ISM non manufacturier

L'ISM services US a très fortement chuté en janvier. C'est la plus forte baisse depuis le début de la série (juillet 97). Elle impliquerait - si on restait sur ces niveaux - une baisse du PIB de 6% au premier trimestre (en rythme annuel), ce que l'on a plus vu depuis début 1982.

Le graphique compare le SP 500 et une moyenne mobile de l'ISM non manufacturier.

Technical Weekly 04022008

Equities

With an oversold bounce over the last two weeks, the DJ Euro Stoxx 50 is approaching a resistance zone from broken support and the 50-day moving average.(yellow line)

Before going further, we should know that the overall trend remains down for two reasons.

First, the index broke down in January with a decisive move below its 2007 lows.

Second, the 50-day moving average is below the 200-day.

The next thing to expect is a reaction rally back toward the recently violated neckline support, which is now overhead resistance.

While the market's recent performance has been good for bulls, you can see on the chart below that strong overhead resistance in the form of the long-term rising trend line lies dead ahead.

The next chart shows the same index but on a monthly basis.

Note that the monthly stochastic lines have just given a sell signal and the monthly MACD histogram has been negative for two consecutive months.

This downside crossover is the first since the last bear market began in 2000.

Technically speaking, I think the current rally may continue in the near term but I also think renew weakness will follow with indices possibly retesting January lows.

One last observation, according to the Stock Trader's Almanac, the January Barometer predicts the year's course for the SP 500 with a .754 accuracy and every down January on the S&P since 1950, without exception, preceded a flat or bear market

Bonds

No change, yields are still caught in a downtrend channel.

For the coming months I can not exclude the possibility of a deeper correction towards the important support of 3.65%.

Brent(Oil)

Oil is trading above support and the double top pattern highlighted last week was not validated . The long term trend remains bullish.

Euro

The rate continues to trade below the important resistance of 1.5.

Watching the two last candlestick patterns, I do not expect significant move in the coming days.

DJ Euro Stoxx 50

The short term pullback may already be over.New low must hold.

If it does, wide trading range is expected with a lot of volatility.
Otherwise the downtrend will resume.

Matrice

La matrice ci-dessous est un outil stratégique (et pas du"market timing") qui me permet de quantifier le trend et le risque return des différentes classes d'actifs.En voici la légende : SXXP=Stoxx 600 Yield = taux 10 ans allemand M=métaux industrielles CRB=matières premières EUR= €/$ AGRI= matières premières agricoles.

Emerging markets

As you can see on this weekly chart, the MSCI Emerging Markets is right on support.
Most technical indicators I follow are still bearish and the last candle is bearish.
I will at least wait for a stabilisation before buying.

Fibonacci time cycles

Please find here a quick study of the SP500 about time analysis.(coming from Bloomberg)
This chart analyse the relationship between price and time using Fibonacci time projection.
By projecting cycle forward using Fibonacci percentages,(within Elliott waves analysis) you will find that most of the bottoms on the way up occurred within a couple weeks of the projection.
The next projected date in the pattern?
The end of April.

Marché baissier?

L'ensemble des différents indices boursiers sont désormais engagés à la baisse suite à la validation de figures de renversement baissières de grande envergure.
Les investisseurs espéraient beaucoup de surprises positives du coté des résultats de sociétés. Malheureusement après les mauvais chiffres économiques de ces derniers mois, ils ont eu droit à des déceptions.
En effet et même si on ne peut pas encore tirer des conclusions définitives, le rapport entre surprises positives et négatives déjà publiés incite à la prudence puisque 53.5% des sociétaires du SP 500 ont seulement réussi à dépasser les attentes.
D’un autre coté d’un point de vue technique les grands indices ont atteint nos objectifs et beaucoup de mauvaises nouvelles sont déjà intégrées dans les cours.
Bien que le marché d’actions soit fortement survendu, il sera prudent de ne pas négocier l'émergence d'un rebond technique avant que des signes tangibles ne nous indiquent l'arrivée d'un tel mouvement. Je ne veux pas prendre le risque d’acheter de façon automatique sur des niveaux prédéfinis et je préfère :
1)déterminer d'abord une plage de cours à la hauteur de laquelle des formations haussières sont susceptibles d'apparaître.
2) Observer ensuite si elles apparaissent bien, et si d'autres conditions sont réunies (chiffres économiques, résultats de sociétés…)
3) avant de valider le démarrage d'un rebond technique.
Le point 1 est déjà réalisé mais pas les points 2 et 3 et il est donc pour l’instant encore prématuré d’investir.(never catch a falling knife).

