Update July 23, 2018

 

Growth Style & Information Technology but not Emerging Markets. The main outlooks predicted at the beginning of this year have been proved wrong. Bitcoin could have completed the corrective phase.

 

InchCapital Platform – MSCI ACWI IMI NET TR LOCAL versus JPM GBI – DJ UBS Commodity – Gold – Updated for July 19, 2018

 

As evidenced by the article published on Monday, the intermarket analysis still highlights the primary interest of investors in the equity markets compared to bond and commodity markets, the latter still in evident decline.

At the beginning of the year, the principal merchant banks and strategists had forecast an outperformance of the emerging markets after years of underperformance versus the developed markets. This prediction has been shown to be false as evidenced by the performance of the MSCI emerging indices both in USD and in local currencies.

 

InchCapital Platform – MSCI Emerging USD – weekly bar chart – updated for July 20, 2018

 

InchCapital Platform – MSCI Emerging Local – weekly bar chart – updated for July 20, 2018

 

What happened on the stock markets in this first part of the year? From the ARC analysis (absolute, relative and comparative) of 332 stock indexes we note, compared to the last analysis of 11 May 2018, the substantial confirmation of the secondary indices such as Venezuelan index of Caracas, Merval index of Buenos Aires and other emerging exchanges such as Egyptian, Tunisia and Kazakhstan indices.

However, these are peripheral markets and do not have a decisive weight in terms of attracting structural liquidity. Actually, investors continue to prefer Information Technology & Growth style and everything it stands for such as SOX, TecDax, MSCI IT, Nasdaq 100, Russell 1000 Growth, D.J. Large Cap Growth and S & P600 small caps index Growth.

 

InchCapital Platform – The Top Five stock indices in the world – weekly bar chart – update July 23, 2018.

 

However, if this is the current state of affairs, let’s now see what we can expect for the next twenty trading days, based on quantitative forecasts

 

InchCapital Platform – Stock indices in the world listed by reward-risk ratios – update July 20, 2018.

 

The table view above shows the list of 332 stock indices based on the trading chance proposed in terms of reward-risk ratios. In other words, the first on the list is the Italian index ALLSTAR with a ratio of 10.72. This ratio highlights that against a certain risk represented for example by 1 euro or 1 dollar, the investor can have a reward of 10.72 euro or dollars, provided for the end of the next month, as shown in the chart below.

 

InchCapital Platform – FTSE ALLSTAR – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – FTSE ALLSTAR – daily bar chart – update July 23, 2018.

 

How to use the indications of the statistical approach based on the search for repetitive patterns within the whole time series?

The two different technical and quantitative approaches will have to be merged. As evidenced by the Inch platform, the FTSE ALLSTAR index has been in the corrective phase since the beginning of the year. This index highlights weakness (MT Ranking = Weaker) compared to the performance of the other 332 equity indices. It also shows a short trade position and only one first possible sign of exhaustion is represented by the bullish turn of the daily trend stage.

In essence, this latter weakness is more likely to be inertial and final. Therefore, it will be possible to open a long trade at the first buy signal highlighted by the Inch Platform.

The same considerations apply to all other indices, which have a reward / risk ratios equal to or greater than 3 and which are all in short technical position with bullish statistical potential pattern predictions. These include the Tokyo JASDAQ index, which for the reasons explained above, may have closed the corrective phase in progress since the beginning of the year.

 

InchCapital Platform – JASDAQ – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – Jasdaq – daily bar chart – update July 23, 2018.

 

BOND MARKETS

With regard to government bonds, we analyzed the trend of ten-year rates of all the major countries in the world. The trends do not show substantial changes compared to the previous months regarding the weight held by institutional investors in the portfolios. Only exceptions are two markets such as Italy and USA.

 

InchCapital Platform – BTP Italian Government Bond interest rate 10Y – weekly bar chart – update July 23, 2018.

 

The Italian 10-year (BTP) has repositioned beyond the 2,500-2,450 area and until it returns to levels below 2,450 it will tend to offer investors a rising Risk Country, especially when compared to similar 10-year in euros such as the Spanish (Bono), French (OAT) or Germans (BUND).

 

InchCapital Platform – TNOTE US Government Bond interest rate 10Y – weekly bar chart – update July 23, 2018.

 

The T-Note continues to be sold as well as all overnight, 1 month and 2 months LIBOR as well as the T-Bill. The rate structures in both the short and medium / long term in the US are all bullish and this is reflected in the reduction in the weight of the bonds in the portfolios for the benefit of equity.

 

COMMODITIES

 

Nothing special to report except the constant weakness of precious metals and copper that is opposed to the possible interest in energy in a broad sense.

 

InchCapital Platform – Copper LME – daily bar chart – update July 23, 2018.

