EME HEADER

CHINA SSE 5O INDEX

Chinese equities might be on the verge of a strong breakout. This week’s price action pushed the SSE 50 Index to the horizontal resistance at 2,225 levels. Since the beginning of 2016, SSE 50 has been recording higher lows, a bullish signal. Another week of strong price action can clear the 8 month-long resistance and push the index towards 2,500 levels. Volatility is low both on the daily and weekly charts suggesting a trend period might develop after a decisive breakout.

CHINA SSE 50 INDEX W

CHINA SSE 50 INDEX D

There are several bullish chart set-ups in Hong Kong listed securities. I share below some of the clear chart patterns that are likely to resolve on the upside if we see a breakout on the Chinese benchmark equity index.

MGM CHINA

MGM CHINA formed a year-long H&S bottom, a bullish reversal chart pattern, with the neckline standing at 12.20 levels. Breakout above 12.20 can push the stock higher to test 17-18 area.

TONGDA GROUP

TONGDA GROUP formed a year-long ascending triangle, a bullish continuation chart pattern, with the strong horizontal resistance standing at 1.69. Breakout above 1.69 can push prices towards 2.0 levels.

PING AN

PING AN is now testing the horizontal resistance at 38.80. Stock closed slightly above the resistance. However, this week’s price action will confirm the breakout. Another strong weekly close will complete the multi-month base formation.

Note: According to Edwards and Magee, a daily close above the resistance by a 3% margin is required to confirm a breakout. I follow this approach to confirm a breakout.

COMMODITIES HEADER

BASIC MATERIALS and ENERGY

In the first few months of 2016, strong performance in Gold and Silver resulted in a sharp rally in precious metal stocks. Several oversold gold and silver mining companies had strong performance over the past few months. Similar bullish theme can take place in the basic materials and energy complex. Some of the commodities in the industrial metals and energy group are in the process of forming major long-term bottoms. The same bullish chart set ups can also be seen in the equities of basic materials and energy companies.

LIGHT CRUDE OIL SEP FUTURES

WTI LIGHT CRUDE is possibly forming a H&S bottom with the neckline standing at $50 levels. This chart is still at the early stages of a H&S formation. A few more weeks of strength will complete the right shoulder of a year-long base formation.

BLOOMBERG INDUSTRIAL METAL SUB INDEX

Formerly known as Dow Jones-UBS Industrial Metals Subindex Total Return (DJUBINTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of longer-dated futures contract s on aluminum, copper, nickel and zinc. It reflects the return on fully collateralized futures positions and is quoted in USD. This chart has possibly completed a H&S bottom and currently consolidating above the neckline.

BLOOMBERG ALUMINUM SUB INDEX

Formerly known as Dow Jones-UBS Aluminum Subindex Total Return (DJUBALTR), the index is a single commodity subindex of the Bloomberg CI composed of futures contracts on Aluminum. It reflects the return of underlying commodity futures price movements only and is quoted in USD. The neckline of the year-long base formation stands at 28.20 levels.

NMDC LIMITED

NMDC Limited is an India-based company engaged in the mining of iron ore. The Company’s business segments include Iron Ore and Other minerals & services. The Company is also engaged in the exploration of various minerals, including copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands. A perfect horizontal resistance (neckline) stands at 105 levels. Breakout above this level will complete a year-long base formation.

FREEPORTMCMORAN

Freeport-McMoRan Inc. (FCX) is a natural resource company with a portfolio of mineral assets, and oil and natural gas resources. The Company’s segments include the Morenci, Cerro Verde, Grasberg and Tenke Fungurume copper mines, the Rod & Refining operations and the U.S. Oil & Gas Operations. It has organized its operations into five primary divisions: North America copper mines, South America mining, Indonesia mining, Africa mining and Molybdenum mines. This is another perfect example of a year-long H&S bottom with the neckline standing at 14.20 levels. Breakout above 14.20 will be bullish and possibly target 25 levels.

TECHNIP

Technip SA (Technip) is engaged in project management, engineering and construction for the energy sector. The Company operates through two segments: Subsea, Onshore/Offshore and Corporate. This stock is listed in France. Over the past year, 53 levels acted as strong resistance. Stock might be completing a year-long base.

WACKER CHEMIE

Wacker Chemie AG is a Germany-based company engaged in chemical industry. The Company operates through four business segments: WACKER SILICONES, which produces silicone products, ranging from silanes through silicone fluids, emulsions, elastomers, sealants and resins to pyrogenic silicas; WACKER POLYMERS, which offers a range of polymeric binders and additives; WACKER POLYSILICON, which provides polysilicon, and WACKER BIOSOLUTIONS, which is the life science division of the Company, offers solutions and products for the food, pharmaceutical and agrochemical industries. While this base formation does not have the perfect symmetry between the left and right shoulders, it is clear from the chart that the horizontal resistance at 86 levels will be critical in the coming weeks. Breakout above 86 will be bullish.

