Thursday, April 05, 2012

Global Equity Markets as at April 5, 2012

When we looked through the major indices, it's that the US markets are still in an uptrend that began in 2009. From the charts for S&P500 & Nasdaq composite index, you will see that the 200-day SMA line has been rising steadily for the past 3 years. This SMA line had only dipped slight from August 2011 to February 2012 due to the sharp selldown caused by the Eurozone crisis. Since March 2012, the 200-day SMA line has curved up again. This means that the US markets are likely to continue in their uptrend, albeit some correction may set in after the strong rally over the past few months.

 Chart 1: S&P500's daily chart as at April 4, 2012 (Source: Stockcharts)

Chart 2: Nasdaq's daily chart as at April 4, 2012 (Source: Stockcharts)

The European markets- being in the center of the Eurozone crisis- are not expected to fare so well. In fact, we can see from the charts for DAX & FTSE that their 200-day SMA line, which hooked down in August 2011, have yet to curve back up.

Chart 3: DAX's daily chart as at April 4, 2012 (Source: Stockcharts)

 Chart 4: FTSE's daily chart as at April 4, 2012 (Source: Stockcharts)

Surprisingly, HSI and STI also exhibit the same pattern as the European markets.Why?

Chart 5: STI's daily chart as at April 4, 2012 (Source: Stockcharts)

Chart 6: HSI's daily chart as at April 4, 2012 (Source: Stockcharts)

I feel that the direction of the 200-day SMA line may suggest that the European markets and the two major Asian markets (Hong Kong & Singapore) may be much weaker than the US markets. Even if the 200-day SMA lines were to hook back up for these markets, the upside may be limited. They may travel the same route that taken by Shanghai's SSEC index since 2011. For European markets, the concern of a rerun of the Eurozone crisis will keep investors on the edge. In Asia, investors may stay cautious due to tight monetary policies instituted to check assets inflation as well as consumer price inflation.

Chart 7: SSEC's daily chart as at April 4, 2012 (Source: Stockcharts)

How does Malaysia compare to its Asian counterpart? The movement of the 200-day SMA line for our FBMKLCI is quite similar to those of the US markets. Does this mean that our market may have more underlying strength than we perceived? What could be the basis of this strength? Could it be attributed to the promising story of our ETP? However, we cannot run too far with this story because the strength of our market is confined to a few blue chips and MNCs while the broader market is very weak. Our recent rally to a new all-time high was received with skepticism & disbelief.

Chart 8: FBMKLCI's weekly chart as at April 4, 2012 (Source: Quickcharts)

Finally, you may note that I have drawn an uptrend line onto the RSI indicator for S&P500, Nasdaq, DAX, FTSE, STI & HSI charts. The RSI of all these indices are still in an uptrend, which means that the outlook for these indices is still positive. However, a break below this uptrend line could signal a top for these indices.


luckystock2 said...

Hi Alex,
What's your opinion about plantation counters like TDM , Twsplant and Hsplant outlooks in term of technical and prospect? Should we continue to hold or start to take profit gradually?
Tx for ur precious sharings!

Kok-Siang said...

klci index looks similar to US. Can we believe it? Is it due to election effect? Shall we just focus on the chart?
KLCI does not align with other Asia index which are in down trend

Alex Lu said...

Hi Kok Siang,

You are probably right. Like US, we are also in an election cycle. That cycle is generally positive for stocks.

Alex Lu said...

Hi luckystock2

I am generally positive on plantation stocks. As for your 3 stocks, I prefer HSPlant while TWSPlant & TDM have moved up quite a bit. Having said that, TWSPlant is quite interesting. I am about to post on it. It looks like a bullish breakout of an inverted H&S.