Posts

BIST 100 (TURKEY) and INDUSTRIAL SECTOR

/0 Comments/in , /by

Industrial sector outperformance is usually negative for Turkey’s BIST 100 index. Last  time I updated this chart was in January 2014. Since the last update It’s been more than a year and BIST 100 index trended higher from 60,000 levels to 91,000 levels. Strong upward trend might be reversing once again towards a corrective period in Turkish equities.

BIST 100 INDEX

XUINDXU100

Industrial Sector continues to outperform the BIST 100 index. 

Relative performance ratio between Industrial sector and BIST 100 index is breaking out of a long-term consolidation. Historically industrial sector’s outperformance didn’t bode well for the BIST 100 performance. Strong uptrends were usually led by financial sector outperformance.

Latest change can have significant medium/long-term implications. We can expect further correction/sideways trading in equities and continuation of industrial sector outperformance in the coming months.

TURKEY BIST100

/0 Comments/in , /by

Turkish financial sector has been strong over the past few weeks. I don’t have the deep knowledge or the resources to understand the reasoning behind this. I would welcome any thought. But here, I’d like to share some chart evidence that supports further strength in the banking and financial sector stocks in the coming months. I’d also like to draw your attention to the latest bullish development on the Turkish government bond yields (which could have a positive impact on the financial sector).

TURKEY 2YR YIELDS

In September yields were targeting 11.8 levels. That direction would have been disastrous for the Turkish economy. In October we have seen a “V” reversal changing the whole picture to a more bullish one. 2 YR government bond yields can now target 5-6 area in the coming months.

XUIND XU100 II

Industrials vs. BIST 100 is a chart that I keep track of since 2003. When industrial sector outperforms it usually signals underperformance for the financial sector and this coincides with market corrections. XU IND/ XU 100 ratio is now reversing from a multi-year resistance suggesting financial sector outperformance and industrial underperformance.

Long-term chart patters are usually very powerful. When I see major chart patterns developing on long-term scale I pay close attention. Below are some of the financial sector stocks that has formed bullish chart patterns. Latest chart patterns or consolidations can be compared with 2010-2012 periods. I think they are similar.

HALKB

HALKBANK is forming a year-long inverse head and shoulder. Neckline stands at 16.80 levels

KCHOL

KOC HOLDING breaks out to all-time high levels. This is a bullish development.

SAHOL

SABANCI HOLDING formed a year-long inverse head and shoulder. Breakout above 10.60 will be very bullish.

VAKBN

VAKIFLAR BANK formed a year-long inverse head and shoulder with bullish implications. Breakout above 5.30 will be very positive for the stock.

YKBNK

Another inverse head and shoulder chart pattern can be seen on YAPI KREDI BANK.

MSCI TURKEY, YIELDS and USD/TRY

/0 Comments/in , /by

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

BIST 100 (TURKEY) and INDUSTRIAL SECTOR

/1 Comment/in , /by

From politics to its financial markets and its currency, news flow on Turkey has been negative. Can the financial markets in Turkey return to stability?  I’d like to draw attention to an interesting correlation between BIST 100  and the relative performance ratio between Industrial sector and BIST 100 index. Relative performance ratio is calculated by dividing the Industrial index (XUSIN) to BIST 100.

BIST 100 INDEX III

XUSIN XU100

Few findings:

1) Correction periods on the BIST 100 index resulted in outperformance for the Industrials and undeperformance for the Financials.

2) Since 2004, 0.93-0.95 area acted as strong resistance for the relative performance ratio between XUIND/XU100.

Few conclusions:

1) As the relative performance ratio reached strong resistance area, we are likely to see a change in trend favoring financials.

2) Change in sector performance (Underperform: Industrials, Outperform: Financials) could have a positive effect on the BIST 100 index.

We are at the early stages of this development and we should wait for the initial reaction (confirmation) on both the relative performance ratio and the BIST100 index.

Update: TURKEY YIELDS and BIST 100

/0 Comments/in , /by

Below are two updated charts on an earlier theme I discussed on this blog. Relative performance ratio between 2 year government bond yields and 10 year government bond yields is breaking above a critical threshold and repeating the same cycle of late 2011. Short-term yields are outperforming the long-term yields and the selling pressure remains intact on the equity index. As long as the 2YR / 10YR ratio trends higher, equity market will remain under pressure and yields will suggest further upside.

2YR vs 10YR II

BIST 100 INDEX II

TURKEY YIELDS and BIST 100

/0 Comments/in , /by

Over the analyzed period when Turkey 2YR Bond yields outperformed the 10YR, equity index entered into a correction and vice versa. This is an interesting correlation. Patterns on the relative performance chart of the 2YR Bond Yields vs. 10YR Bond Yields can reveal some important information on the direction of the markets in the following months.

Technical outlook on the 2YR/10YR chart is very similar to the second half of 2011. Since the beginning of 2011 BIST 100 was in a correction. Equity index resumed its downtrend after the 2YR/10YR broke above 0.97 levels. Relative performance reached 1.17 levels and BIST 100 reached the lowest level for that year.

Relative performance ratio between the short and long-term yields are now challenging the previous resistance at 1.00 levels. Breakout above this level could send the ratio towards 1.10-1.15 area once again and the equity index lower to test 60,000 levels. Failure to break above 1.00 levels will help the ratio to ease back towards 0.90 and the BIST 100 to hold above 65K.

2YR vs 10YR

BIST 100 INDEX