 

DME HEADER

MSCI ACWI and S&P 500 INDEX

Global equities get a boost from both S&P 500 and Dow Jones Industrial averages breaking out to all-time high levels. In mid-July, S&P 500 index cleared the strong resistance at 2,125 and recorded an all-time high. This was followed by two weeks of consolidation in a very tight range. With Friday’s strong close it is likely that U.S. equities and global equities in general will resume their up trends in the following months.

S&P 500 INDEX W

On the weekly chart, the resistance at 2,125 levels will now become support. Upward break from the year-long consolidation will gain momentum and resume higher as long as the index remains above 2,125 levels.

S&P 500 INDEX D

On the daily scale, low volatility registered by contracting Bollinger bands suggests a strong directional move is likely to follow. A breach of the upper band in the following trading sessions will confirm this.

MSCI ALL COUNTRIES WORLD INDEX M

MSCI ALL COUNTRIES WORLD INDEX, that captures large and mid-cap representation across 23 Developed Markets and 23 Emerging Markets countries, formed a clear upward trend channel. Long-term uptrend resumes between the boundaries of this channel with the historical high standing at 443 levels.

MSCI ALL COUNTRIES WORLD INDEX W

The weekly chart of the MSCI All Countries World index is more constructive and suggests a year-long H&S bottom is now completed. Price target for the H&S bottom stands at 460 levels. 2015 high level is at 443 levels. Breakout from this bullish chart pattern can target 443-460 area in the following months. Failure to remain above 405 levels will negate this bullish outlook.

EME HEADER

TURKEY BIST 100

Turkish equities are at critical support levels from where they can see a possible turnaround. We are talking about a country and financial markets that experienced a failed coup, an S&P downgrade and a recently declared state of emergency. Yet the magnitude of the correction is less than what BIST 100 experienced after the Gezi Park protests in 2013 and much smaller in magnitude when compared with the banking crises in 2000-2003 and the global financial melt-down in 2007-2008. Is it possible to say the worst is over?

TURKEY BIST 100 W

Long-term chart of the BIST 100 index shows the multi-year long uptrend being tested between 70K-72K area. This is also the lower boundary of a larger scale sideways correction which I label it as a symmetrical triangle.

TURKEY BIST 100 D

Daily chart shows the 3 year-long sideways consolidation. After the recent sell-off the BIST 100 index is now very close to strong support area between 70K and 72K. Unless we see a breakdown below the strong support area, we will expect a rebound and a possible reversal.

MSCI TURKEY VS MSCI EM

MSCI Turkey has underperformed MSCI Emerging Markets index. Though, the ratio between MSCI TURKEY and MSCI EM is now at a major support level. This ratio is indexed to 1 with the base year being 2016. Since the beginning of the year, including the latest sell-off the ratio stands at 0.92. This is 8% underperformance versus the MSCI EM. More important than the numbers, I think the level of the ratio suggests a possible reversal. Unless there is a breakdown below 0.90-0.94 area, being long Turkey versus MSCI EM at this inflection point could be a low risk trade.

BIST 100 INDEX

IND VS BIST

Corrections led by a financial/economic cause has been deeper and more lengthy when compared with corrections led by political turmoil. Recent data from 1996 till today supports this conclusion. 2000-2003 was the banking crisis in Turkey. 2007-2008 was the global financial melt-down. Both has been the major corrective periods on BIST 100 index. 2011-2012 was related to the global recession fears and the global equity corrections. Since 2013, BIST 100 is in a sideways consolidation.

During each corrective period, Industrials outperformed the BIST 100 index. In other words Financials have under-performed. Risk on trade for Turkish equities have always been buying the financials. Industrials have been a defensive play. The ratio between Industrial Index and BIST 100 reached 2003 levels. If there is a turnaround (a market reversal), you should keep an eye on the performance of financials in the coming weeks. This ratio should also reverse from 2003 levels.

Several charts above suggests equity markets in Turkey are at a major turning point. If we see stability at these levels I’ll weigh going long Turkey.

EME HEADER

MEXICO IPC INDEX

A strong breakout is likely to take place on Mexico’s IPC Index. Last week’s price action breached multi-year horizontal resistance at 46,500 levels. The horizontal resistance was tested for 5 times over the past four years. Another week of strong price action will confirm the breakout on the local price index and will suggest higher levels in the coming months. It is important to note that both on weekly and monthly scale the index is going through low volatility period. Usually breakouts from such technical condition result in prolonged up/down trends depending on the direction of the breakout.

MEXICO IPC INDEX W

MEXICO IPC INDEX D