Enjoy your weekend...
Friday, July 26, 2019
Sunday, July 14, 2019
Market Battle Fatigue: China Versus USA
* See UPDATES below...
There have been numerous reports of an economic slowdown (and even contraction in some sectors) in China, one of which describes those in detail at ZeroHedge. While some of China's difficulties may have been exacerbated by a fairly recent trade war with the U.S., it certainly didn't start them...other factors were already in play and bear responsibility for its inception, as explained therein.
There are a couple of gauges I'm monitoring that seem to measure the strength/weakness of both the United States' and China's economies, namely the Canadian Loonie and the Aussie Dollar, respectively.
Canada exports a great deal of commodities to the U.S., while Australia exports many to China. The strength/weakness of those exports is reflected in their respective currencies, and, hence, in the economies of the U.S. and China.
You can see from the long-term monthly forex chart below of CAD/UAD that the Loonie has, essentially, outperformed the Aussie Dollar since February 2012, albeit with several periods of sustained volatility peppering it along the way.
The monthly forex chart of CAD/USD shows that price has, once again, pierced above major resistance around the 0.76 level. Watch for that level to hold to, potentially, signal continued strength in the U.S. markets, versus China's weakness.
The monthly forex chart of AUD/USD shows that price is hovering just above major support at 0.70. If this level is broken with force and held, watch for continued China weakness.
The following daily forex chart of the Loonie versus the Aussie Dollar (CDW:XAD) shows that price briefly broke above major resistance at 1.100 several days ago, hinting of further weakness ahead for China.
Watch for price to possibly retest this level, and if it breaks above and holds, I'd like to see the RSI tick up again and both the MACD and PMO indicators reverse back to the upside in support of further strength in the Canadian Loonie...potentially, signalling further weakness ahead for China.
The following Year-to-date percentages gained/lost graph of the major world currencies illustrates the difference between the Loonie and Aussie Dollar. There's quite a gap between the two in terms of Loonie gains and Aussie Dollar losses, so far, this year.
The following one-week percentages gained/lost graph shows a slight uptick of the Aussie Dollar over the Loonie this past week...one to keep a close eye on over the coming days/weeks, along with the above-mentioned charts and price levels, as potential gauges in determining the strength/weakness of China's economic health.
In addition, the following two monthly charts give a long-term bird's eye view of the S&P 500 Index (SPX) and China's Shanghai Index (SSEC).
China's weakness since mid-2015 is striking, compared with the strength of the U.S. market. I don't think that can be entirely attributed to the current trade war, which is relatively recent, and I think that more weakness may lie ahead.
Finally, I'd just point out that the following SPX:SSEC daily ratio chart shows that the SPX is poised to continue outperforming the SSEC, with minor short-term resistance some distance above at 1.10...another gauge to throw into the mix of, purely technical, analysis of the United States' and China's economic and market health.
* UPDATE July 20...
* UPDATE July 26...
WSJ article: "China is not, as some believe, a “trivial state” that seeks nothing more than to preserve its regime and defend its territory."
* UPDATE August 1...
President Trump sent out a series of tweets this morning regarding the addition of a further 10% tariff on the remaining $300 Billion on Chinese goods...
In response, China opened down in overnight trading...
Here's a screenshot of the World Stock Market Heat Map taken at 10:50 PM ET...
A drop and hold below, firstly, 2850, then 2800 on the Shanghai Index (SSEC) could send this index plummeting to major support at 2500, or lower, as shown on the following weekly chart.
The S&P 500 Index (SPX) closed down today just above near-term support of 2950, as shown on the following weekly chart. A drop and hold below that level could send it down to 2600, 2400, or even lower, as I've described in recent posts.
* UPDATE August 5...
Historian, Niall Ferguson, discusses the present dangers posed by Russia and China with Fox News TV host, Mark Levin, on August 4 in the following informative and important video...
