Published on February 15, 2020.

Time for a quick mid-month analysis of current market trends. As usual the trend assessment below is based on a simple, binary metric:

up trend = price > 40 week average (SMA 40)
down trend = price < SMA 40

The market timing status is characterized by another simple metric:

buy = recent 4-week-Exponential Moving Average (EMA 4) cross above SMA 40 (within the last 2 weeks)
sell = recent EMA 4 cross below SMA 40 (within the last 2 weeks)
hold = wait for next buy or sell signal

Global stock markets

Major stock markets closed the week at new All-Time-Highs on February 14, namely the S&P500, the Nasdaq100 and the DAX. It is noteworthy though that the broader market in the US shows relative weakness, with the Russell 2000 still below its August 2018 high. In Europe the FTSE100 in the UK is relatively weak, almost flirting with a break of its 40 week moving average.

market	trend	timing
S&P 500 – SPX	up	hold
Nasdaq100 – NDX	up	hold
Russell 2000 – RUT	up	hold
Germany – DAX	up	hold
UK – FTSE100	up	hold
Europe – Eurostoxx50 – ESTX50	up	hold
Japan – Nikkei	up	hold
China – Shanghai Composite	up	hold
HK – Hang Seng	up	hold

Stock market to watch: Hong Kong

The Hang Seng Index reversed its downtrend – there was no sell signal active so there is also no new buy signal. However, price is very close to its 40-week moving average, which is generally not the worst spot to initiate new positions (long or short) from a reward-to-risk-perspective.

Global bond markets

Global fixed income markets are in strong uptrends.

market	trend	timing
US 10 year GOVT bonds (IEF)	up	hold
US 20 year+ GOVT bonds (TLT)	up	hold
Vanguard Eurozone ETF (VETY)	up	hold
US Treasury bonds ETF (VUTY)	up	hold
BIV Vanguard Intermediate Term bonds ETF (BIV)	up	hold
Vanguard Emerging Markets bonds ETF (VDET)	up	hold
Vanguard Extended Duration bonds ETF (EDV)	up	hold
Vanguard Euro Corporate bonds (VECP)	up	hold
ishares Inflation Link Govt Bond (IBC1)	up	hold

Bond ETF to watch: VUTY

Vanguard VUTY US Treasury Bonds closed the week at new highs after a playbook-bounce from the 40 week-moving average – the trend is your reliable friend since April 2018 in this case.

Commodities & Metals

Commodities are still in downtrends except for Precious metals, which are in long-term uptrends.

market	trend	timing
Invesco DB Commodities Index (DBC)	down	hold
Crude OIL	down	hold
GOLD	up	hold
SILVER	up	hold
COPPER	down	hold

Metal to watch: Copper

Copper held at the 2.50 support for now and is bouncing back a bit. Another strong week or two would be required for a reversal of the trend.

Forex & Crypto Markets

The Euro is very weak and closed at new 3-year-low, also further weakness in AUD and CAD against the US-Dollar. The British Pound is holding up quite well against the strengthening Dollar so far. Bitcoin and Etherum trend is up with weekly buy signals triggered.

market	trend	timing
EURUSD	down	hold
GBPUSD	up	hold
USDCAD	up	buy
AUDUSD	down	hold
BTCUSD	up	buy
ETHUSD	up	buy
XRPUSD	up	hold (buy)

Currency pair to watch: USDCAD

USDCAD entered a new uptrend along with a weekly buy signal. The trend is still vulnerable, being close to the 40 week moving average.

Crypto asset to watch: XRP

XRPUSD is moving above its 40 week moving average for the first time since May 2019. A new trend buy signal (EMA 4 > SMA 40) has not been generated yet but we are very close to it.

Real Estate (REITs)

Both US REITs (VNQ) and European REITs broke out to new highs last week, almost going parabolic right now.

market	trend	action
US – VNQ	up	hold
Europe – XDER	up	hold

REIT to watch: XDER

XDER has been in a remarkably steep advance since September 2019, which accelerated last week.

Published on February 1, 2020.

The first month of 2020 is in and let’s see where global financial markets stand heading into February. In this short, technical trend analysis, we take a look at various asset classes and their trends at the beginning of February, 2020. The trend assessment below is based on a simple, binary metric:

up trend = price > 40 week average (SMA 40)
down trend = price < SMA 40

The market timing status below is characterized by another simple metric:

buy = recent 4-week-Exponential Moving Average (EMA 4) cross above SMA 40 (within the last 2 weeks)
sell = recent EMA 4 cross below SMA 40 (within the last 2 weeks)
hold = wait for next buy or sell signal

