Global Trend Report 01/2020

New month, new year, new decade. In this short, technical trend analysis, we take a look at various asset classes and their trends at the beginning of 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

In a trend following strategy – which might be useful for achieving buy and hold-like returns with lower volatility – you would want to buy, sell or sell short upon trend changes. Also, trend changes can be used for re-balancing existing investment portfolios in order to maximize risk-adjusted returns. 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

Basically all major stock markets are in long-term uptrends. Developed markets like the US and Europe are far above their 40 week/200 day moving averages. Recent trend buy signals according to the definition above were generated on the Shanghai Composite and Hong Kong indexes.

markettrendtiming
S&P 500 – SPXuphold
Nasdaq100 – NDXuphold
Russell 2000 – RUTuphold
Germany – DAXuphold
UK – FTSE100uphold
Europe – Eurostoxx50 – ESTX50uphold
Japan – Nikkeiuphold
China – Shanghai Compositeupbuy
HK – Hang Sengupbuy

Stock market to watch: Hong Kong

The Hang Seng Index started a new 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, let’s see if 2020 allows for a new longer-term uptrend.

Hang Seng Index - January 7, 2020. A trend buy signal was generated on Dec 23, 2019.
Hang Seng Index – January 7, 2020

For a recent fundamental analysis on Global stock markets and their valuations, please check out the Global Value Portfolio for 2020.

Global bond markets

Global fixed income markets are mostly in existing uptrends as well but there are some markets which are quite close to their 40 week moving averages, so there could be some sell signals not too far ahead.

markettrend timing
US 10 year GOVT bonds (IEF)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: EDV

EDV tracks and holds long-term US government bonds with a duration from 20 to 30 years. The 40 week uptrend was tested recently for the first time since February 2019 – so far the uptrend remains intact.

EDV Vanguard World Fund Extended Duration ETF - January 7, 2020. Price touched its 40 week average recently.
EDV weekly chart – January 7, 2020.

Commodities & Metals

market trend timing
Invesco DB Commodities Index (DBC)uphold
Crude OILuphold
GOLDuphold
SILVERuphold
COPPERuphold

Metal to watch: Copper

Copper initiated a new uptrend in December 2019 accompanied by a trend buy signal. Price also broke above its downtrendline from 2018 which should act as first line of support, the 40 week moving average is the second defense right below.

Copper weekly chart - January 7, 2020. New uptrend in Copper started in December 2019.
Copper weekly chart – January 7, 2020.

Forex & Crypto Markets

The US-Dollar (USD) showed remarkable relative strength throughout 2019. At least in the short term there is some weakness in USD heading into 2020 as major currencies like the British Pound, the Canadian and the Australian Dollar and the Euro, are all on new or recent uptrends against the Dollar.

market trend timing
EURUSDuphold
GBPUSDuphold
USDCADdownhold
AUDUSDuphold
BTCUSDdownhold
ETHUSDdownhold
XRPUSDdownhold

Currency pairs to watch: EURUSD and AUDUSD

EURUSD is on the verge of breaking its longer-term downtrend, which has been active since April 2018. A weekly close above 1.1150 on January 10 would very likely generate a new trend buy signal (EMA 4 > SMA 40).

EURUSD weekly chart with potential buy signal - January 7, 2020
EURUSD weekly chart – Jan 7, 2020.

The Australian Dollar broke above its 40 week average at the end of December 2019 with price heading back down again. EMA 4 and SMA 40 are basically at the same level. Price would have to close above 0.69 this week for a confirmed buy signal.

Australian Dollar/US-Dollar weekly chart - January 7, 2020.
AUDUSD weekly chart – January 7, 2020.

Real Estate (REITs)

European REITs are in a very strong uptrend with price far above the 40 week moving average. Some reversion to the mean could be expected from this level.

market trend action
US – VNQuphold
Europe – XDERuphold

REIT to watch: VNQ

VNQ has been in a strong uptrend for about a year and has recently tested the 40 week moving average for the first time. A new downtrend and a potential trend sell signal are not far away and could be triggered upon a weekly close below 90.

VNQ Vanguard Index Funds Real Estate - weekly chart, January 7, 2020.
VNQ weekly chart – January 7, 2020.

no responses for Global Trend Report 01/2020

    Leave a Reply

    Your email address will not be published. Required fields are marked *