Long Term Outlooks and Analysis:

This is simply a place where I decide to post most of the long term analysis I make, spanning one year or more. Occasionally, updates on recent events and other things that have happened with this analysis will be posted as well. The reason I put it out here is that it does not rapidly change, and expectations can be put out on here and viewed without me continuously updating it, or referring to this page rather than updating the blog area with new quips on whatever happens on a day-to-day basis when my single candles are either covering a week or a month!

China A50:

Post with full analysis here.

Chart: Weekly candles, 4 year time frame, courtesy: CMC Markets.

Summary and outlook:

Look for the stimulus discussion line in blue for support, probably taking it to the upper fib around 8 730 in the short term. Stops around 7 900 though as the incoming lower fib looks set to be rather dangerous and might continue the downwards trend. Keep in mind the potential for a head-and-shoulders pattern with the break below 8 730 as well, which would lead to a revisit of the 50% fib.

Hang Seng Index:

Post with full analysis and backing factors here. Highly recommended for further reading into the other indexes as well.

Chart: Weekly candles, 5 year time frame, courtesy: CMC Markets.

Summary and Outlook:

Currently, we have a break above the 21 000 line, and also a leaving of the top of the central white stripe. We’ve pinged and failed to cross the upper white stripe with a click above 21 800, which was quickly and promptly rejected. Volumes are picking up after the further shortening of the lunch break at the start of March, and overseas markets do look increasingly frothy.

We have not had a weekly close below the 21 000 level since initial crossing, although we did have  quick dip into the 20 300 area intra-week. The top of the central white tripe, falling at 100 points per month, has thus hend on a week-closing basis as well, and in my view represents a buying opportunity.

Given valuations and potentially subsiding hard landing concerns in China coupled with recovering world trade, the base case scenario is to hit the middle blue line some time this year, and an index value at 24 000. On the upside, it’s obviously the top line, currently around 27 000, although that would be very much potentially too quick barring absurdly higher valuations in China, or if the discount in Hong Kong gets taken out. Though, the heavy discount is of course heavily dependent on the property developers, which are (except forHenderson Land) trading near 5 P/E and non-local banks trading between 6-10 on the same measure. thus, another reason why Chinese easing would be a positive for Hong Kong, given the big mainland banks’ weighting.

Downside risks remain in the overall economic climate, where i feel somewhat alone in worrying about the rally in the US not to have legs unless there’s more stimulus, and of course Europe worries remain. Hard handing in China? The landing as of now isn’t even what the government is trying to engineer in housing, and elsewhere there is the added stimulus efforts and RRR/IR cuts discussions to support banks and manufacturing firms, coupled with the current halt of the yuan appreciation.

Stockholm OMX 30: Currently under revision

S&P500:

Post with full analysis here.

Chart: Weekly candles, 5 year time frame, courtesy: CMC Markets.

Summary and follow-up:

The rising trend line has held. Beautifully. We’ve broken the head-and-shoulders pattern, targeting a new Post-Lehman high, and pretty much everything that could technically be bullish is bullish. To good to be true? Probably, low volumes! This means either suckers will pile in if things keep improving, creating the momentum rally hoped for for a longer time, or institutionals simply need to rotate out of their own positions before volume returns and cannibalize on the last entrants into the off-loading game. Probability of this looks rather low, given how much all of them are talking about buying into stocks… but maybe it’s The Muppet Show… who knows.

As an example of the exuberance on the technical level, the only reall call that can be made is near the all-time-highs near 1 600, or a break below the rising trend line, then pinging back ot the blue trend line, where momentum indicators get “flushed out” and we can wait 2-3 months for more longer-term closing-based momentum indicators to tell us anything. Oscillators “flush” faster, so your best bet might be looking into oscillators, like shorter-term (13, 8 or 5 week, map to day candles if desired) stochastics and RSI’s, or potentially DMI’s for any technical clues.

Fundamentally, you might want to check whether the bullish area of average index P/E at 16-17 can be approached before taking any sell signals. Currently, each P/E represents roughly 100 points.

US Dollar/Japanese Yen FX rate:

Post with full discussion and analysis to be found here.

Chart: Monthly candles, 16 year time frame, courtesy: CMC Markets.

Summary and Outlook:

Negative trend firmly broken, after the initial expectation I had that there would be continuation of the yen-strengthening trend. However, the Valentines Day 2011 policy shift to inflation targeting and added liquidity by means of asset purchase program expansion firmly changed the yen trajectory, and now looks to sustain it into a much lower range against the US dollar and euro. Instant game changer, and given the break of the strengthening trend line, the minimum expectation is a tag at USD/JPY 90 by year end, base line at 94, and if there’s a positive central banking dollar bias, I would not be too surprised to see a return to the 100 level, although at a slightly longer time frame, like 1 year to 18 months.

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