State of the markets – mid-February
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.
|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.
|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.
|Invesco DB Commodities Index (DBC)||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.
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.
|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.