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

U.S. DOLLAR INDEX

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Multi-year low volatility reading on the U.S. dollar index suggests strong directional movement in the following weeks/months. U.S. dollar index tested the strong support level for the 5th time over the past two years and a breakdown below this support level at 79.5 could push the U.S. dollar index towards 75 levels. Unless we see another rebound from the strong support in the following weeks, we will favor a bearish scenario for the U.S. dollar. Low volatility is something we should keep an eye on. Previous breakouts from such low volatility readings resulted in sharp price swings.

US DOLLAR INDEX

 

BRENT CRUDE and PALLADIUM

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Strong breakouts are likely on these two commodities in the following weeks. Both Brent Crude oil and Palladium reached multi-year low volatility levels. Volatility is cyclical. Low volatility periods are usually followed by high volatility and vice versa. Charts below show Brent Crude Oil ETF trading in London and Palladium cash price. Breakout above 73 levels on ETFS Brent and also above 767 levels on Palladium will be followed by strong trend periods. We should monitor these two commodities closely in the following weeks.

ETFS BRENT

PALLADIUM

MSCI TURKEY, YIELDS and USD/TRY

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Over the past few weeks we have seen stability in the Turkish equity and currency markets. Turkey started outperforming the MSCI Emerging markets index after its massive underperformance. MSCI Turkey/MSCI Emerging Markets ratio rebounded from multi-year support. This is positive news for the Turkish equities and this trend should resume.  Meanwhile recovery in the emerging markets helped the MSCI Emerging Markets index rebound from the lower boundary of its 3 year-long sideways consolidation. This also suggests some positive sentiment for the emerging markets going forward.

MSCI EM

MSCI TURKEY vs MSCI EM

USD/TRY which took a parabolic shape and reached 2.40 levels, reversed sharply lower and started pulling back to its 200-day moving average. Expect stronger Turkish lira in the short/medium-term.

USDTRY

Turkish government bond yields are now close to strong resistance area between 10.5 and 11.8. Failure to break the strong resistance area could result in lower yields in the following months.

TR 2YR GOVT YIELDS

EMERGING MARKETS – EQUITIES

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Are emerging markets really weak? There are outflows from the emerging markets but how are their equity market performances so far? Are their long-term uptrends challenged? Has there been significant technical damage during the latest so-called weakness?

If a market is holding above its long-term moving average (200-day moving average), I classify this a uptrend. Likewise, if a market is recording higher highs and higher lows, this is also considered an uptrend. Below I analyzed 21 emerging market equity indices. Most of the markets are still healthy and they are either in a uptrend or moving sideways (no major downtrend as of now). For some emerging market weakness is not a new phenomena. They have been weak over the past 3 years. Yes, some markets have experienced weakness, but to conclude for further weakness we should see major breakdowns. At this stage I don’t see major breakdowns on the charts. On the contrary, I’m analyzing more sideways consolidations and possibility of rebounds from strong support areas.

Markets that are weakening: CHILE, THAILAND

Markets that have been weak but now close to strong support: BRAZIL, COLOMBIA, PERU, CHINA, MOROCCO, TURKEY

Markets that are moving sideways: MEXICO, INDONESIA, KOREA, PHILIPPINES, TAIWAN, HUNGARY, POLAND, CZECH REPUBLIC, RUSSIA

Markets that are in an uptrend:  INDIA, MALAYSIA, EGYPT, SOUTH AFRICA.

MSCI EM III

CHILEAN IGPA INDEX

BRAZIL BOVESPA INDEX

COLOMBIA COLCAP INDEX

MEXICO MXSE IPC INDEX

PERU LIMA SE IGRA INDEX

CHINA SSE 50 INDEX

INDIA BSE SENSEX

INDONESIA JSX 45 INDEX

KOREA KOSPI INDEX

MALAYSIA KLSE INDEX

PHILIPPINES SE INDEX

TAIWAN SE WEIGHTED INDEX

THAILAND SET INDEX

HUNGARY BUDAPEST SE INDEX II

POLAND WIG 20 INDEX

PRAGUE SE INDEX

RUSSIA MICEX INDEX

EGYPT EGX 30 INDEX

MOROCCO ALL SHARE INDEX

SOUTH AFRICA ALL SHARE INDEX

TURKEY ISE 100 INDEX

U.S. UNEMPLOYMENT

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U.S. ADP January payroll change smallest since August at 175,000. U.S. employment increased by 175K private sector jobs in January. Data updated on a monthly basis.

Thursday: U.S. weekly jobless claims data. Data updated on a weekly basis.

These two data series become more important as FED starts tapering program. U.S. weekly jobless claims and ADP Employment (total nonfarm private employment) reached strong support levels; in other words overstretched levels from historical perspective. Any data point going forward could be worse than expected. Historically medium/long-term reversals took place around these levels. By looking at these long-term charts on the economic time series, I believe the FED will not be aggressive in their tapering program in the following months. Any spike on the U.S. weekly jobless claims or worse than expected numbers on the ADP employment could weaken the case for further tapering.

ADP EMPLOYMENT

US JOBLESS CLAIMS

U.S. DOLLAR INDEX

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February will be an important month for currencies and especially for the U.S. dollar. U.S. dollar index rebounded from the lower boundary of its 2 year-long consolidation for the 4th time and now the index is challenging the minor resistance at 81.50 levels. Similar breakouts resulted in a strong U.S. dollar in the first half of 2012 and in the beginning of 2013. Breakout above 81.50 can push the U.S. dollar index towards 84-85 area in the following months. Strong medium-term support remains at 79.5.

U.S. Dollar Index (Weekly scale)

US DOLLAR INDEX weekly

U.S. Dollar Index (Daily scale)

US DOLLAR INDEX daily