The following screenshot of CNBC's world markets heat map, taken at 2:30 pm ET, shows US markets down more than 3% today following the overnight 1.62% drop of the Shanghai Index. No doubt, we'll see further weakness in China's markets tonight, as the trade war between the two countries has escalated considerably over the past several days.
How US major indices closed today...
The article referenced in the following Zero Hedge tweet is critical to note...
* UPDATE August 24...
This speaks for itself...
* UPDATE September 5...
Just what China doesn't need...
There have been numerous reports of an economic slowdown (and even contraction in some sectors) in China, one of which describes those in detail at ZeroHedge. While some of China's difficulties may have been exacerbated by a fairly recent trade war with the U.S., it certainly didn't start them...other factors were already in play and bear responsibility for its inception, as explained therein.
There are a couple of gauges I'm monitoring that seem to measure the strength/weakness of both the United States' and China's economies, namely the Canadian Loonie and the Aussie Dollar, respectively.
Canada exports a great deal of commodities to the U.S., while Australia exports many to China. The strength/weakness of those exports is reflected in their respective currencies, and, hence, in the economies of the U.S. and China.
You can see from the long-term monthly forex chart below of CAD/UAD that the Loonie has, essentially, outperformed the Aussie Dollar since February 2012, albeit with several periods of sustained volatility peppering it along the way.
The monthly forex chart of AUD/USD shows that price is hovering just above major support at 0.70. If this level is broken with force and held, watch for continued China weakness.
The following daily forex chart of the Loonie versus the Aussie Dollar (CDW:XAD) shows that price briefly broke above major resistance at 1.100 several days ago, hinting of further weakness ahead for China.
Watch for price to possibly retest this level, and if it breaks above and holds, I'd like to see the RSI tick up again and both the MACD and PMO indicators reverse back to the upside in support of further strength in the Canadian Loonie...potentially, signalling further weakness ahead for China.
The following Year-to-date percentages gained/lost graph of the major world currencies illustrates the difference between the Loonie and Aussie Dollar. There's quite a gap between the two in terms of Loonie gains and Aussie Dollar losses, so far, this year.
The following one-week percentages gained/lost graph shows a slight uptick of the Aussie Dollar over the Loonie this past week...one to keep a close eye on over the coming days/weeks, along with the above-mentioned charts and price levels, as potential gauges in determining the strength/weakness of China's economic health.
In addition, the following two monthly charts give a long-term bird's eye view of the S&P 500 Index (SPX) and China's Shanghai Index (SSEC).
China's weakness since mid-2015 is striking, compared with the strength of the U.S. market. I don't think that can be entirely attributed to the current trade war, which is relatively recent, and I think that more weakness may lie ahead.
Finally, I'd just point out that the following SPX:SSEC daily ratio chart shows that the SPX is poised to continue outperforming the SSEC, with minor short-term resistance some distance above at 1.10...another gauge to throw into the mix of, purely technical, analysis of the United States' and China's economic and market health.
* UPDATE July 20...
 |
| Source: ZeroHedge.com |
 |
| Source: Bloomberg.com |
* UPDATE July 26...
WSJ article: "China is not, as some believe, a “trivial state” that seeks nothing more than to preserve its regime and defend its territory."
 |
| Source: WSJ.com |
* UPDATE August 1...
President Trump sent out a series of tweets this morning regarding the addition of a further 10% tariff on the remaining $300 Billion on Chinese goods...
In response, China opened down in overnight trading...
 |
| Source: Bloomberg.com |
Here's a screenshot of the World Stock Market Heat Map taken at 10:50 PM ET...
A drop and hold below, firstly, 2850, then 2800 on the Shanghai Index (SSEC) could send this index plummeting to major support at 2500, or lower, as shown on the following weekly chart.
The S&P 500 Index (SPX) closed down today just above near-term support of 2950, as shown on the following weekly chart. A drop and hold below that level could send it down to 2600, 2400, or even lower, as I've described in recent posts.
* UPDATE August 5...
Historian, Niall Ferguson, discusses the present dangers posed by Russia and China with Fox News TV host, Mark Levin, on August 4 in the following informative and important video...
