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How Watching Market Psychology Can Help You Time the Market

Elliott wave patterns in price charts reflect the struggle between the bulls and bears
By Elliott Wave International

 

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend. The market chose one report over the other, and the question is, why — and what can we learn from that? Read more.

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Investment Markets Overview — 21st November 2014

No sooner was the ink dry on last weekend’s G20 meeting “communiqué,” citing 1000 collective initiatives to boost global growth by 2%, or $US2 Trillion by 2018, than Japan announced a tip back into recession, defined as two quarters of negative GDP, on which we comment more on below. As for the G20 meeting, held in Brisbane Australasia, the G-20 host Nation had made boosting growth, jobs and infrastructure spending a focus of its presidency. Unfortunately, it was overshadowed by three of the G4 big-boys, the US, the UK and Europe, who preferred to badger Russia’s President, Vladimir Putin, over the ongoing crisis in Ukraine, as if it’s been nothing to do with them. Aside of the ongoing expansionary push by the EU to “acquire” former soviet satellites, including Ukraine, one might recall the proposed missile defence system, announced by George W Bush but subsequently overturned by Obama, which sought to park ten missiles on the Russian border with Poland, whilst strengthening military partnerships with countries in eastern Europe. This would be akin to Russia placing military hardware along the border between the US and say Mexico, whilst cultivating relationships with countries such as Cuba and not expecting a response from the US. There was of course, called “the bay of pigs,” a failed military invasion of Cuba, undertaken by a CIA-sponsored paramilitary group in April 1961.Launched from Guatemala, the invading force was defeated within three days by the Cuban armed forces, under the direct command of Prime Minister Fidel Castro, which subsequently strengthened the position of Castro’s administration. Fast forward to today and ironically, Putin’s popularity within Russia is soaring, whilst the economic sanctions appear to be harming the EU as much, if not more, than Russia.

21 Nov 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Returning to the G-20 plans to boost global growth, particularly via a perceived increase in infrastructure spend …….

Charts:
1.Indices Weekly
2.US Builder Sentiment V  US Existing Home Sales
3.UK House Prices  V UK House Asking Prices
4.Japan GDP V Japan Private Consumption
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

The Biggest Bubble Is in Government and Central Banks

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

Japanese Jolt

The financial newswires have been buzzing all week, after the “shock” news that the land of the rising sun has turned somewhat cloudier, tipping back into recession once more and panicking Japan’s Prime Minister, Shinzo Abe, into calling a snap-election whilst delaying the planned sales-tax hike.

Whilst for the many it may have been a shock, our early September 2014 piece, entitled “Ailing-Nomics,” observed that “consumption, the engine of Japan’s GDP, is unlikely to increase any time soon, due to the fall in real wage’s and the ¥1,000,000,000,000,000 of public debt, which needs to be serviced as the printing press is ratcheted-up yet another gear, not to mention the plans for a further hike in the sales tax.”

 Patently consumption hasn’t increased, nor has economic growth.

 A few more observations may be in order, starting with the correlation between Japan’s most closely watched stock-index, the Nikkei Dow 225, the bell-whether of Japan’s collective social mood, and retail sales, in this case being nationwide department and large supermarket store sales, as its history goes back further.

19 Nov 14 Blog 1

As can be seen, the collective social mood turned higher in 2009, a full 3-years before Abe was elected and, as stocks moved higher, so did consumption. Of late, the Nikkei’s momentum has waned, as have sales.

Also mentioned within the early September blog, was the fact that a country’s main stock-index is also a leading indicator of the economy, not vice-versa as so many are taught and believe. This can be observed within the second chart, albeit that the Bloomberg GDP data only goes back to 1994, whereas the Nikkei data is shown to include it’s quarterly peak level of 38,957 from way back in December 1989.

Kindly note that the Nikkei is still 56% below that peak of 25 years ago, despite a rafter of stimulus measures, including roads to nowhere, airports with no planes, not to mention QE, which today’s batch of Central Bankers state is new and untested.

19 Nov 14 Blog 2

Will Abe be re-elected? Who knows? … When will taxes increase? Who knows?

 What we do know, however, is what’s in the charts and that the charts are saying the Nikkei needs a very close watch, as do the charts of the Yen and the Gold price, as set out in the recent “Gold Watch comment.”

