From Mallorca with love...after summer there is FALL Sorry..

Life is great in this marvellous island, with its fabulous landscape, beautiful beaches, lovely restaurants, and joyful people ...Things are going well, don't they? Well it depends for who: For us, as tourists, clearly Yes, as there is no queue at the places we have been going every year, restaurants, attractions...; we managed to book summer camp & tennis camp for our son the day before...And when you talk to local people, you realise how bad things are... more than 50% drop in the number of customers...So my guess: 3Q is likely to be a cold shower...and indeces are telling that already: this nice summer and some blabla from Super Mario drove markets up: well down trends (Europe, Commodity index) & tops (US/Asia mkts) are intact, and the very low level of VIX index shows very highy complacency!... 
Top of downtrend/range + overbought index + over positive sentiment = the summer rebound is over...Prepare for Fall fall....

Eurostoxx Monthly: Downtrend intact, Sell signal

The index has rebounded and is testing 20month moving average. As long as it is below previous high, we are in downtrend. As it is overbought in monthly, weekly charts ( one months to 3 months view). The downtrend is intact , and we have a Sell signal now







Commodity Index: Downtrend  intact, Sell Signal

Similar charts as the Eurostoxx, downtrend intact, overbought, at resistance level, Sell Signal














VIX: Volatility Index: Super complacent market...

The index is a its low since 2008, and as you can see it does not stay at this level very long....















Happy end of holidays!

Normal Bear Market....

While the French elected a new "normal" President, and were taking all their "ponts" (for the non Grenouille among you, May is a month with loads of bank holidays), Markets refused to have a break and continued its course...C'est normal, it is a bear market....

Last month, I was expecting Europe indices to pause as they were oversold and on support, and US and Asia were to catch up...Well, both collapsed. Now the latters are  testing support and oversold, and Europe has broken support...Commodities index as well, and the US$ broke up... I dare to say again... we are to have a pause...


MSCI Asia Pacific ex Japan weekly chart: Collapsed and on support

The index fell directly to the Fibo retracement which happens to be also the lower band of the Bollinger Band, which corresponds to 2 standard deviation. 
Momentum is still down


Next strong support is 10% down, ie last year low...






S&P 500 weekly chart: Same as Asia, collapsed as well

S&P 500, as expected, collapsed and is at the level mentioned last month..1270's... It is oversold, with downward momentun, on support.
A pause is expected..Keep the short.. Sell on rebound.
The next big support is previous year low, around 200 points lower...The target for the next few months... For the short term the support is 50 points lower





CAC Index weekly chart: Broke support..Oversold
 
CAC, like the Eurostoxx 50 analysed last month, was testing the last strong support...Broke it easily...nothing before last year low.... 10% lower...














CRB (Commodities) Index : Three times were enough...


Last month, we noted that the CRB index was testing for the 3rd time the strong support... well broke and acceleration of the move...














Conclusion: Keep the short, sell more...
The question now is...where is the bottom?  or when to buy?
I use three criteria (in that order):
1) Technical Analysis!! c'est normal...(a new trendy word sorry)
2) Sentiment.. not mine...I mean in general
3) Fundamental analysis... Yes! though the least important for me...But it gives some useful insight for the long term view



OK so Bottom is when 1) market is oversold, at a support level (like 2009 low which is alos 2003 low), 2) sentiment is extremenly negative and it could be measured with the volatility index: the higher the more panic, and you can see from the chart below that we are not there yet.. Also when the press talks about the end of the World... more on sentiment in the next blogs and finally 3) when valuations are very low.. we had all three in Feb 2009... 


VIX index monthly: No panic yet.... far from previous peak...

Happy investing!

Most indeces, oversold, and testing support, are to take a breather...Sell on any rebound...

Phew! what a month! indeces fell and are now testing supports, be there Fibonacci retracement, moving averages or the lower Bollinger band. Some are oversold, but all are still with downward momentum...We may see a pause, or even a rebound...It is a classical trending market: Just keep the short, sell on strength.. US Indeces, which have been spared so far, are the next ones to collapse...

Eurostoxx Weekly chart: Testing -Fibo- Support

  The index is testing the 62% Fibo retracement, a strong support. It is oversold (stochastic), but there are still downward momentum both on 3-4 weeks and 3-4 months time frame...On  monthly chart, the index is on downtrend...

As a general rule, on a down market, a rebound, an overbought signal are - easy- sell signals. But it is hard to make money on rebound. 
On a flat market, sell on overbought stochastic, and buy on oversold stochastic...






MSCI Asia Pacific Ex Japan weekly chart:

The index is testing moving average, slight oversold, momentum is down, with a sell signal on the MACD indicator.
More downside than Eurostoxx...















