Given the rather interesting market set-ups that we got last year, the high volatility, and apparent inability by anyone (most notably me) to forecast anything, here are a few fortune cookies for the immediate future that I hope will lighten up the first trading day of the year. No predictive capability given, just a few rather weak and vague market observations, with even more uncertain effects. I make no claim to even try to sound like this would be in a fortune cookie, and for the sake of all you hold dear, make your own decisions before you consider seriously anything you read in this post. It’s sampled for comedic and lighthearted purposes, to fit things in thematically, so please add a barrel of salt to everything here.
First fortune cookie – damp:
“Talk is silver, silence is golden.”
The following chart says it all.
MACD is vaguely bullish, with the three parallel trend lines rather bearish, and being further enforced by a falling 20D EMA which hasn’t been tagged for quite some time and will provide resistance. Bollinger Bands indicate downwards surf! Support might crystallize around the 1500-flat level. There’s a little for everyone here, and a little from every technical perspective, but I suspect that the most likely case if it decides to stay above 1560 (most bullish) is a rather sticky position until the end of January between there and 1620-1640 which represents the range of the trend line, the 20D EMA and the last significant top at 1641. The most important levels in the meantime to consider to test if there is bullishness at all is the 1590 level which sparked the last dip to 1525, and then the 1600 level for previous resistance and nice round numbers.
Slightly more bearish is the idea that we see a retreat to 1500 where volatility then goes crazy, and whatever gold sentiment wins at the moment it stops takes it leaps and bounds in that direction. Bullish, bearish, who knows?
Second fortune cookie – light and very crisp:
“Lone little solider breaks through the line of an oncoming army at night, must watch back when dawn comes and steel himself for army of two myriad up ahead.”
And, the chart:
As I’ve referred to time and time again in my triangle trading methodology, this looks less like a genuine breakthrough, mostly because of the quick downward sloping line which creates less solid breakthroughs (look at the orange triangle for comparison! which got repeated forming the white line first fake breakthrough, and then broke through the same orange level strongly again!) and then we are right in the thick of the 18 800 – 19 200 level, which means we could very well reverse this triangle break. Also, the first trading day of the year while a bunch of the world markets are still out of commission (Tokyo, Shanghai, etc.) doesn’t really say too much, especially since there’s no market action from the western markets to trade off of.
More interesting might be that the Bollinger Bands are contracting, which is highly unsurprising for anyone watching volume (check the speculation on HSI volume hidden underneath the speculation on gold) but pretty much tells the bulls to hold their horses if they feel one good volume day on the first year trading day will justify much, especially in the Sinosphere and their upcoming holidays. Also, previous massive peak is at… 20 000, which essentially makes it a big resistance plus a round number. The Bollinger might be overshot here, but again, watch carefully. Check further price action however to see if this downwards sloping triangle trend will act as support or be broken upon retouch. This could be very important information with technically low volumes.
Third fortune cookie – filled with heavy and precious lotus paste:
“For where three times six is six, value is not found on the edges of the surface, but deeper inside.”
Many individual Hong Kong-traded equities, predominantly Mainland Chinese companies, are still well within easily breakable triangles, hiding pretty good technical value in the very near future. Again, these stocks could possibly be unleashed by a volume return from the doldrums after Lunar New Years. This is a bit tedious to go through on a chart-by-chart basis, and the quick and dirty version is that a lot of triangles exist that can be very well exploited. Image dump in the link referencing equities, where it’s a bit of a mix and match to see where you think the triangles will break to. But then again, Chinese news have been good, if somewhat muted for the time being.
Any sustained rally in the HSI and/or SHCOMP will be a good opportunity to start looking for good triangle breaking opportunities, possibly catalyzed by policy easing by the CCP, also to make the transition of power for this year and next somewhat smoother. I’m an early bird I know, but China likes to front run the news and respond to the mathematical derivatives of macroeconomic data rather than the actual data, and also like to give things time to work their way through the economy.
Forth fortune cookie – sweet dough covers sour and dry plum pieces:
“Before the dragon nears, you can hear its wings swoon; before the dragon eats, its’ roar: only after the dragon collapses will you hear its mighty head clap to the ground.”
China is looking increasingly agile in a number of important matters regarding its own economic future, and rest assured that what little can be known about it from the outside has for a long time been attempted to be mitigated on the inside. Trade pacts across all of Asia, with both Japan and India most notably, spell of a more assertive tone which seems befitting of the lunar Year of the Dragon. Again, there will be a power shift internally, so watch closely for any sign of trying to make the transition to a new set of rulers much easier as filling the leaders bowl with plenty by filling the bowls of the People with rice serves everyone’s interest.
Next, the currency is currently gaining a lot of ground and today was the formally acknowledged break of the CNY6.30 level for a US$, which is pretty much matched only in YOY% terms by the Japanese yen. Now, consider that China exports a lot to Europe! Acquisition train anyone? Massive consolidation of several internal Chinese companies? Who knows…
Lastly on the topic of China: They know what’s happening internally better than we do. Whatever anyone in the west can read about fudged data to look better is peanuts to what’s inside. On the positive side, it requires a fairly comprehensive knowledge of just how the data doesn’t match expectations to fudge it correctly from raw data (falsification is rather tough as long as you’re inside a bureaucracy). Using the assumptions that 1. China’s rulers do not want to see the nation fall, that 2. social stability and therefore growth is in their self-interests, and that 3. their practical dictatorship grants them an ability of execution [read into that what you wish, I won’t change your view by writing one or the other] at least allows them to be competently acting in the face of change, I suspect that if it blows up, it will be after this lunar year, and it will be from something we could never have known about.
Fifth fortune cookie – heart shaped:
“If this year is the 101’st, and you live across the narrow seas from the dragon’s keep, you have to love it or leave it.”
This is on a slightly lighter note to leave a slightly sweeter taste as you head into the new year. In Taiwan, this counts as year 101. What else counts to 101? (Both use somewhat fudge-y methodology, don’t worry!) The tallest building in the country, formerly the tallest in the world by spire height! (Fudge-y, fudge-y!)
Now, why does this matter? Follow closely, it’s a little bit twisted: Pretty much anyone that’s been thinking of marrying for the last few years or that would potentially consider doing it, or even those that might barely be eligible, have a certain incentive to try to squeeze in here. First of all, homonyms for Chinese words for “long” or “tall” in numbers or “tall” references indicate a long-lasting and healthy marriage – rather than what more questioning people might simply interpret as indicative of a “tall order”. Together with a Lunar Year of the Dragon which is very auspicious for the people born in it, we pretty much get a rush to marry and engage in the marital duties before May 2012 as the Lunar Year of the Dragon ends in February 2013.
Short term, be long jewellery/gold/silver, discretionary spending items, and anything that otherwise has with love to do. Early on, especially if you’re on this island, consider closely your relationships with the opposite sex, and whether it’s worth a go, because said person most likely will. Longer term, be long food, baby products, toys, and computer games.
The “tall” thing doesn’t carry over to China, but this is a Water + Dragon year, and water is considered to be the element maximally associated with “yin” (dark, cold, retraction, valleys, troughs, etc), and therefore the point where it reverses. If this was the bad year for Chinese economic news and sentiment, expect it to wane and launch higher later. From a purely and highly superficial astrological standpoint. So, putting it all together, the Chinese will have every astrological incentive to have a kid now. Yay!