Ravencoin

Ravencoin

While the vast majority of crypto tokens, currencies and coins will go to zero over the next few years, digital currencies, in one form or another, are in our future. A cursory look at what central banks are doing today with the supply of the currencies they control and it doesn’t take a rocket scientist to figure out that a better alternative will surely evolve over time. Technological developments will make it inevitable. Bitcoin has first mover advantage and has a good chance of surviving and thriving over time. There is another innovative technology in early stage development that has a real chance of thriving in a digital world. That technology is called Ravencoin (RVN).

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Running Out of Steam

Running Out of Steam

Following the sharp -20% decline in the stock market in December, we have experienced an equally dramatic rally back to the underside of the multi-year support trend line. Many of the technical indicators I watch have tipped back in to bullish mode. Trump and the Fed have done everything in their power to drive stock prices higher, but so far, new all time highs have proved elusive. I think the market has just about run out of gas now and if that is the case, and this bear market rally has ended, we should see lower prices in the months ahead.

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Calm Before the Storm

Calm Before the Storm

Calm has been restored. Following the sharp -20% break lower in stocks in December 2018, the rally that followed has recovered the majority of the decline. Volatility has abated and I get a sense that investor confidence has also returned. That is what happens during bear market rallies. At least, that is what I think is going on here. Check out the monthly chart below of the S&P 500. Relative strength as measured by the RSI indicator (top) is making a series of lower highs and lower lows, not confirming the recent rally. The S&P has also rallied back to test the underside of the multi-year support line that has been in place since the bear market lows of 2009, a decade ago. I expect the nest move in markets will be a resumption of the downtrend. If we break out to new all time highs, I will reassess but for now, patience.

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Patience is the Name of the Game

Patience is the Name of the Game

The recent surge higher in stock markets feels powerful. Are the bulls back in control? For now they are, yet stock markets have just returned to the underside of the longer-term trend channels that had provided support for the bull market all the way back since 2009. A re-test of the upper trend line is a very common occurrence. What happens next is all important. If stock markets can power through overhead resistance and overbought conditions and go on to make new highs, then the bull market continues. If the rally ends here and reverses, markets could be in trouble. We just have to wait and see what happens. Patience is the name of the game.

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The Active Asset Allocator

I run an active asset allocation strategy for clients where I aim to invest with the primary trend of the market. When the stock market is trending higher, I want to capture that growth and want to be invested 60% in global equities, 20% in bonds and 20% in precious metals and cash. When the market is trending lower, my plan changes, as it should. During a bear market, my goal is to sidestep the trouble and be defensively positioned, 0-20% in equities, 40-60% in bonds and 0-60% in cash and precious metals. I use a number of tools to help me identify the market’s primary trend. I have my Technical Trend Indicator (TTI) and a range of additional technical patterns I pay attention to, which, when combined together, work very effectively. The Active Asset Allocator (AAA) returned +3.4% in Q4 2018 and +2.1% in December 2018 during a period when stock markets declined sharply. I know of no other investment strategy on the market that performed as well. The AAA is off to a good start in 2019 too, +2.1% in January 2019.

 
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The AAA doesn’t just do well in bear markets, as some of my competitors have recently suggested. There will be times when I am bullishly positioned. That will happen in bull markets. When the trend is down, it pays to be defensively positioned. Having a fixed allocation and hoping for the best isn’t a great strategy but that is what all of my competitors seem to do.

At Secure Investments, I advise individual clients on their pension and non-pension fund investment portfolios. To learn more about my Active Asset Allocator and Gold Trader  investment strategies, please get in touch at brian@secureinvestments.ie or 086 821 5911. If you are reading this via LinkedIn, why not visit Secure Investments and subscribe to get exclusive content for free. No spam, ever. Just great stuff.

Disclaimer

The information contained herein should not be taken as an offer of investment advice or encourage the purchase or sale of of any particular security or investment. It is provided for information purposes only. Secure Investments and its content providers makes no representation or warranty of any kind with respect to the services described, analysis or information obtained arising from use of the pages on this website. Information provided is obtained from sources deemed to be reliable and is provided solely on a best efforts basis. Secure Investments and its content providers do not guarantee the completeness or accuracy of such information and do not accept any liability for any loss or damage arising out of negligence or otherwise as a result of use or reliance on this information, whether authorised or not. The use of the website is at the user's sole risk. Not all recommendations are necessarily suitable for all investors and investment policy must be tailored to suit the circumstances of the individual. We recommend that readers consult their professional adviser before acting on any advice or recommendation on this website. The value of any investment may fall as well as rise and you may not recover the full amount originally invested. Past performance or simulated performance is no guarantee of future investment returns. The value of your investment may be subject to exchange rate fluctuations which may have a positive or adverse effect on the price or income or the securities.

