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.

markettrendtiming
S&P 500 – SPXuphold
Nasdaq100 – NDXuphold
Russell 2000 – RUTuphold
Germany – DAXuphold
UK – FTSE100downhold
Europe – Eurostoxx50 – ESTX50uphold
Japan – Nikkeiuphold
China – Shanghai Compositeuphold
HK – Hang Sengdownhold

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.

Hang Seng Index below 40 week moving average again.
Hang Seng Index as of January 31, 2020.

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.

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

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.

TLT on the way to new highs after a successful retest of the 40 week moving average.
TLT weekly chart, January 31, 2020.

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)downsell
Crude OILdownsell
GOLDuphold
SILVERuphold
COPPERdownsell

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.

Copper sold off sharply in the last week of January 2020.
Copper weekly chart, January 31, 2020.

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
EURUSDdownhold
GBPUSDuphold
USDCADuphold
AUDUSDdownhold
BTCUSDuphold
ETHUSDdownhold
XRPUSDdownhold

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).

Bitcoin is back above its 200 day moving average for a bullish continuation of its advance since April 2019.
BTCUSD weekly chart – February 1, 2020.

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 – VNQuphold
Europe – XDERuphold

REIT to watch: XDER

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

XDER European Real Estate on the rally.
XDER weekly chart, January 31, 2020.

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