Technical Weekly 21012008

Equities
Last week was another bearish week for the market. It is now clear that the technical outlook remains bearish following the recent breakdown below key major supports. I also still think that technical bounces could start anytime,(see last weekly) because most indices are deeply oversold and sentiment is now very bearish. In these conditions, we do not think that the current downside move will be sustained. Nevertheless, it remains extremely difficult to time such technical bounces and even more dangerous to trade them, which confirms that the mid-term trend has changed. In a bear market, technical bounces are always surprising and often preceded by unexpected downside accelerations. So, due to the technical damage on long term trending indicators, we can not anticipate a major bullish reversal at this stage (even if we anticipate a sharp but short term rebound) and prefer to wait for a more significant bottom or at least a stabilization to start some bottom fishing. The long term chart of the Stoxx 600 presents a long-term view, which makes it more clear how serious the situation is. The questions remain as to how far down prices will go and how long the bear market will last? In the shorter term we have a minimum downside projection from the bearish descending triangle of 300-310, which correspond to the bottom of wave 4. That could mark a medium term low from which a bear market rally (wave B) could rise.

Bonds

Last week I said that a move towards the 4% was a high probability. This week, we believe a deep break below this level seems unlikely. For the coming months we can not exclude the possibility of a deeper correction towards the 3.65%.

Brent(Oil)

No change, the Brent is still correcting and a clear breakdown below the neckline (see arrow on chart) could validate a double top pattern. In this case the target of this bearish pattern would be 80$.

Euro

Start a pullback last week, this correction may continue towards 1.43. There is a strong resistance around 1.5.

Stoxx 600-Elliott Waves

The Stoxx 600 already broken his long term uptrend in September.
The target of the first bearish wave (wave A) is 12.7% lower, which is the bottom of wave 4.

Technical weekly 11012007

Equities

The new year on the US and European market got off to one of the worst starts in recent memory, with the SP 500 and the Stoxx 600 breaking below support zone.

Despite the amplification of the correction in the United States and the opening of bearish tendencies on the three principal indices (SP 500, dow Jones and the Nasdaq), the European narrow indices (Footsie 100, Eurostoxx 50, Cac 40, Dax 30) resist on or around their decisive supports. Currently, there is thus exists a dichotomy between the small and mid caps and the large caps which are overall considered as safe haven.Now that bearish tendencies were open on the three American indices, the realization of pullbacks bulls (which will come to reinforce these mid-term bearish tendencies) is foreseen at the immediate horizon. In Europe, the good resistance of the narrow indices during the American corrections makes it possible to think that many stocks are able to benefit from pullbacks and to rebound appreciably on a short term basis. That will not change their trend but will allow to sell under better conditions that in the beginning of the year.

The recent sector moves have been easy to track.

Investors have started the year buying defensive sectors (health care, telecom, utilities, oil majors) and selling cyclicals (auto, industrials, retail).

Bonds

No change, since May, the German 10 year bond yields are trading in a downside trading range. A move towards 4% is a high probability.

Brent(Oil)

The Brent has reached our target is still challenging the ascending support trend-line.A break below this support could extend the correction towards 90 $ but the long term trend is still up.

Euro

The recent correction was short lived and the rate is now close to challenge the 1.5 resistance level. As it is now overbought and close to resistance zone, I think that a more significant rise is unlikely for the coming days/weeks.

Bonds equities ratio

After 5 years of underperformance the European bonds-equities ratio seems to be bottoming out.
One more worrying sign for equities!

SP 500 daily

The chart of the SP 500 is now looking very dangerous.Even if the August low is not yet broken down , I think the risk is now very high to have another bearish leg.
The target of the descending triangle is 10% lower (around 1270).

Technical scoring and buy&sell signals

Technical scoring from o to 10 points for the 18 Stoxx sectors+Real Estate.
Number in green when the scoring improving, red when deteriorating and scoring in bleu when unchanged.
The 2 last tables show some technicaly good and bad stocks.

"click on the table to enlarge"'

Ranking models

"click on the table to enlarge"

"click on the table to enlarge"

The country/zones ranking model continues to deliver the same message : overweight emerging markets!

The Stoxx sectors model is bullish for Chemicals, Utilities, Telcos, Food&beverages and bearish for Real Estate, Travel&Leisure, Retail and banks

Best wishes for 2008!

End year rally?

On the hourly chart (DJ Euro Stoxx 50) below, you can see that a end year rally is still possible.
The target is the upper part of the rising channel.(+/- 4% higher).
But for now volume is still falling.(OBV indicator)

Baltic dry et bourses chinoises

L'indice composite Baltic Dry Index (courbe jaune), moyenne des prix pratiqués sur 24 routes mondiales de transport en vrac de matières sèches (minerais, charbon, métaux, céréales..) a récemment atteint un plus haut historique et techniquement parlant semble prendre une tournure parabolique.
Cet indice est fortement corrélé avec la performance de la bourse chinoise.(CSI 300-courbe jaune)

Concrètement en 2008 il y aura lieu de surveiller de près les indices boursiers chinois car il y a un risque de retournement après les jeux olympiques.

