Apologies for the delay in posting up Standard’s report. The SC team have become shorter term bearish it seems but medium and longer term remain committed to their long defensive equities, gold and oil position. If the recent weakness breaks the recent up trend they recommend using the weakness to add to positions. I would agree. A break of 1400 S&P would suggest a deeper correction in the short term for the SC team. The positive breakouts for Asia continue with SC pointing to the strong technical chart of the Hangseng. UBS sighted the Korean index.
The data over the weekend after this report was published from China was very positive re money supply as well as export growth.
Their economy looks likely to exceed the government’s own growth forecasts. On the negative side historic earnings look a little weak but these are historic so i wouldn’t get too concerned on these. Anyone who expected stellar earnings for the last quarters from Chinese cos must have been asleep at the wheel. Q2 and Q3, on a world wide basis, has been a disastrous period for the world economy but these are historic now and much policy action (money printing in the developed world and interest rate and bank reserve cuts in the emerging world) have occurred to prevent the weakness becoming an avalanche.
Technically the Shanghai does appear to have successfully based. We are at a key technical resistance on the Shanghai so last night was interesting to technical watchers.
http://www.stocktiming.com/Shanghai_Daily_Stock_Market_Updates/shanghai-index-update-friday.htm
The Shanghai shows a reversal daily hammer. (For candle stick price technical traders). A reversal bar at a key resistance is not enough to enter but its a positive at a time of bullish divergence across Shanghai technical indicators. To remind the Shanghai is an important index for commodity and cyclical themes. A breakout now would infer stepping up the allocation to these themes and would support the general ‘reflation’ trade. Personally I’d like to see policy announcements (from China and Spain) to cement the breakout for until we get these the cyclical reflation trade continues to look vulnerable.
Western indexes wise i don’t see any trends really broken yet. Ok, a few key levels have been stepped over by “inches” but this is stop hunting so far. Its an age old practice to take price over the level to clear out those late to trade to roll them over and book the profit. Note, many cyclical themes remain strong here with miners and manufacturers looking ok and well supported as are the various banking indexes even inc the euro banks – sxp7 index. Indeed the SXP7 appears pretty bullish which has a strong correlation to Spain going for the bailout. I would continue to watch the sxp7 as a key indicator of near term direction. For now given the above, it appears part of a cyclical rotation, thus far.
Precious metals, a little weakness here. 1740 gold a key, near term, support area. Seen as a retrace of the august up trend, zippo, in terms of fib retracement levels, etc. We are in a buy the dip area of the chart on gold. Nothing more to say, is my own view. The US$ remains in her downtrend with almost no buyers. A nice technical candle stick here on the day. I would continue to sell US$ vs commodity currencies or borrow and go long equities and precious metal themes.
On the macro front the frustration in Europe with Spain is really palpable. The door remains open to them on this bailout but next time they need Europe’s help may be a different story. Rajoy has certainly burnt any good will he enjoyed a month ago even from his allies in France and Italy.
Events wise we have yet another European summit. Last week it was the finance heads and this week (18th and 19th) its the European leaders turn to enjoy yet more EU funded “hospitality”. We live in hope that one day soon a policy decision on something will be made by Europe. Spain and Greece remain the focus as they have been for the last few years of meetings.
Here the report
All the best
Rich
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