Update Mexican Peso : From Oversold To Overbought in 1 month time.

 

Hereafter an update of chart posted on January 23rd   : “Mexico … Time to buy ! ”  :   Link here  .

9 % gain for MXN since January 23rd . Investors who played this move via a pure Forex/leveraged trade could take partial profit from here and approaching the 19 support level. Investors who traded MXN via a short term 1 year bond purchase should hold. Those who did not act should wait an upward correction to 20,25 to 20,50 as  a good entry point.

 

 

 

 

Indian stocks testing resistances – Nifty 50 @ 8996

 

Growth concerns that followed demonitization announced last november have receded and Indian stocks advance since mid december bottom amounts to around 14%. The market here represented by the Nifty 50 Index is testing the 9000 level for the 3rd time in 3 years . It never closed above this key level so far. Indian stocks might need a pause (divergences do appear on momentum / price) after a 32% up move since march 2016. Investors should remain long term bullish on this very high potential market . Two potential entry points at this stage : 1/ On a firm confirmed (more than 1 or 2 days) break of 9000 level – not my preferred scenario for the time being given the general overbought sutuation in global markets  2/ after a consolidation/down reaction – i will keep you updated on the timing should scenario under 1/ not happen before.

3 funds amongst the best performers (*) in the last 3 years :

  • Comgest Growth India $ Acc – IE00B03DF997 –         3Y : 112,2%  – 2016 :  8,1%
  • Jupiter India Select $               – LU0365089902 –        3Y : 102,2% – 2016 :  4,3%
  • Morgan Stanley India Eq $      – LU0266115632 –         3Y : 88,60% – 2016 :  5,8%

(*) Performance as of 31/12/16 – In EUR terms –

 

Nifty 50 Indian Index

Indian Rupee vs USD

Rupee successfully tested 69-70 previous bottom (top for USD) versus USD and started to reverse days after major event that represented demonetisation in India . Indian Rupee may have found a major bottom against USD (Watch 70 not being crossed) after several years of weakness.

 

Updates : Gold , US Markets .

 

Gold : I refer to the post dated february 17th – Link here –

The USD 1246 level mentionned therein was crossed – Gold Chart  – and the way is open for the discussed chart pattern to repeat i.e. a violent move to the upside with first targets in the USD 1300-1340 and thereafter a test of 2016 highs around USd 1375  . A move below USD 1220 support would switch my stance to neutral .

Gold Mines stocks –  GDX Chart   Barrick Gold Chart    –  are in consolidation mode after respectively 40 to 50% gain in the last 2 months and so for time being are divergfing from yellow metal move . Good entry levels should current reaction continue are at 22,50-23 for GDX (current 24,13) & USD 18,50-19 for Barrick (current 19,54). 

 

US Equity markets :

New all time highs  on SP500 and Dow Jones last friday . The Dow Jones (20821) closed higher for 11 consecutive days which is the longest streak in 30 years. Bullish sentiment is at very high levels (Daily sentiment index shows 91% stock bulls) and drives the move in the last few days. Psychology is the market driver , nothing else , no specific news . The last part of this rally is very selective as it was accompanied by a negative NYSE advance/decline ratio i.e. more stocks that closed down than up.. market “internals” are weak . See also another warning signal in last week Bloomberg piece (Link below) : Based on Novus Partners analysis , hedge funds liquidity is at all time low and such low liquidity level tended to precede markets selloffs in the past. The “Over-crowded” Trump trades as financials and cyclicals will be the most hurted in the inevitable correction to come. A 5 to 10 % correction looks likely in the near future and will be the base for a rally continuation into the summer.

https://www.bloombergquint.com/markets/2017/02/21/hedge-fund-liquidity-falls-to-danger-zone-in-u-s-stock-market

 

 

 

 

 

 

Virtual Portfolio Update – February 17th 2017 – Portfolio +14,59% – YTD + 0,61%

 

 

The US markets continued their march (much) higher since our last updates so that both SP500 and Nasdaq 100 broke their resistance levels discussed on January 17th and 19th posts . SP500 (See 1st chart below) surpassed the 2275 point which acted as support thereafter and early february the 2320 was also broken which as expected “..move above 2320 would be very bullish.” accelerated the move to above 2350. The US markets are overbought and could even become more overbought with this very strong trend in place. A correction will come but nobody dares to call an end for the current move and knows what will be the trigger for it. Action on Nasdaq 100 (See second chart below) was even more spectacular with a 5%+ up move after crossing levels mentionned in January 17h post. Technologies are deeply overbought on a daily basis but the RSI on weekly chart testifies of another 2 to 4 %  upside potential is not excluded . I would definitely not chase this segment of the market at this stage but keep our current 15% IT exposure in our strategic (Long term) exposure . This is matching the proportion of IT stocks in the FTSE All World index. Our portfolios strategic allocation is overweighted in Healthcare (16% vs 10%), Materials (15% vs 7%) and Industrials (15% vs 10%) and underweighted in Financials and Consumer Staples.

Virt. Portfolio :  The two 1% of portfolio hedges taken on SP500 and NDX 100 expired worthless as their strike levels were surpassed … this is how this kind of put “insurance” works : if the underlying asset (here SP500 and Nasdaq ) continues higher from the time one takes the position , one profits from underlying positions positive move and loses from position itself . If underlying asset loses in value , result can be 2 , 5 or 10, .. times the committed amount depending of market move size and leverage of position taken .

