Trend Analysis – week 1, March 2020.
Published on March 8, 2020.
With fast moving markets, a quick update of current trends. Our trend model:
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
After the sell-off end of February, the markets saw a turbulent first week of March. Weekly sell signals are recorded on all major indices, except for the Nasdaq 100 and the Shangai Composite, which are still holding their uptrend above the 200 day moving average.
|S&P 500 – SPX||down||hold (sell)|
|Nasdaq100 – NDX||up||hold|
|Russell 2000 – RUT||down||sell|
|Germany – DAX||down||sell|
|UK – FTSE100||down||sell|
|Europe – Eurostoxx50 – ESTX50||down||sell|
|Japan – Nikkei||down||sell|
|China – Shanghai Composite||up||hold|
|HK – Hang Seng||down||sell|
Stock market to watch: S&P 500 – SPX
SPX bounced and retested its 40 week moving average. The weekly close below is bearish and a sell signal very close.
Global bond markets
Long-term US Treasury bonds are going parabolic now. As I have pointed out with REITs a few weeks ago, such moves are normally not sustainable and are followed at least by some mean reversion. Let’s see how bonds react when the stock market starts to calm down.
Euro corporate bonds are right at their 40 week moving averages, very close to a new downtrend.
|US 10 year GOVT bonds (IEF)||up||hold|
|ishares Investment Grade Corp Bond ETF (LQD)||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 (sell)|
|ishares Inflation Link Govt Bond (IBC1)||up||hold|
Bond ETF to watch: VECP
The Vanguard VECP EUR Corporate Bond ETF bounced and managed to close above its 40 week moving average again. However, watch out for a weekly sell signal if we see further weakness in the coming week.
Commodities & Metals
Commodities took a hit again last week, heading sharply lower. WTI Crude Oil closed the week at 41.50 USD, its lowest weekly close since August 2016. Silver managed to reverse and is holding above its 40 week moving average for now.
|Invesco DB Commodities Index (DBC)||down||hold|
Precious metal to watch: Silver
No weekly sell signal has been generated in Silver yet.
Forex & Crypto Markets
The Euro shot up above its 40 week moving average against the US-Dollar last week and is ripe for weekly buy signal. BTCUSD has recorded a weekly sell signal by a tiny margin.
Currency pair to watch: EURUSD
The Euro showed a strong move up last week and a weekly buy signal is highly likely in the coming week.
Crypto asset to watch: Bitcoin
BTCUSD has been hovering around its 40 week moving average for a while – first on a failed buy, now on a sell signal by a very tiny margin. So technically the downside seems more likely right now. However, with Bitcoins’ volatility this can go either way fast for a bigger move. Interesting position from a reward-to-risk perspective, whether you prefer the downside or the upside.
Real Estate (REITs)
Whereas US REITs (VNQ) bounced back from the lows a bit, European REITs are basically sitting at their lows from February 28, right above the 40 week moving average.
|US – VNQ||down||hold|
|Europe – XDER||up||hold|
REIT to watch: VNQ
VNQ bounced back from the lows last week and hasn’t recorded a weekly buy signal yet, but it is highly likely next week, if there is no significant price increase above the 40 week average.