19 Nov 14 Blog 3

A final look at the Nikkei includes a horizontal resistance dashed-line, which we would prefer to see penetrated before getting too excited about any further upside for both stocks and the economy. Of perhaps more concern is a proprietary indicator that we use, which historically has been of great use.

It is currently suggesting a larger jolt to come.

 

Investment Markets Overview — 14th November 2014

There were more divisions within Euro-land this week, one political and one financial, albeit that the two are married. First up is Catalonia, which is home to 7.4 million people in the northeast corner of the Iberian Peninsula and has the largest economy of Spain’s 17 autonomous regions, with a GDP 17% above the European Union average and Catalonia-based companies representing about 12% of Spain’s main stock index, so its an important region. Like Scotland and many other regions within Europe, Catalonia has been itching for a vote on devolution but has been denied thus far by the Spanish political establishment, with Spain’s Prime Minister, Mariano Rajoy, marshalling a ban from the Constitutional Court on any voting attempt. Rajoy has been outmanoeuvred however, as last week an alleged 2.3m Catalonians participated in the “non-binding survey,” thereby circumventing the courts, where they were able to answer two questions: a) Do you want Catalonia to become a State? If the answer is in the affirmative: b) Do you want this State to be independent? Of the 42% voter turn-out, 81% have supported the Yes-Yes option and is adding to the serious political crisis developing within Europe where even the Germans are becoming surprisingly sceptical of Brussels. As for the financial division of the week, Italian political activist and founder of the Five Star Movement, Beppe Grillo, has called for a referendum on Italy leaving the euro, with a bold statement saying,” we are not at war with Russia, but with the ECB.”

14 Nov 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

As divisions within Europe widen, China sees closer integration next week as   …….

…..

Charts:
1.Indices Weekly
2.US Consumer confidence V  the $US Index
3.E-Z Core CPI  V E-Z GDP
4.China Retail Sales V China PPI
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Big Is Not Necessarily Beautiful

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

Gold Watch

Retirement used to beckon at the age of 65 (for men) when, if you were a long-standing employee, aside of been shown the door and gradually forgotten, you received a gold watch, albeit that it would likely be a Timex as opposed to a Rolex!

Well, although it’s been just over a year since our last comment on Gold, entitled “Yellow Peril,” and, “Gold Guidance,” shortly before, it’s an asset class that we have certainly not forgotten about.

In both overviews we highlighted the likely-hood of further falls in price, together with warnings on not to follow the buying track-record of the Central Banks, excepting as a contrarian indicator, together with observations on Gold’s relationship with Japan’s Nikkei stock-index and the Japanese Yen.

Since then the $US Gold price has fallen by a further  $200, or about 15%,as can be seen below, with half of the loss transpiring over the past month or so, as the markets have anticipated the barmy antics by Japan’s policy-makers, in further trashing its currency in a futile effort to inflate away Japan’s massive debt burden.

12 Nov 14 Blog 1.

Gold-mining stocks have endured a far rougher period, as evidenced by the North American XAU index, which has collapsed by a massive 70% since $Gold’s 2011 high, half of which has transpired over the past year or so.

The chart above shows a lot of technical resistance to any rebound in price, including the 50-day and 200-day moving averages, plus the two dashed trend lines.

However, for both the physical price and for the XAU, we note the completion, or near completion, of 5-waves down, which in Elliott wave parlance suggests an expectation of a reasonable ABC bounce, with the likely targets being somewhere between $1400 and $1500 oz, based on Fibonacci retracement levels (not shown.) Furthermore, investor sentiment towards gold have become lop-sidededly bearish, just as they were lopsidedly bullish at the November 2011 high for the metal, plus the two momentum indicators shown below the main body of the chart, are oversold.

Moving on to the Nikkei and Yen correlation, an update shows that it still holds true, with the $Gold price inverted to better show the relationship.

12 Nov 14 Blog 2.

IF our projection is correct for $Gold, it also has consequences for the “born again bulls” of Japanese stocks, where the dashed blue horizontal line, at $1450 gold, suggests a possible 20% reality check for Japanese stocks and indeed the Yen.

Time will tell, of course, and it requires a close watch.