Buy&Sell DJ Euro Stoxx 50

"click on the table to enlarge"

Wheat

Wheat prices rose 33.66% YTD and 71.88% YOY.After this amazing performance, you may think that this rally may end soon and that it is too late to buy.
This long term chart below gives another perspective and tells another story.

This is a very bullish chart!

Technical weekly 18122007

Equities

Based on a favorable seasonality, short term oversold condition, extreme pessimism and a friendly Fed, I turned short-term bullish for a year end rally. However the recent downside acceleration deteriorates the short-term technical outlook.

So, I need a long term model to convince us that the long term outlook is still good.
A model’s greatest value is that it provides an objective assessment of the consensus of the indicators.
Forecasting procedures can be used to place current developments in the context of long term probabilities if they are used in conjunction with an objective model that enable you to maintain flexibility in responding to changing market conditions.
This model isn’t a market timing tool, but it will give you a clear perspective on risk and reward.
If it indicates that the market outlook is risky, you should respond by maintaining a defensive investment approach.
When the model starts to indicate that the skies have cleared and that there is little risk on the investment horizon, you can again be confident in taking an aggressive approach.
To determine the quality of the trend, I use a weighted combinaison of 3 waves of trend, based on different time frames.(monthly, weekly and daily)
The stronger weight is given to the long term trend.
I also used a risk return approach; this tool tries to define the potentiel of a trend.
The higher the score, the higher the probabilities of higher prices in the future. The stronger weight is also given to the long term trend.The combination between the trend and the risk return model is the matrix.

As you can see, based on this technical model, the risk/return and the trend for the Stoxx 600 remain weak.

Bonds
Since May, the German 10 year bond yields are trading in a downside trading range. As the yields trades now close to resistance and are overbought, I foresaw lower yields for the coming days.

Brent(Oil)
No change, the Brent is still challenging the ascending support trend-line.

A break below this support could extend the correction towards 80 $ but the long term trend is still up.

Euro
Last week I said that a break below support would suggest a much larger correction.For the coming days/weeks a move towards the 1.422 level, which is upper part of the bullish long term channel, seems likely.

€/$

Bearish signal for the rate today.A move towards the 1.422 level, which is upper part of the bullish long term channel, seems likely.

EMU GROWTH/VALUE

Is it still the time to switch from value to growth?
The long term chart (since 99) below shows a ratio between Dexia EquityB EMU growth versus value.

Euribor-DJ Euro Stoxx 50

Euribor 1 M rises close to a 7 year high.

The last time the black line (stock market) crosses below the yellow one (money market) it was in September 2000

Seasonality

According to this chart, equity markets will remain bullish into December.

Technical Weekly 10122007

Equities
On a short term basis equity indices are still bullish but as you can see on this first chart of the DJ Stoxx 50, the index is now overbought and a test of the resistance is now developping.

The second chart shows the same index but with a DMI system. The DMI system is made up of three lines ; the green line which measures the buying pressure (+DMI), the red one which measures the selling pressure(-DMI) and the white line which is the ADX.
This indicator measures the difference between +DMI and –DMI and indicates the trend of the market.
For now the system is bullish.(green line above red line)

What is interesting is the level of the ADX, a level below 25 indicates that the market is caught in a trading range and a level above 25 indicates a trading market. The latest values of the ADX for major indices confirm that equity markets are now range bounded and that the “buy and hold” approach must be change into a “buy and sell” approach.
DJ EuroStox50 :ADX :18.43

SP 500 : ADX: 20.26

MSCI World : ADX :19.94
MSCI Emerging markets : ADX : 20.56

Bonds

The German 10 year bond yields are still trading around the 4% level.

The ADX indicator (16.07) indicates a sideways range between 4% and 4.25% for the coming days.

Brent(Oil)
The short-term correction continues and Brent is now challenging the 88 support zone.

A break below this support could extend the correction towards 80 $ but the long term trend is still up.

Euro

After the recent correction, the trend of the euro remains long term bullish.

As long as the euro remains above its channel support line (currently, this line lies around 1.46), the outlook would remain higher with the upper part of the channel 1.500 as first target.
A break below channel support would suggest a much larger correction.

€/$ Part2

Many thanks to Arthur Hill for this interesting comment concerning sentiment analysis on the greenback.
On the lighter side of analysis.... you can even thrown in a few magazine covers for good measure.
Der Spiegel, Knack and The Economist all featured the falling $ on their covers this week.
The Economist has featured the falling dollar before - so no big deal here.
However, we must be close to a bottom if Der Spiegel and Knack are featuring the falling greenback.
And don't forget about the rapper (Jay-Z) and the Brazilian supermodel, who have suddenly become currency experts by shunning the dollar.