Friday, July 29, 2011

Global Macro - Technical check - 200 DMA 50 DMA -Dollar,Oil,Copper,Gold,Global Stocks Index

Summary  - Objective is do a Global Macro Technical analysis check -using 50 and 200 DMA `s-across Commodities,Currencies,Junk Bonds and Stock Markets - to connect the dots and attempt to foresee what lies ahead.
30 July 2011 -US in the dumps and so is the Euro. But it seems so far, the Euro is winning as it has maintained to stay above the 200 DMA of 1.40.
The seeds of this was already sown when the government unleashed mega bailouts and stimulus packages to recover from great 2008 recession.
Basically what was being done in the whole process was that the debt from leveraged private sector debt was being taken off it by the Public (Govt.) Sector. ( In most countries ,private debt is still more than public debt. Charts here )

This is quite similar to a situation where one drunk is trying to stabilize the other drunk person.

And what was the lesson from the 2008 recession ? Oh, just put the blame on the bartender, saying that he was serving us too much during happy hours and hence this was bound to happen.

Then, today`s present scenario and concerns were raised by a few but it was all quickly drowned in the voices of "Yes, more bailouts , more stimulus , its working, we need it".

As I write this, Senate has rejected the other debt ceiling plan again and US Q1 GDP was revised down 80% from 1.9% to 0.4%. ( More news updates on this my twitter updates here )

So here is a Global Macro round-up from a simple technical perspective . Let us see what all asset classes and markets are telling us. ( Table / Chart at the end of this post)
Here is the summary

Currencies -Dollar is down vs almost all currencies. In the past 3 months, US Dollar is even down 2% vs the world`s weakest currency Vietnamese Dong (VND) that is going through hyperinflation. ( latest July 2011 Inflation of 22% ) .Versus the  CHF Swiss Franc - USD is at record low and at a 60 year low vs JPY Yen. Same story with AUD and Dollar Index.
Precious Metals  - The mirror image of falling dollar can be seen in precious metals - Gold and Silver - trading well above their 200 and 50 DMA`s.

WTI Crude (US) slipped below 200 DMA which makes sense as US economy is clearly entering a stall speed mode.
But Brent Crude is still +6% above its 200 DMA and so is Copper which is both above the 50 and 200 DMA `s.
Global Stock Markets / Country Indices- For comparison ,I have taken the top 15 World Stock Indices.
  • Among BRICs, only Russia RTS Index is still holding up above 200 DMA. Rest ,Brazil Bovespa,India,China - Shanghai Composite Index are all below 200 DMA.
  • In EU Euro area only Germany DAX index is barely above its 200 DMA. France CAC,Italy MIB index,Spain are all below 200 DMA`s.
  • US (S&P500) is also just barely afloat above 200 DMA. ( On intraday basis , it went below 200 DMA to 1280 on 30-July-2011)
  • UK FTSE Index / Footsie is also below 200 and 50 DMA
  • In major APJ, countries,  only Singapore and South Korea Kospi Index are still above their 200 DMA`s.Major indices HangSeng,Nikkei,Sensex,Nifty,Shanghai Composite,Taiwan TSEC Index all are below 200 DMA`s.
  • Overall Indices /Countries 10/15 or 67% are below 200 DMA `s and 73% are below their 50 DMA`s. 
  • Smaller Asian countries such as Singapore STI ,Thailand SET and Indonesia JCI Index are still above their 200 DMA`s
Not pretty indeed.
Junk Bonds - Though in recent weeks,surprisingly Junk Bonds are still doing well (reported as `safe harbour` by WSJ ). But I checked the Barclays High Yield Bonds Index HYG. It is just flat in this year. Post on Junk Bonds fall in 2011 here and HYG Chart here

My view  -
  • Unlike in the past usual recessions (also in 2008),where the USD appreciates, this time the US dollar could go the reverse way and continue to fall vs most currencies. This could negatively impact the US export focussed firms based in Asia for example.
  •  US ( and some countries UK,EU ) seems to be headed for the dreaded `Stagflation` phase - deadly combination of high inflation and low growth.
  •  Select asian domestic consumption firms could outperform Asian export focused firms.
  • USD is making historic lows vs Singapore Dollar and also made a 12 year low vs Brazilean Real.  Incidentally, Brazil is second major stock market to suffer a 20% correction. 
  •  China was the first market to see a 30% correcion. Chinese Yuan is also making new 17 year highs vs US Dollar. 
  • Here is the table below of 200 and 50 DMA for all Global Macro Asset classes ( Click to zoom)

1 comment:

kalpeshmmaniar said...

Sensex bounced exactly from the level of 16990, I had mentioned that sensex could hit 16969, sensex bounced exactly from 16990.

What next?
August will be volatile month and will see turbulent markets, the present correction would end in September, when markets take off in a big way.

To get accurate forecasting please visit http://www.kalpeshmaniar.com