 

Investment Markets Overview — W/E 7th November 2014

Just as the people within the UK and the EU vented their frustrations with main-stream politicians earlier this year, the American people voted for change in this week’s mid-term elections, albeit that they currently have little choice other than the two main parties. Regardless, the Republicans roared back to win control of the Senate and thereby ensuring control of both chambers of Congress. The Democrats were punished for being tied to Obama, as exit polls showed a 54% disapproval of the President versus a 54% approval two years ago, with the same CNN poll showing that 65% of voters felt that national economic conditions were poor, despite the “official” lies statistics suggesting falling unemployment and a rebounding economy. With the most expensive mid-term in history now complete, the emboldened Republicans will likely press Obama on immigration and the controversial Obama-care, aka the Affordable Care Act, conveniently delayed until after the mid-terms and set to commence in January 2015. The polls show the approval rating of Congress at a lowly 7%, even worse than Obama’s 39%, so unless this bunch can get their collective act together, expect to see a rise in 3rd party independent candidates before the 2016 election.

7 Nov 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

We mentioned a while back about the growing divisions appearing within the “decision-makers” at the main Central Banks…….

…..

Charts:
1.Indices Weekly
2.US Trade deficit V US West Texas-Lite Oil Price
3.UK New Car Registrations / UK Retail Sales
4.Japan Vehicle Sales V Japan Monetary Base
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

Debt is often very divisive

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

Sale, Sale, Sell?…Revisited

In late May of this year we looked at UK retail sales, as the state’s “Office for National Statistics,” were quick to point out that the 7.7% annualised rate for April was the largest rise since April 2011, which chimed with policy-makers boasting at the time that UK economic growth was the fastest within the G7.

However, we re-stated a preference to study charts, as price doesn’t lie or try to guestimate, going on to observe a close correlation between retail sales and the UK’s FTA All Share Stock Index, reminding that the latter is perhaps the best barometer of whether there is growing optimism within the UK, confirmed by a rising index, a sideways move perhaps indicating a subtle change, or a negative social mood as evidenced by a falling stock-index.

5 Nov 14 Blog 1.

A closer look showed that the index peaked in late February 2014, since when both momentum and volume have trended lower, never a healthy sign, with a suggestion that the temporary rise in “Sales,” could be interpreted as a “Sell” signal for stocks, followed by a slowing UK economy, being as the stock-index is a lead indicator in respect of economic growth.

Fast forward to now and we can see the following:-

5 Nov 14 Blog 2.

Well, retail sales have fallen off the proverbial cliff in the five months since that April figure, whist the All-Share has fallen by a further 4% and the Q314 advance GDP reading for the UK, announced last week, came in at 0.7% versus the 0.9% seen in Q214, a 23% slow-down.

So, is the message, Sale, Sale, Sell, set to continue?

Again, let the charts do the talking, so here is the FTA All-Share, which includes one of our preferred indicators, Buy, Sell or Neutral.

5 Nov 14 Blog 3.

They say a picture tells a thousand stories, so perhaps it’s time to look at ours.

 

Investment Markets Overview – 31st October 2014

The BIG news of the week wasn’t so much the confirmation from the US Federal Reserve that it’s finished its third round of QE, important that it is. It was the Bank of Japan’s board who surprised the markets on Friday by ramping up Japan’s already aggressive monetary base to Yen 80 Trillion, or $US724BN, a hefty 33% increase on the existing Y60Tr. The 70-year old B of J Governor, Haruhiko Kuroda, led a divided board to expand what was already an unprecedented large stimulus program, boosting stocks, both domestically and around the globe, whilst devaluing the yen. Ironically, being as the idea is to stimulate inflation, typical inflation bell-whethers such Gold, Oil and commodities in general, also fell. The current plan, labelled Abernomics after Japan’s Prime Minister, Shinzo Abe, was launched 19 months ago under a 3-point scheme, dubbed the “three arrows” consisting of a massive fiscal stimulus, aggressive monetary easing via the Bank of Japan and structural reforms needed to improve competitiveness. Although economic activity initially picked-up, it soon slipped back due to the weight of Government debt in Japan, put at ¥1,000,000,000,000,000,plus the necessary sales-tax increase required to service it. Hence this additional stimulus.

31 Oct 14

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Whilst the Bank of Japan’s desperate move will see it buying $108BN of debt…….

…..

Charts:
1.Indices Weekly
2.US PCE Core V US CPI
3.UK Mortgage Lending / UK Mortgage Approvals
4.Japan Housing Starts V Japan Unemployment
5.Commodity 1 Week Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

It will be the markets who force the unwinding, not the Central Banks

Click Here to view Details of the full version of this Newsletter which includes full text and detailed Charts for each section

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