Markets Trend Report 02/2020
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.
|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.
|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.
|Invesco DB Commodities Index (DBC)||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.
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.
|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.