Saturday, October 8, 2011

Global Macro Technicals- Mega Dollar Carry Reversal doesnt bode well for stocks

Global Macro Technicals- Mega Dollar Carry Reversal doesnt bode well for stocks.
This post covers Global Macro Technicals - 200 & 50 simple DMA `s of
  • Currencies -Euro,US Dollar,AUD,Yen,Swiss Franc and Dollar Index DXY
  • Commodities - Crude Oil - WTI Nymex and Brent, Copper, Silver,Gold
  • Country Stock Indices - Major 16 Global Countries - G7, PIIGS, BRIC,Asia
I had posted Global Macro - Technicals on 30 July 2011  and at that point in time,over 67% of World Country Stock Indices were already below their 200 DMA and very few countries that were above their 200 DMA`s were S&P 500 ( was at 1292) , Russia ( among the BRIC),Germany DAX ( was at 7158 )in the Euro pack. 
But interestingly, then Dollar was still below 200 DMA vs. most currencies. And even I was thinking to myself -  "This is another recession then why is Dollar not appreciating as it does every time during recession /slowing global growth ?"
It seems I was early than the market is seeing this discrepancy.
Now today -on 7 Oct 2011, just 50 trading days later, one can see the mega dollar reversal again like clockwork. And the resulting damage to risky asset classes - Commodities,Stocks, other currencies,Junk Bonds.
Summary of the latest technicals
  • Stock Index / Indices - 100% of all 16 Countries are below their 200 DMA`s.
  • Stock Index / Indices - Percentage of countries below their 50 DMA `s have marginally declined from 63%to 73%. I.e there were 4 countries above their 50 DMAs and now there are 6 countries that are above 50 DMA`s. And these set of countries are not the same.In fact,this time all 6 are different from the last 4 countries. Detailes below.
  • Interesting aspect is few countries recently have just closed above their 50 DMA `s. Those Six countries are FTSE ,Germany DAX,France CAC,Spain IBEX,Italy MIB 40 and Australia ASX 200. But they are above their respective 50 DMA `s by a narrow spread /margin - by just 0.4% to 4.9%. These Euro countries could be a leading indicator of the recovery.
  • BRIC `s are still tumbling like a ton of bricks - all of them ( Bovespa,RTSE,NIFTY / Sensex and Shanghai Composite Index ) are firmly below their 50 and 200 DMA`s
  • US Dollar is above its 200 DMA vs all other currencies and so is the Dollar Index
  • Most Commodities are below their 200 DMA `s. Gold is just barely 4% above its 200 DMA.
I still believe the downtrend in most assets will continue to worsen and expect US Dollar to continue its uptrend vs all other currencies. 
Shorts / Bears  should keep Euro countries closer - Germany Dax, France CAC, Spain,Italy - They should be watched closely for early signs of reversal of the downtrend.
But I find it very surprising that inspite of such clear signals from the market , one can still see many professionally manged funds post huge losses in past two months. It is criminal.
For details,please see the table below. ( Click to zoom). It also has comparison with the technicals 50 trading days ago.

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