Global stock markets

Major stock markets are still in long-term uptrends. Developed markets like the US and Europe are far above their 40 week/200 day moving averages. Recent downtrends were registered on the UK FTSE100 and Hong Kong indexes. In Hong Kong the Christmas 2019 buy signal was invalidated (price below 40 week average) but no new weekly sell signal has been generated so far (4 week EMA still slightly above 40 week SMA). This might be the case on Feb 7, provided markets trade at or below current levels next week.

market	trend	timing
S&P 500 – SPX	up	hold
Nasdaq100 – NDX	up	hold
Russell 2000 – RUT	up	hold
Germany – DAX	up	hold
UK – FTSE100	down	hold
Europe – Eurostoxx50 – ESTX50	up	hold
Japan – Nikkei	up	hold
China – Shanghai Composite	up	hold
HK – Hang Seng	down	hold

Stock market to watch: Hong Kong

The Hang Seng Index started an uptrend in December with a new buy signal generated on Dec 23, 2019 (EMA 4 > SMA 200). The trend signals in 2019 were not sustainable and as it seems right now, 2020 starts out with more of the same.

Global bond markets

Global fixed income markets are in existing uptrends which have only strengthened at the end of January as markets shifted towards risk-off-mode.

market	trend	timing
US 10 year GOVT bonds (IEF)	up	hold
US 20 year+ GOVT bonds (TLT)	up	hold
Vanguard Eurozone ETF (VETY)	up	hold
US Treasury bonds ETF (VUTY)	up	hold
BIV Vanguard Intermediate Term bonds ETF (BIV)	up	hold
Vanguard Emerging Markets bonds ETF (VDET)	up	hold
Vanguard Extended Duration bonds ETF (EDV)	up	hold
Vanguard Euro Corporate bonds (VECP)	up	hold
ishares Inflation Link Govt Bond (IBC1)	up	hold

Bond ETF to watch: TLT

TLT tracks and holds long-term US government bonds with a duration of more than 20 years. After the successful test of the 40 week average the market continues its uptrend and is not far from new highs.

Commodities & Metals

Commodities got hit hard at the end of January and are trend-down except for Precious metals, which continue to hold up strongly.

market	trend	timing
Invesco DB Commodities Index (DBC)	down	sell
Crude OIL	down	sell
GOLD	up	hold
SILVER	up	hold
COPPER	down	sell

Metal to watch: Copper

Copper, commonly known as a leading global economic macro indicator (“Dr. Copper”), initiated a new uptrend and a trend buy signal in December 2019. Furthermore, the break of its downtrendline from 2018 acted as bullish confirmation. Well, the party was short lived. This is a good example that setups fail all the time and one should not get married to certain expectations. If you follow the trend, you may have to ride out some nasty whipsaws until a bigger trend takes off. So here we go with a continuation of the downtrend and a weekly sell signal by a tiny margin. Copper is now deep in the 2.45-2.60 support zone, which held up since late 2016.

Forex & Crypto Markets

The Euro is still weak though not far below its 40 week average. The Canadian and Australian Dollar sold off sharply along with commodities at the end of January. Bitcoin trend is up but the weekly buy signal has not triggered yet – though it is already very close.

market	trend	timing
EURUSD	down	hold
GBPUSD	up	hold
USDCAD	up	hold
AUDUSD	down	hold
BTCUSD	up	hold
ETHUSD	down	hold
XRPUSD	down	hold

Crypto asset to watch: Bitcoin

BTCUSD is on the verge of continuing its April 2019-uptrend. A weekly close above 9.000 on February 2 or in the week after, would very likely generate a new trend buy signal (EMA 4 > SMA 40).

Real Estate (REITs)

US REITs (VNQ) tested the 40 week moving average and continued the uptrend so far. European Real Estate has been extremely strong for quite a while too.

market	trend	action
US – VNQ	up	hold
Europe – XDER	up	hold

REIT to watch: XDER

XDER has been in a remarkably steep advance since September 2019, almost without a pause. A deeper correction seems overdue.

As Index Fund pioneer Jack Bogle and other professional investors have pointed out for decades and investment research has shown, low costs and fees are paramount in maximizing real investment returns long-term. Why are costs so important, especially for the long-term investor?

Why costs matter in investing

Let’s do a simple comparison of two exemplary investment portfolios to show the impact of costs in the long-term.

	Portfolio 1	Portfolio 2
Total Value	$500K	$500K
Total expense ratio	1.5% p.a.	0.1% p.a.
Annual expense amount:	$7,500	$500

The portfolios show expenses of $500 vs. $7,500 annually, that’s a whopping $7,000 difference every year. If that does not shock you right away, take that $7,000 over 30 years reinvested at 6% p.a. and you arrive at a difference of more than $550,000, which is the cost-based outperformance of Portfolio 2, assuming equal returns.