My Balanced allocation model portfolio (50% Max Equities) is up 1,95% YTD : Equities (out of hedges) contributes positively to performance by 2,55%, bonds by 0,33% and hedges negatively by around 0,90%.

 

 

 

 

Gold (USD 1240/oz) update

 

Market patterns repeat themselves over-and-over in the same way history tends to repeat itself . Why so ? Markets are influenced by investor supply and demand for an asset, by investors fear and greed and so by human behaviour.  Does human behaviour not repeat itself too over-and-over? QED

I show you here below an interesting pattern developping in Gold price that mirrors action early 2016 (see the 2 red ellipses) :    1/ Bottom followed by a crossing of the descending 50 days MA     2/ Reaction down to retest the stabilizing 50 days MA    3/ Another move up (recently to USd 1246) followed by a short move down (Recently below 1220)  4/ Move up again : in January last year this move after crossing the 1130+/- previous interim high triggered a 15% gain in a very short period to 1264 and even more thereafter . For now let ‘s keep a close watch to USD 1246 previous interim high and see if same kind of price action would follow should this level be overtaken … I suspect YES.

 

 

 

 

Silver (USD 17.70 /oz) breaking higher above 17-17.50 zone.

 

Silver Long term chart shows price evolution in 3 phases since 2007-2008 crisis : 1/ A bottom at USD 8.40 in 2008 followed by a bull move into USd 30 end 2010 .The 6 months ensuing nearly doubling to USD 50 was clearly a market exaggeration even tough nobody could say at that time where the move would stop ( follow the trend was just fine .. see benefit of MACD during strong trends) 2/ A 5 years bear market from 2011 till early 2016 with a double bottom around USD 14 in 2015 as the base for the next move.. 3/ a developping up trend since 1 year with an initial and quick 50% gain followed by 6 months down reaction .

Silver shorter 2 years chart shows that the last 6 months down move seem to have been stopped by the crosssing of USD 17-17.50 area ( see purple downtrend channel ). A bullish MACD signal apperaed last week on the weekly chart.

How to trade Silver from here : Definitely long but with caution as technically we do not want to see price below the USD 17 barrier again . The mid long term picture would even improve above USD 18 where the 200 days AND weeks line lies red lines on both charts ) .

The 1 to 1 proxy investment for Silver spot is the  ishares Silver (SLV) quoted on the NY Exchange . Companies like Hecla Mining (HL), Pan American Silver (PAAS) , First Majestic Silver (AG) are stocks that one can trade to “play” the Metal and benefit/ suffer big leverage effect. Silver Wheaton (SLW) as a streaming company is less volatile if i dare say so with for example  a 50% down move between August and december and + 40% since december. I will publish some other charts in the next days.

Little warning : The investor betting on Silver and silver mines must be ready to exit quickly if a reversal is confirmed even at a small loss .

 

Silver Long Term Chart

Silver 2 years Chart

Dax Update : 11400 Support and stocks to be considered if market bounces.

 

December 7th and  December 12th posts quoted  (Red arrow 1) : ” Upside is open as said before with first targets at 11400 & 11800 with maximum retracements allowed to 10800-10900.

The last 2 weeks of 2016 saw  first target of 11400 reached (Red arrow 2) and 11800 target in the last week of January (Red arrow 3). After a 17% up move since november , Dax is in a normal consolidation process and prices should be supported at previous 11400 resistance area . The ascending 50 days moving average blue line should help to support prices around the same zone.

Beware a daily close below 11400 as this could bring Dax down where the current move started back in December i.e. 10800 . A weekly close below 11400 would put more weight on the bearish side.

 

 

Should 11400 support holds and markets reverses (Watch MACD daily for confirmation) , the stocks having the best chances to outperform would be the “Trump beaten stocks ” (mainly the german car makers – amongst the worst performers YTD), the High BETA , the HIGH dividend and  the low PE stocks .

The 2 stocks complying with the 4 criteria are BMW and Daimler . I like the cyclical Thyssen Krupp that will likely overperforms if market picks up and EON ( High Div) in catch up mode since a few weeks after several years of misfortune.

 

Dax High Dividend Stocks

 

Dax High Beta Stocks

 

Dax Low PE Stocks

Virtual Portfolio Update – January 31th 2017 – Portfolio + 14,87% – YTD + 0,85%

 

Portfolio is up 0,85% for January vs 0,14% for our SP500/Eurostoxx50 average benchmarks.

Best performers YTD are Emerging Markets, Turkey (+ 10,52% !!but  in TRY) , Brazil (+7,38%) , India and Hong Kong (+6%).  Matured markets performances were softer : SP500 (+1,79%) , Dow Jones (+0,51%) , Nikkei is down 0,39%, Dax up 0,48% and Eurostoxx50 down 1,50%.

From now on I will publish this update on 15th and at end of each month and like in the past any transaction at the time of placing the order. 

Readers of this blog who would desire to have an insight of my STRATEGIC allocation  can contact me any time via email or telephone . The Balanced allocation (50% Max equities) has yielded +1,80% YTD (USD based)