DAX, NIKKEI and DJIA

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For those who are not a big fan of twitter I’m posting my latest updates on global equity markets. I believe these are important charts and are worth reviewing again. Global equity markets are experiencing a correction. Long-term trends are still intact. Long-term 200-day averages will play a significant role in determining the next direction of the long-term trends.

MSCI WORLD MARKETS

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Global equity markets can experience a pull back. MSCI World Markets index is testing strong long-term resistance levels. A pull back towards the long-term averages would result in a reversal on the MACD too. It is still early to call for a reversal but it is also extremely important to keep an eye on this long-term chart after 5 years of uptrend. Failure to breach long-term resistance at 1,690 levels could result in medium-term weakness towards 1,440-1,500 area.

MSCI WORLD MARKETS INDEX

SERBIA AND SLOVENIA

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Frontier markets performed well over the past year. More and more frontier equity markets are gaining strength. Both Serbia and Slovenia equity indices are completing 2 year-long base formations. Slovenia SBITOP Index cleared 700 levels; a horizontal resistance for the cup & handle formation. Index should target 970 levels in the medium-term. Serbia SRX USD index is one step behind from Slovenia. Serbia is still preparing for a strong breakout above 187 levels that will also complete the bullish chart pattern. Both indices are gaining strength and technical outlook is turning positive. More information on cup with handle formation (here).

SLOVENIA SBI TOP INDEX

SERBIA SRX USD INDEX

USD/ZAR

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Positive sentiment for the South African rand might be over as the cross rate reaches strong support area formed by the long-term trend line and moving averages. Both 3 year-long trend line and the 200-day moving average are forming support at 10.35 levels. RSI (Relative Strength Index) is also testing 50 levels; which is considered to be the lower boundary for a bull market. Over the past 3 years cross rate managed to rebound from the 200-day average and the RSI rebounded from 50 levels simultaneously. Expect a similar rebound from the strong support area and weakness in South African rand against the U.S. dollar.

USDZAR

BRENT CRUDE OIL

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Oil prepares for a massive breakout in the following weeks/months. Magnitude of the price change is likely to make the oil “the hot topic” in the financial media. Why am I saying this?

1) Breakouts from low volatility periods are usually very powerful and are followed by strong directional moves. United States Brent Oil ETF (BNO) and ETFS Oil Securities (OILB.L) both meet this criteria.

2) The longer price tests a trend resistance the more valid that level becomes. 45 levels on the BNO and 73 levels on the ETFS Brent are strong horizontal resistances. They are valid trend lines.

While it is still early to call for a direction, I would suggest everyone should place these two charts at the top of their watch list. A strong directional move is overdue.

BNO

ETFS BRENT II

COTTON

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COTTON

Cotton price prepares for a strong breakout from its 2 year-long base formation. Recent consolidation can be one of the two bullish chart formations. A cup with handle chart pattern or an ascending triangle.

CHART PATTERNS

If it is the former, Cotton should break above 94 levels in the short-term. Breakout above 94 levels will clear 2 year-long horizontal resistance and should be very bullish for Cotton prices.

If prices are forming an ascending triangle, breakout above 94 will be delayed. Only after another pullback towards the 200-day moving average will Cotton challenge the 94 resistance. One or the other, current technical outlook is bullish and suggests higher prices in the medium-term. Watch 94 levels as strong resistance.

PERU LIMA IGRA INDEX

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Peru’s IGRA index has been one of the weakest from the emerging market equities. After testing 23,850 levels for the third time in the beginning of 2012 IGRA index fell to 14,600 levels. Index formed a clear downtrend below its long-term moving average. Over the past year rebounds have been weak. Index is now testing the horizontal support at 14,600 levels for the third time. Breakdown below 14,600 will be negative for Peru’s IGRA index. Unless the index reverses above the 200-day moving average at 16,150, downward pressure will remain intact.

PERU LIMA SE IGRA INDEX

Similarly, cross rate against the U.S. dollar is challenging the resistance level at 2.82. 200-day moving average is forming support at 2.77. Peruvian Nuevo Sol remains in a downtrend against the U.S. dollar and unless USD/PEN reverses below 2.77 levels outlook will remain negative for the local currency.

USDPEN

CHINESE YUAN

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Still a highly managed currency Chinese yuan is trading above its 200 day moving average – with only one exception since 2005. China was criticized for currency manipulation during the financial crisis between 2008 and 2009. PBOC (The People’s Bank of China) was asked to strengthen the yuan and China to focus on internal demand rather than an export driven economy.

USDCNY

CHINA SSE 50 INDEX

In the second half of 2010, USD/CNY started moving lower resulting in weak U.S. dollar against the Chinese yuan. Over the past 4 years China lagged the global recovery. China SSE 50 index is now testing 2009 low levels. However, since the beginning of 2014, USD/CNY started moving in the opposite direction of the major downtrend. Similar price action occurred in the second half of 2012 but it was short-lived. Cross rate failed to hold above the long-term average.

Technical outlook could be different now. 6.1 levels will be an important threshold in the following months. Given that SSE 50 index is now very close to a major support both Chinese equities and the currency should be watched closely. If USD/CNY holds above the 200-day moving average, this will signal a major shift in the long-term trend.

GOLD

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Above are some of the updates I shared with TechCharts followers on GOLD. Since the beginning of 2013, it is the first time GOLD has breached its long-term moving average. Strong momentum should push prices towards 1,440 levels in the following weeks. 200-day moving average at 1,330 levels will become the “new” support.

GOLD

PALLADIUM and COPPER

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Both Palladium and Copper have industrial use. Yet one has clearly outperformed the other over the past four years. Charts suggest the latest strength in Palladium and weakness in Copper could continue. 10 year weekly correlation between Palladium and Copper has been positive 0.4869.

CORRELATION

Last week Palladium broke out of its year-long sideways consolidation pattern. While Copper has been in a downtrend and clearly below its long-term average. Weakness in Copper price is continuing this week with the industrial metal now challenging the strong support at 3 levels. Breakdown below 3 levels will have long-term negative implications.

PALLADIUM III

COPPER

Relative performance ratio between Palladium and Copper favor Palladium in the medium-term. An interesting fact is that Palladium has been outperforming Copper since the beginning of 2009. This trend should continue.

PALLADIUM VS COPPER