You would need exceptional, consistently higher returns in the high-cost investment in order to just offset the cost disadvantage – good luck with that. Research has shown that you simply cannot expect that, so you give away a fortune over a lifetime of investing as your portfolio grows in size! Just one simple investment rule – sticking to a low cost asset allocation – may save you thousands of Dollars per year, which you can invest instead.

How to keep costs low

In a diversified investment portfolio, or in other words, a global asset allocation, keeping costs low can be tricky, as the universe of investable financial instruments expands daily. To make matters worse, if you want to include Real Estate and Commodities in addition to Equities and bonds in your allocation, costs can increase significantly.

However, thanks to the emergence of low-cost Index Funds and ETFs, building an ultra-low-cost global investment portfolio is now more than doable for the average investor.

So let’s check out a few allocations. I will not discuss the weights of the various asset classes and the selected ETFs in detail. For the purpose of this article, we just focus on low costs and diversification among asset classes.

The portfolios below clearly represent a diversified allocation for a long-term, capital-building investors. For retired investors aiming for capital preservation and lower volatility, a lower Equities-weight may be suitable.

1. “The World’s lowest cost portfolio”

This portfolio was published by Matt Hougan on etf.com in 2017. At a total expense ratio of just 0.05% p.a. you are already close to zero costs with this allocation.

Asset Class	Weight	Fund	Ticker	TER
U.S. Equity	40%	iShares Core S&P Total U.S. Market ETF	ITOT	0.03%
Developed Markets Equity	30%	SPDR S&P World ex-US ETF	GWL	0.04%
Emerging Markets Equity	5%	SPDR Portfolio Emerging Markets ETF	SPEM	0.11%
Fixed Income	15%	Schwab U.S. Aggregate Bond	SCHZ	0.04%
REITs	5%	Schwab U.S. REIT ETF	SCHH	0.07%
Commodities	5%	GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF	COMB	0.25%
		Combined weighted fee		0.05%

Source: etf.com

2. Lower costs by getting paid for ETF holdings

This portfolio builds on the approach shown above and was published in a recent article by Ryan Kirlin on alphaarchitect.com. It includes a US Equities ETF that currently pays you 0.05% p.a. just to hold it. Though this may be temporary only, it also shows where fees could be headed. Why not negative fees in an age of negative interest rates?

Asset Class	Weight	Fund	Ticker	TER
U.S. Equity	40%	Salt Low truBeta US Market Fund	LSLT	-0.05%
Developed Markets Equity	30%	SPDR Portfolio Developed World ex-US ETF	SPDW	0.04%
Emerging Markets Equity	5%	SPDR Portfolio Emerging Markets ETF	SPEM	0.11%
Fixed Income	15%	Vanguard Total Bond market ETF	BND	0.04%
REITs	5%	Schwab U.S. REIT ETF	SCHH	0.07%
Commodities	5%	GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF	COMB	0.25%
		Combined weighted Fee		0.0195%

Source: alphaarchitect.com

This portfolio drives fees even further down – almost close to zero with a weighted fee of 0.0195% p.a.

3. An ultra-low-cost option for Europeans

The low-cost portfolios above are quite US- and US-Dollar-focused in all asset classes. Furthermore, not all of these ETFs may be accessible to retail investors in Europe. Especially in the bonds & REITs-section, a more global approach may be suitable, although it comes with slightly higher costs. The selection below should be tradeable for most European investors through the online broker of their choice:

Asset Class	Weight	Fund	TER
U.S. Equity	20%	Invesco S&P 500 UCITS ETF USD	0.05%
Developed Markets Equity	20%	SPDR MSCI World UCITS ETF USD	0.12%
European Equity	30%	Invesco EURO STOXX 50 ETF EUR	0.05%
Emerging Markets Equity	5%	iShares Core MSCI Emerging Markets IMI UCITS ETF USD	0.18%
Fixed Income	15%	SPDR Bloomberg Barclays Global Aggregate Bond EUR Hedged UCITS ETF	0.10%
REITs	5%	Think Global Real Estate UCITS ETF EUR	0.25%
Commodities	5%	ishares Diversified Commodity Swap UCITS ETF USD	0.19%
		Combined weighted fee	0.095%

At a combined total expense ratio of 0.095% this portfolio is considerably more expensive than portfolios 1 and 2 above, but it is still very low-cost and way cheaper than lots of the alternatives out there.

The good thing is, it will probably only get cheaper further down the road, with the zero-cost-ETF-portfolio not too far away anymore. Think of ETFs whatever you want (ETFs Pros & Cons may be a topic for another post), but at least the retail investor has a choice now, e.g. to invest in a globally diversified portfolio at below 0.1% fees p.a. Isn’t that great? – Compare that to the dark ages of the 20th century where as retail investor you may have had to pay up to 2.5% p.a. for your mutual fund selection, which very likely delivered nothing but underperformance for you and excess profits for Wall Street.

Disclaimer: Personal opinion, no investment advice.