European Resistance

European Resistance

European stock markets continue to trade in bearish mode. In December 2018, a key support level, which had held since the 2009 lows, was broken. The recent rally has made it back to that trend line, which is a common occurrence, but support has now turned to resistance. The STOXX Europe 600 Index closed on Friday at 358, below its long-term, downward-trending 50-week moving average, which closed on Friday at 372. The Relative Strength Index for $STOXX600 is still below 50, which only happens in bearish declines and momentum (MACD) is also clearly trending lower. Each of these metrics needs to reverse higher before I can take a position in EU equities.

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Head and Shoulders

Head and Shoulders

We are starting to see a deterioration in some of the technical indicators I follow. Relative strength indicators (RSI) for US markets are still holding just above 50% but the RSI for EU stocks has dipped below 50% again. MACD momentum readings are still negative for all markets. The S&P 500 has closed below the long-term MA (50WMA) again, joining the NYSE, S&P 100, NASDAQ and EU Stoxx600 Indices. Only in the tech sector are the majority of stocks still trading above their 200DMA. The NYSE A/D Line is still near the highs set in December but needs to see follow through or else we have a lower high in the A/D Line. The TTI remains 42 points above its long-term trend.

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Assessing The Market's Technical Trend

Assessing The Market's Technical Trend

The Technical Trend Indicator (TTI) registered -6 on Wednesday. Industrials, transports, utilities and technology stocks closed lower on the day. There were fewer advancing stocks than declining stocks (A/D) on the NYSE. The largest market cap stocks (BMBI) closed lower on the day while the majority of stocks with the highest daily volume (MASI) on the NYSE also closed lower on the day. Bond yields closed lower on the day, positively impacting the TTI. The TTI registered 2,898 versus its long-term moving average of 2,852, +46 above trend.

There were no real changes in the technical indicators. Relative strength indicators (RSI) for US and EU markets have moved into positive territory above 50%. MACD momentum readings are still negative for all markets. The S&P 500 has edged above the long-term MA (50WMA) for the first time in months but the S&P 100 closed back below the 50WMA yesterday. The tech sector, S&P 500 and 100 indices in the US are showing readings with the majority of stocks trading above their 200DMA, but no confirmation yet from the broader NYSE index. The NYSE A/D Line is approaching the highs set in December while the TTI has broken out to new all-time highs.

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Overbought

Overbought

The stock market technical indicators delivered another improvement yesterday. Relative strength indicators (RSI) for US markets have moved into positive territory above 50%, now joined by the EuroStoxx 600 Index this week. MACD momentum readings are still negative for all markets. The S&P 100 and 500 have edged above their long-term MA’s (50WMA) for the first time in months. The tech sector, S&P 500 and 100 indices in the US are now showing readings with the majority of stocks trading above their 200DMA. Meanwhile, the NYSE A/D Line is approaching the highs set in December while the TTI has broken out to new all-time highs.

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Reading the Tealeaves

Reading the Tealeaves

I have outlined my expectations for the stock market in the chart below. In scenario one, the S&P 500 forms a head-and-shoulders top pattern, similar to the German Dax Index. For this scenario to play out, the S&P should peak in the region of 2,750-2,850 over the next three months. In scenario 2, the S&P tops out here, retraces 50-78% of the recent rally, forms a higher low with positive divergences in RSI and MACD and then resumes the bull market and breaks out to new highs later in the year. The continued recent strength in my TTI suggests that scenario 2 has higher odds of playing out at the current time.

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Waiting Game

Waiting Game

Following the December plunge in the stock market, we are experiencing a sharp oversold rally, which is now running into resistance overhead. The longer-term 50 week moving average is turning down and should cap the advance from here. What happens next is all important. Is this a bear-market rally that has run its course, or the start of the next leg higher in an ongoing 10-year bull market? We will find out shortly.

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Assessing the Market's Technical Trend

Assessing the Market's Technical Trend

There is a lot going on in this chart but if you spend some time with it, I think you will find it quite a useful study. The chart captures the daily volume flowing into advancing versus declining stocks on the NYSE. In a bullish trend, the majority of the volume (cash moving into and out of stocks) each day flows into stocks that are rising. Hence the Advance-Decline Volume Index ($NYUD) trends upwards. In a similar fashion, when the majority of the volume flows into declining stocks, the Index trend downwards. What is also quite interesting is that the Index tends to peak and trough ahead of price, which provides me with very timely information. The Relative Strength Indicator (RSI) and Momentum oscillator (MACD) provide further clues that help me to assess the market’s future direction. In the chart, you can see that the RSI and MACD also tend to rise and fall ahead of price.