S&P500 weekly: the move just started...Dragged down by Europe...

 S&P index has started to fall, testing moving average. It is not oversold, and also has a sell signal on the MACD.

Heading toward the 1270 level within the next 3-4 weeks














CRB index weekly: on support - Fibonacci:

 The commodities index, is testing the last strong Fibo support - for the third time....
 I hope that with all the charts I have been showing, you all start to believe in Fibnacci...The fanatic rationalist that I am had analysed thousands of charts, and these retracements are almost always there... I don't know why...

The CRB index is oversold, with downward momentum. As we are testing a strong support we are to see a rebound or a pause...














Conclusion: Keep the short on European Indeces; Asia Pacific ex Japan indeces and US are going to be dragged down by Europe... Short them...
Remember, on a downward trending market, overbought signal and/or rebound are Sell signal!


Happy investing


Jean

Just one word, SELL!

Should I take my loss or stay with my loosing position as market goes against me! Well, a couple of days after my last recommendation (to SELL), that was exactly the question I was asking myself as markets shot up!
A small voice in my head started to tell me I was wrong and to take my loss... 
Well, you must not let your emotions take over (dare I say like everything in life...), pick some indicators that are built differently and not too correlated, watch how they behave, know their weaknesses... I have 5-6 indicators I have been using for ages, and they are pretty reliable...Bollinger bands, Stochastics, MACD, Moving Averages, Parabolic, and Fibo retracement...They "told me" that the rally in mid March was not sustainable and that we are heading towards last year low in the next 3 months, ie 15-20% downside.... Then, though not clear yet, I think they will tell me that we will touch 2009 lows.... SELL SHORT....
If you care, I have no long position in any equity.. Cash and one big short in the French CAC40... 


Eurstoxx 50 Index weekly: reversed

The week after my sell, we had a one week shot up above a resistance, a "bull trap". Momentum is downwards, with index testing the 20w moving average.
It will continue its fall down to previous low, around 2000, in the next few months.


Keep your short...








Nikkei Monthly: reversed...

Index did not resist to the global reversal
same conclusion, Sell
















Volatility Index weekly chart:

The VIX index, measures volatility of options traded in the US, it is high when markets are falling , and low when market are in uptrend. Simply put, the more market are falling, the more nervous are the market players.. The arrow I draw shows positive divergence, a very reliable reversal signal... Here the VIX index is moving down, while the momentum index is going up. This signals a reversal to come... Volatility is about to reverse and increase...ie market is about to continue to fall....


Conclusion: SELL EQUITY MARKET, DON'T OWN  SHARES, the only index that looks bullish is the Nasdaq... I am happy to miss this rally . 
Even Sell short if you can...
Happy investing....

2012: The year of the Dragon...but for Market it is the year of the BEAR! Time to Sell NOW!!

Dear all, it's been a while! Hope you guys are all well...
Another year! 2012 is the Year of the Dragon, so a great year huh? Well, clearly not if you are a long only equity investor... As I wrote a while ago, the summer collapse marked the beginning of the Bear market.
On my last update in November, I was highlighting that we were to witness a couple of months of rally.. Well we had it! Now we have reached sell signal in Europe: Eurostoxx50, Cac are nice sell, even short for the aggressive punters among you...S&P500 is loosing steam, Russell 2000 still is in an upward momentum but close to sell levels. Same comment for Nikkei...Personally, if you care, I closed all the long I have in the European markets, and opened some shorts in Cac last week, I am still long Russell, and Nikkei...but very close to pull the trigger sell...

S&P500 weekly index: 

As expected in November, the index moved up to test the 1350 level and even overshot to 1370. The SP& is now overbought on both weekly and monthly charts, and unlike in November, teh momentum is not upward anymore, lossing some steam...If you are long, sell.

Eurostoxx50 Weekly:

The index rebounded as expected but did not test the 2650, there is no strength in Europe.

2500 level is a resistance (50% Fibo), and the momentum is not upward anymore. The index is overbought, and we have a reversal signalled. This on top of the weak rebound we had the last few months, gives more confidence to sell short now... 

So you got it : Sell.. Close your long, open short...

Conclusion: Sell Europe, even short... Sell SP&500, wait a bit for Russell 2000 and Nikkei...


and last,

Nasdaq100 quarterly chart:

The index have retraced 50% since the Tech bubble burst.
I am always amazed by the Fibonacci retracement points, in 2008, the index retraced up to the 38% level and started to fall, and now we are at the 50% level...So an upward break or not? well, not this year...It is interesting to note that on long term basis, the trend is up...