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Technical Market Indicators
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November 21, 2015
Expectations Of More Fiat Currency Printing Saved Markets Again
Preview from my weekly report*
The chart on page 1 [not shown here due to space limitations] shows a current example of The Fan Principle: breaking the third trendline is usually an indication that prices are headed lower. (Murphy, John J., Technical Analysis of the Financial Markets, New York Institute of Finance, 1999, page 76.) This is a long-term chart of the S&P 500 covering more than 7 years, the entire bull market since 3/6/2009.
Traders have come to expect that global central banks will intervene to save the financial markets every time the markets look dangerously weak,
Indeed by Friday, the European Central Bank president Mario Draghi reaffirmed the long-standing inflationary bias: "If we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible." The next ECB monetary policy meeting will be on Thursday 12/3/15. When central banks inflate the quantity of fiat currency, much of that new "money" flows into global securities, inflating their prices.
We can't be sure how long this market manipulation will continue before a financial accident. The financial system is fragile, as we saw in 2008, and history shows that markets can't always be controlled. As we have been saying, global securities markets remain caught between tangible economic weakness on one hand and potential central bank monetary policy changes on the other, thereby creating a volatile, high-risk, roller-coaster challenge for investors.
For the short-term, the minor trend for the stock market, which changes very frequently, may have turned up, and a test of the highs might be possible for some of the strongest sectors and stocks. Further price volatility at any time, including both sharp rallies and declines, would come as no surprise, however.
Looking at the whole year 2015, stock market upside momentum has been deteriorating as the year has established a choppy trading range and multi-year trendlines were broken.
Traders and investors should carefully manage their risk exposure and be prepared for continuing and possibly even greater volatility just ahead.
Currently, most of the large-capitalization price indexes are back above their widely-watched 200-day SMAs, while small-cap and mid-cap indexes are below their 200-day SMAs. In addition, everything related to the production of commodities is still below 200-day SMAs. The 200-day simple moving average is widely regarded as an objective measure of trend strength (price above the 200-day SMA) or trend weakness (price below the 200-day SMA).
Of 32 major global financial instruments ranked, 11 (or 34.4%) are above their 200-day SMAs. That is an improvement compared to the previous week, when only 4 (or 12.5%) were above their 200-day SMAs. Still, for all but 3 of the 32 instruments ranked, the 50-day SMAs are below the 200-day SMAs, suggesting longer-term trend weakness. That is not what we might expect in a bull market.
The instruments below their 200-day SMAs on the above list [not shown here due to space limitations] are thought to be in bearish medium-to-long-term trends. The relationship of price to the 200-day SMA is generally considered to be an objective measure of trend strength, and instruments trading below the 200-day SMA are thought to be in relatively weak positions. Generally, it is a good strategy to avoid instruments that are weak like that. The list above indicates that most global markets remain weak and bearish. (See all of these charts by scrolling down in this report.)
The full report offers clear and unbiased guidance on the following each week:
• Global stock markets
• The Defensive stock sectors
• The Health Care sector
• The Cyclical sectors
• The Technology sector
• The Financials sector
• U.S. bonds and notes
• Commodities (Oil, Metals, Agriculture)
• Objective Quantitative Rankings for hundreds of Exchange Traded Funds
Now is the time to take action. Preserve your capital by placing your assets under our careful management--before the next major bear market of -20% to -50% devastates most portfolios.
Make no mistake, the ongoing global economic and financial crisis has not been fixed by any sound or lasting solution. History shows that the authorities will not protect you or give you any advance warning--but we will.
If you agree that making money while staying safe is better than taking big risks in the stock market and exposing your nest egg to potentially ruinous losses, we would be very happy to implement our time-tested strategies for all of your assets. It makes good sense to choose protection--especially at this time when the financial world is stretched out of proportion.
We are always happy to discuss your goals and concerns and answer all your questions.
Call us now for a free consultation.
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My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.
Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.
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