 

BITCOIN

 

It is very likely that Bitcoin has completed the correction that is characterizing this whole first part of the current year. The quotes versus all the major currencies of the world are characterized by bullish reversal patterns and quantitative prospects in line with a progressive recovery of the quotes.

 

InchCapital Platform – Euro vs. Bitcoin – daily bar chart – update July 23, 2018.

 

The picture shows the daily bar chart with a bearish reversal pattern (Head and shoulders) and the ongoing short trade.

 

InchCapital Platform – USD vs. Bitcoin – daily bar chart – update July 23, 2018.

 

The picture highlights the daily bar chart concerning USD vs. Bitcoin and the same bearish reversal pattern (Head and shoulders) of the Euro vs. Bitcoin. The trade is short.

 

InchCapital Platform – Cryptocurrencies listed by reward-risk trading opportunities – update July 20, 2018.

 

Bitcoin versus all major currencies highlights all bullish quantitative perspectives for the next four weeks, as is clear from the charts below

 

InchCapital Platform – BTC vs. CAD – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – BTC vs. AUD – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – BTC vs. CHF – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – BTC vs. JPY – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

InchCapital Platform – BTC vs. NZD – Pattern Prediction for the next 20 trading days – update July 20, 2018.

 

Conclusions:

Equity markets continue to be preferred by investors over other asset classes. Among these it is evident the interest for all that is GROWTH and Information Technology. Bitcoin shows signs of a bullish recovery for the first time after six months of correction.

Update May 11, 2018

 

Macro

Compared to our latest update of 9 April, we see the gradual recovery of stock markets that now are at the top of all financial markets, according to our spread analyses between Equity and respectively Bonds, Commodities and Gold.

 

Spread Analyses MSCI ACWI IMI NET TR vs. JPM CBI (Bond), DY UBS Commodity (Commodities) and Gold. 

 

The outlook is still favorable with regard to the expectations on earnings for the current year and for the next year and therefore sentiment again became to be more favorable towards risk in a broad sense. The global growth showed an increase of + 3.9% in 2017, while for the current year the IMF forecasts updated in April set a further increase to 4.9%.

 

 

The estimates are confirmed by the performance of the Baltic Dry Index, which shows a potentially bullish trend for the coming months.

 

 

The index represents the trend of the costs of maritime transport and freight rates of the main categories of non-liquid cargo ships and represents a global benchmark for measuring the health of the global economy (https://it.wikipedia.org).

 

 

After many years of contradictory and sideways trends, the index has tested the long-term average for the third time and is preparing to test, in the next few weeks, the first supply-line of 1740 over which it will prepare to test the second more important supply-line at 2340.

 

Equity

The strength of the Equity is evident as we have already discussed in our previous article of May 12 (The Inch Magazine – May 12th, 2018) in terms of DSS as it is immediately perceived by the prevalence of the green color of the map updated to Friday 11 May 2018

 

 

Compared to the previous bullish phases of 2017, there is a greater comparative strength of Europe and Japan compared to other geo-economic areas. So what is expected for this second part of the year is an over performance of: Germany, France, Spain, Holland and Japan.

According to the analysis of the strongest stock markets in the world, updated to 11 May 2018 and based on the trend / momentum DSS, are confirmed some stock markets already present in the previous analysis of 9 April.

These are Kase Index (Kazakhstan Stock Exchange), Egypt CASE 30 Index (Egypt Stock Exchange) and Oslo Stock Exchange read more previous issue (The Inch Magazine – April 20th, 2018)  the latter already reported on 20 April as the strongest equity index in Europe.

There are also other secondary new entries such as Tunisia, Colombia, Jordan and Finland. Extending the analysis to the medium / long term, there are strong interests of investors towards the Information Technology sector. The TecDax index (https://it.wikipedia.org/wiki/TecDAX) recorded new highs compared to the previous top of 2017. The indices of PHLX Semiconductor Sector and MSCI World Information technology, on the other hand, showed buy signals with the last weekly closing of the May 11, 2018.

 

 

 

 

The Tecdax index together with the German MDAX, DAX and AEX (Holland) stock indices had all been proposed as low-risk quantitative opportunities in the previous analysis of April 9th (see above). Let’s go and take a look at what happened.

 

Tecdax

The comparison highlights the forecast formulated at the daily closing of 6 April in terms of potential increase / decrease in the index for the subsequent twenty trading days and what then occurred from the opening of the markets on April 9th until the daily closing of May 11th, 2018.

 

TecDax – Previous Forecast Updated April 6th, 2018

 

TecDax – daily bar chart – period from April 6 to May 11, 2018.

