) = 18000
That's all from me for today. Take care.
Passionate hatred can give meaning and purpose to an empty life. Thus people haunted by the purposelessness of their lives try to find a new content not only by dedicating themselves to a holy cause but also by nursing a fanatical grievance. A mass movement offers them unlimited opportunities for both.
~ Eric Hoffer
Research & Investment Pty Ltd is a Corporate Authorized Representative (AR Number 384 397) of Andika Pty Ltd which holds an Australian Financial Services Licence (AFSL 297069).
The information on this web site and in the newsletters is general in nature and does not consider your personal circumstances. Please contact your professional financial adviser for advice tailored to your needs.
Research & Investment Pty Ltd ("R&I") has made every effort to ensure the reliability of the views and recommendations expressed in the reports published on its websites and newsletters. Our research is based upon information known to us or which was obtained from sources which we believe to be reliable and accurate.
No guarantee as to the capital value of investments, nor future returns are made by R&I. Neither R&I nor its employees make any representation, warranty or guarantee that the information provided is complete, accurate, current or reliable.
You are under no obligation to use these services and should always compare financial services/products to find one which best meets your personal objectives, financial situation or needs.
To the extent permitted by law, R&I and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information. If the law prohibits the exclusion of such liability, such liability shall be limited, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.
Important Warning About Simulated Results
Research & Investment (R&I) specialise in developing, testing and researching investment strategies and systems. Within the R&I web site and newsletters, you will find information about investment strategies and their performance. It is important that you understand that results from R&I research are simulated and not actual results.
No representation is made that any investor will or is likely to achieve profits or losses similar to those shown.
Simulated performance results are generally prepared with the benefit of hindsight and do not involve financial risk. No modeling can completely account for the impact of financial risk in actual investment. Account size, brokerage and slippage may also diverge from simulated results. Numerous other factors related to the markets in general or to the implementation of any specific investment system cannot be fully accounted for in the preparation of simulated performance results and may adversely affect actual investment results.
To the extent permitted by law, R&I and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information offered by R&I whether or not caused by any negligent act or omission.