The following screenshot of CNBC's world markets heat map, taken at 2:30 pm ET, shows US markets down more than 3% today following the overnight 1.62% drop of the Shanghai Index. No doubt, we'll see further weakness in China's markets tonight, as the trade war between the two countries has escalated considerably over the past several days.
How US major indices closed today...
The article referenced in the following Zero Hedge tweet is critical to note...
"Following the plunge in the yuan overnight, the U.S. Treasury Department on Monday designated China as currency manipulator, a historic move that no White House had exercised since the Clinton administration."
 |
| Source: ZeroHedge.com |
* UPDATE August 24...
This speaks for itself...
* UPDATE September 5...
Just what China doesn't need...
 |
| Source: Reuters.com |
Saturday, July 13, 2019
SPX: Trade With Caution
Purely from a technical point of view, its ascent is beginning to look a bit like the parabolic move that Bitcoin (BTC/USD) began to make in early 2017 and peaked by the end of that year (weekly chart below).
Granted, the SPX is quite a different market instrument than Bitcoin and is much more stable, but I simply thought I'd show a comparison of these two charts, on a purely technical basis, for your information. What you do with that is up to you.
One thing I would point out is that the Momentum indicator (MOM) on the SPX is not corroborating the series of new swing highs that price has made since the beginning of 2018. That's in line with what I reported in my post of June 29, wherein I described what market gauges I'd be monitoring as price, potentially, approaches 3047. My observations and conclusions remain unchanged.
Bottom line...trade with caution in the coming days/weeks.
Tuesday, July 02, 2019
President Trump's Rose-Coloured Glasses Are Back On
It looks like President Trump has chosen to dust off his rose-coloured glasses and put them back on regarding his stance on North Korea and, in particular, its leader, Kim Jong Un.Take a look at what the President tweeted about his impression of Kim's appearance and health when they met at the Korean DMZ on June 30 and contrast that with what Fox News Anchor, Tucker Carlson, reported in the following video.
Assuming Tucker Carlson's version is accurate wherein he describes Chairman Kim's ill-health (unlike the President, he has nothing to gain by lying about it), I would imagine that Kim depends greatly on his military leaders for support in order to remain in power...for health reasons, safety and security reasons, economic reasons, political reasons, and in order to maximize his priorities of securing North Korea's power as a nuclear powerhouse.
Without that important and immense military support system in place, and as long as they remain loyal to Kim, I believe his future would be very fragile and precarious because of his poor health. For that reason, I cannot foresee an agreement ever being reached between Kim Jong Un and President Trump to completely and verifiably denuclearize, because Trump is not just dealing with Kim, he is also dealing with all of Kim's military leaders/advisers...who are, essentially, propping him up, for the time-being. To create prosperity for the citizens of North Korea would undermine their absolute power over them -- and over Kim -- and would take away their nuclear power and leverage over the rest of the world.
If Kim were of robust health, I'd have a different opinion in this regard...he'd have absolute autonomy to make such a deal with the U.S. However, with so many hard-line military players involved (who are necessary for Kim's survival), the deck is stacked against such a deal ever being struck, with Kim Jong Un at the helm.
So, President Trump is only biding his time with Chairman Kim, using flattery as an interim appeasement tool -- sprinkled with another summit or two and more photo ops, that Kim can use to prop up his image with the North Koreans and the rest of the world -- until such time as he is no longer the U.S. President...and, no doubt, those rose glasses will stay firmly on until then.
In the meantime, I hope the President will not back-track on his maximum pressure campaign against North Korea and will, instead, begin to enforce the rules of that campaign on those countries that are, reportedly, breaking the sanctions that they originally supported at the U.N. (e.g., Russia and China, etc.).
* UPDATE July 26...
It looks like international sanctions against North Korea are working...If Chairman Kim wants to save his people from starvation, he will have to make major concessions soon, especially when it also begins to impact his military personnel...
 |
| Source: CTVNews.ca |