As for the TecDax we had a maximum linear drawdown of 0.8% and a potential increase of 8.14% at one calendar month. In fact, the stop loss was not activated and the increase was at the weekly closing of 11.18%. The forecast has come true. We highlight the other proposed indices below

 

Dax 30 – Previous Forecast Updated April 6th, 2018

 

Dax 30 – daily bar chart – period from April 6 to May 11, 2018.

 

German MDax – Previous Forecast Updated April 6th, 2018.

 

German MDax – daily bar chart – period from April 6 to May 11, 2018.

 

AEX (Netherlands) – Previous Forecast Updated April 6th, 2018.

 

AEX (Netherlands) – daily bar chart – period from April 6 to May 11, 2018.

 

Let’s go now to see what the Inch platform offering for the next twenty trading days.

 

As can be seen immediately from the first fifteen indices listed for reward risk ratios, it should be noted that most of the bullish forecasts concern American stock indices that could just take over Europe for the next calendar month, rebalancing what has been highlighted so far in terms of relative strength.

It is also important to note the strong Warning on the CAC 40 index and the ISE 100 index (Turkey). For these two equity markets, trends are expected that are contrary to the current technical positions, i.e. bearish perspectives for the CAC40 and bullish forecasts for the ISE 100 (Turkey).

 

Cac 40 – Pattern Prediction for the next 20 trading days – May 11th, 2018

 

Cac 40 – daily closing 5541.90 – May 11th, 2018.

 

Conclusions

The stock market is reconfirmed as a strategic asset preferred by most investors, always looking for returns that can justify at least management costs. The choice of geo-economic areas and sectors will be of fundamental importance for recording the best performances of the year.

 

Update for April 9th, 2018

 

Equities

One month after the last monthly review, there were no particular signs of failure with regard to the performance of the main equity indices. The overall picture is weaker for equity both in absolute terms, as evidenced by the stock market DSS map (InchCapital Platform), and compared to the performance of the bond markets, gold and commodities.

 

Map of all the DSS in the world at the closing of the stock markets April 6th, 2018

 

Compared to the previous month, the visual communication highlights the progressive deterioration of the green color to the advantage of the red shades, which have been affirming themselves in the last two months of February and March. The situation is not dramatic and can still be included in the corrective phases. The countries most affected by pressure for sale, as Malaysia, Thailand and Russia do not have the weight to impose structural strategic rotations.

 

Equity versus Bond, Commodities and Gold.

 

Spread analysis between stocks in the world (always in the numerator) versus, bonds, commodities and gold, highlights in this phase the weakness of the global equities in terms of relative strength. In essence, we are still in a corrective phase, which, however, could close shortly, re-presenting the themes of the underlying long-term uptrend trends, still present with regard to the most important stock markets in the world.

 

The world’s strongest equity indices April 6th 2018.

 

 

Kazakhstan. This stock index does not know no pause. It continues to surprise for its strength, expressed by its trend and momentum. The economic forecasts for the two-year period 2018/2020 (Tradingeconomics.com) are excellent and the effects of the real economy on the financial side have been constant for over two years.

 

 

Peru. In this case, we are dealing with a secondary market with excellent economic prospects (Tradingeconomics.com), which now shows new relative highs, higher of those achieved by the other main equity markets at the end of January.

 

 

Egypt. Changing continent, we see how the Egyptian stock market increased its bullish angulation in 2018, accelerating progressively in this first spring phase of the year. For this country, the GDP growth rates (Tradingeconomics.com) are well above the average of those shown by the main developed countries.

 

 

 

Vietnam. Two equity markets with the same result that is constant rise. The two equity markets merge into one ETF (Db X-Trackers Ftse Vietnam Ucits Etf isin code LU0322252924 EUR) which is among the strongest (in terms of trend / momentum DSS, see amplius infra DSS: Services for Professional Investors) in absolute of all the listed categories. In fact, for this country the growth forecasts (Tradingeconomics.com) are double those estimated for the first two stock indices listed above (Kazakhstan and Peru).

 

Developed countries

Among the various geographical areas concerned, we have analyzed all the main equity indices in the world and we have listed them for benefit/risk ratio using the perspective analysis (amplius infra: Predictive Analytics Solution) relative to the following twenty sessions subsequent to April 6, 2018. Below we highlight the most interesting forecasts, which are proposed for the period April 9th / May 4th 2018.

 

 

More precisely

 

 

 

 

 

As you can see from the list shown in the table, the best prospects are focused into Europe, especially as regards the driving Germany leader, positively supported by the Dutch and Luxemburg countries.

In short, therefore, we cannot exclude that the markets can gradually recover in the coming weeks with a greater potential, probably for the European economic and financial realities. We will see above all if the S&P500 index will manage to stabilize beyond the first resistance area 2672.00 / 2675.00, as well as the DAX30 index is expected to test the area 12450.00 / 12600.00.

