Two DOWN days create a bear market?
We are at an interesting juncture in the market, - just when short term cyclicals suggest it should arise:
The MSCI World in SGD
Markets globally have seen a lot of downward pressure last week, meaning that a lot of sellers came on the market and buyers, although willing to instigate considerable trading volumes initially, did not see it as an outright purchasing opportunity by the time we got to Friday. Over the weekend sentiment among buyers wilted and come Monday an impulsive rout ensued pushing markets some 2% lower, a little more in tech stocks, less in defensive equities.
The reason I am showing you the MSCI World in SGD terms (instead of a DJIA or S&P500) is to alert you on exactly where you - the SGD investor - are positioned. Avoid being bamboozled by an index chart in any other currency! We are only back to the levels of April 18 and, to all intents and purposes, it looks as though markets could find support here. The rout, to me, only confirms that weak hands have been shaken off by the recent volatility and it is the strong hands that are poised to regain the upper hand: it means that a short sharp rally in equities is on the cards, even if it does not last very long!
The US Dollar rebound
The USD, having rallied from a low of 0.72 to near 0.76, followed by a small consolidation, has 'gap'-ed up to form a new interim high at 0.7636, which coincides with the upper Fibonacci Fan level of an overall negative trend. This impulsive thrust has resulted in more weak hands wanting to buy back US dollars now, but it may (and I think it is!) already be at the highest point for at least the next 2-3 weeks.
Gold precedes the Equity move
As so often, Gold prices rallied even as stocks retreated - and even against a rapidly strengthening USD. This is a good sign for the overall more bullish outlook in the short term. Unlike many observers, I dispute the notion that gold is used as a safety item only. Indeed, gold bugs continue to place its highest value on an implied ability to outpace currencies, - and keeping in line with real asset inflation.
Since May 16, gold prices are up 3% from 1475, a crucial support level, which should not be breached this month, but may be in jeopardy late in June. This early start is likely the precursor to a potentially widening rally, especially if - as we suspect - the US dollar has now peaked as well. And equities are next to turn up, probably.
Conclusion
I would watch very carefully how today's traders behave: a consolidation in the morning hours may bring additional paper losses, but by end of day, the sentiment should become firmer. It's Tuesday-Turnday today, probably...
If you subscribe to longer term trading views then this particular setup may look too risky for you. And that is ok. After all, the medium term outlook is not particularly enticing. But for those with a keen eye on returns and a swift hand for execution, this one is not to be missed!
 |
| Global Equities back to April 18 lows, - finding support? |
Markets globally have seen a lot of downward pressure last week, meaning that a lot of sellers came on the market and buyers, although willing to instigate considerable trading volumes initially, did not see it as an outright purchasing opportunity by the time we got to Friday. Over the weekend sentiment among buyers wilted and come Monday an impulsive rout ensued pushing markets some 2% lower, a little more in tech stocks, less in defensive equities.
The reason I am showing you the MSCI World in SGD terms (instead of a DJIA or S&P500) is to alert you on exactly where you - the SGD investor - are positioned. Avoid being bamboozled by an index chart in any other currency! We are only back to the levels of April 18 and, to all intents and purposes, it looks as though markets could find support here. The rout, to me, only confirms that weak hands have been shaken off by the recent volatility and it is the strong hands that are poised to regain the upper hand: it means that a short sharp rally in equities is on the cards, even if it does not last very long!
The USD, having rallied from a low of 0.72 to near 0.76, followed by a small consolidation, has 'gap'-ed up to form a new interim high at 0.7636, which coincides with the upper Fibonacci Fan level of an overall negative trend. This impulsive thrust has resulted in more weak hands wanting to buy back US dollars now, but it may (and I think it is!) already be at the highest point for at least the next 2-3 weeks.
Gold precedes the Equity move
Since May 16, gold prices are up 3% from 1475, a crucial support level, which should not be breached this month, but may be in jeopardy late in June. This early start is likely the precursor to a potentially widening rally, especially if - as we suspect - the US dollar has now peaked as well. And equities are next to turn up, probably.
Conclusion
I would watch very carefully how today's traders behave: a consolidation in the morning hours may bring additional paper losses, but by end of day, the sentiment should become firmer. It's Tuesday-Turnday today, probably...
If you subscribe to longer term trading views then this particular setup may look too risky for you. And that is ok. After all, the medium term outlook is not particularly enticing. But for those with a keen eye on returns and a swift hand for execution, this one is not to be missed!
Comments