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Bitcoin's Headed For $2,000

Bitcoin's Headed For $2,000

There is absolutely nothing bullish about bitcoin’s current chart setup. Despite the collapse from $20,000 to under $4,000, bitcoin has traded sideways for months as it has worked off its oversold position. Bitcoin continues to consolidate below the declining channel and looks set to shortly resume its decline. Odds now favour a drop towards $2,000 before potentially finding a more meaningful low. I am bullish on the long term prospects for cryptocurrencies and am researching a number of exciting new technologies in this sector. However, there is still too much optimism and far far too many ‘alt-coins’ still in existence. Many need to go to zero before the clean-out can finally end.

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Sterling Strength

Sterling Strength

Despite all the noise that surrounds the ongoing Brexit talks, it is interesting that GBP has strengthened by 5% in recent weeks versus both EUR and USD. Any additional rally by GBP versus EUR and sterling will break below the consolidation triangle that has been in place since 2016. A meaningful rally could be starting. Relative to USD, a similar setup is taking shape. The chart on the right shows that GBP is showing relative strength versus USD and improving momentum, despite the 2018 decline in this relative currency pair. We still need to get through the next couple of months of political maneuverings as the 29 March deadline approaches, but I continue to believe an opportunity to add an allocation to UK assets may be close at hand.

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The Correction Begins....

The Correction Begins....

Last week I noted how many were taken aback by the sharp -20% plunge in global equities in December. A glance at some of the technical charts would have been enough to warn investors of the broad deterioration that was taking place beneath the surface. The information was in plain sight for those to cared to take a closer look. For example, the $OEXA200R captures the the percentage of stocks trading above their long-term moving average. It corrected sharply in 2018 despite the US equity indices making new highs in September.

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New Highs & Lows On NYSE Back in Balance for Now

New Highs & Lows On NYSE Back in Balance for Now

Yesterday, I discussed the relief rally underway in stock markets, which was fast approaching overhead resistance. I expect the long-term moving averages that are now coiling lower will cap the recent run. We should now expect a re-test of the December lows in the weeks ahead. IF those lows hold, or are taken out but the market then recovers, we have a set up to get long equities again. If the lows give way, then the downtrend will resume and cash will remain the favoured position. I monitor the number of stocks making new highs versus those making new lows on the NYSE each day….

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Oversold Rally

Oversold Rally

We have had the sharp correction,. Now it is time for stock markets to rally. I am watching closely to see how far they can juice the market higher before heading into trouble. The relative strength and momentum indicators are oversold but still in a sharp downtrend. My guess is that stock markets need to re-test the lows at a minimum before a more sustained rally can commence. Today is options expiration in the United States, so often prices can get manipulated in the short-term. The next few weeks should provide meaningful information as to the health of the stock market.

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Bearish Trend Still in Force

Bearish Trend Still in Force

Regular readers will know I rely heavily on technical analysis and reading the charts to assist me in forming my views on global markets. It has definitely helped me navigate the volatility of the equity markets in recent months and steer clear of the downdrafts. Many were taken aback by the sharp -20% plunge in global equities in December. However, a glance at some of the technical charts would have been enough to warn investors of the broad deterioration that was taking place beneath the surface. The information was in plain sight for those to cared to take a closer look.

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Sterling Performance Mrs. May

Sterling Performance Mrs. May

Sterling has been consolidating between €0.82 and €0.94 for over 2 years following a greater than -30% decline in the currency versus EUR in 2016. Today, the UK parliament votes on Teresa May’s Brexit plan. Odds are that May will lose the vote. If she loses by a significant majority, watch for $EURGBP to break out higher from the triangle consolidation as GBP resumes its decline versus EUR. An unexpected vote in favour of May’s plan would see a sharp rally in GBP and a break lower from the 2-year consolidation. While it is not possible to predict the outcome of this afternoon’s vote, I can assign a much higher probability to the longer-term direction of $EURGBP following the break higher or lower from the pattern below.

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Renminbi Volatility vs Gold

Renminbi Volatility vs Gold

Last October in ‘As Good As Gold’ I referenced China’s long-term intention to replace the United States as the world’s global superpower. China has a lot of work to do. As part of the process, China needs to provide an alternative to the US dollar as the world’s reserve currency. China is making some progress in this regard. Since 2016, renminbi volatility versus gold has declined sharply and in recent weeks, the currency has rallied sharply relative to gold. The renminbi experienced quite a difficult end to 2018 but as the new year turned and the currency reached the lower support range versus gold that has been set over the last three years, the renminbi rallied sharply…

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