The beginning.

World – March 9, 2018. Equity markets – The bullish trend is not finished: the synthesis leads us to Information Technology and Robotics.

Premise

The most important issues of this 2018, which is about to close its first quarter, concern topics we have already heard about during the course of 2017.

Among these, we can mention a progressive increase in the interest rates in the United States and second in Europe, possible rise in inflation, salary increase, over performance of Emerging Markets after five years and more of underperformance compared to the traditional equity markets.

To all this, however, it is necessary to add the “historical” novelty that is outlined with the new American protectionism and the inevitable reflexes that will be recorded on the development estimates of the various GDP in the geo-economic areas.

In this intermarket context it becomes rewarding and strategic do not miss the timing of rotation from one market to another because anticipating potential turning points could cost dearly in terms of underperformance compared to the performance of both the benchmarks and the main competitors.

Equities

From a global standpoint, the stock market does not currently show bearish signals of medium / long-term, such from to foreshadow a trend reversal. Although it has been substantially nine years since the bullish phase started by the driving effect of the main American stock indices.

The inflow of liquidity is still very substantial and does not allow an immediate and sudden turnaround. Therefore, it is more likely to see the upward acceleration of secondary geo-economic areas accompanied by the contextual over performance of GROWTH styles and securities linked to the Information Technology sector, while the main benchmarks should always have a tendency to rise, but less pronounced and more inertial than propulsive.

 

 

From the analysis of all the stock markets in the world (71 countries) highlighted in the map provided by the Inch Platform we can benefit from the immediate effects of visual communication.

In fact, one immediately perceives both the best predispositions to the purchases of the American and Chinese stock exchanges in one to the renewed interest in Brazil, thanks to the color closer to the green, and those of the various geo economic areas in which the equities world was subdivided, where interest in the North American area substantially prevailed.

The green color highlights the prevalence of bullish positions based on trend and momentum DSS (InchCapital Platform – Professional Investors Services) of the stocks listed in that country compared to the bearish and neutral positions. On the other hand, the red color highlights the opposite situation where the bearish positions prevail compared to the neutral and bullish always on the total stocks traded in that country.

As a result, the more green the color becomes intense and the higher the percentage of bullish positions with respect to the total number of listed stocks. The more red the higher the percentage of the bearish positions will always be compared to the total number of stocks listed in that country.

The sizes of the squares and rectangles in the map are directly proportional to the number of securities listed in the stock markets of the individual country without overlapping for the same security if there are more local stock exchanges or specific markets.

Comparisons

The MSCI WORLD IMI NET TR LOCAL index covers the entire world of stock in local currency, thus avoiding the distortionary effects created by the exchange rate. Its ARC rating (Absolute, Relative and Comparative) is still decidedly bullish when compared to the bond and commodity markets.

Main equity indices:

Among the main top ten equity countries by capitalization (https://en.wikipedia.org/wiki/List_of_stock_exchanges) the American presence is absolutely overwhelming. Adding the capitalization of the NYSE to NASDAQ, we obtain a result that is more than five times higher than the one highlighted by the NIKKEI, which occupies the third position.

In the fourth to seventh and eighth place are the three stock exchanges in Shenzen, Hong Kong and Shanghai, which together account for twice the capitalization of the Nikkei index, confirming that China is directly or indirectly the second largest company of the planet.

Finally, at the tenth and twelfth place we see the presence of India with its two stock markets of Mumbei.

Emerging Markets.

In this context, the equity indices of the main “so-called” Emerging Markets stand out. So-called because as we have seen, both China and India cannot be considered as emerging economies but already emerging economies that are expanding.

After years of under-performance, compared to the main equity indices, emerging markets are progressively increasing, thanks above all to the good performance of Brazil and China. This other over-performance is also contributing to other local stock markets characterized by a brilliant macro-economic trend such as Peru (www.worldbank.org) or from a consistent demographic presence and growth such as Egypt (www.worldbank.org)

The perception of the Emerging Market risk by institutional investors has changed and it is unlikely that it will re-enter in the next few months given the quality expressed by the ongoing bullish phases. The exchange risk seems to be widely hedged and mitigated by the available hedging instruments.

One of the most fitting examples in this regard is represented by the recent performance of the BOVESPA index, which manages to overcome the exchange rate risk, especially against the Euro.

 

 

 

 

 

 

Sectors

U.S.A. The strongest sectors are the Information Technology and the Industrial. The first subdivided into the various sub-sectors highlighted in the last week new highs that objectively confirm the continuation of the bullish trend after this last correction.

We remind that this sector, in which we can list the FAANMG (Facebook, Amazon, Apple, Netflix, Microsoft e Google), has an important capitalization compared to the overall American market and will be very difficult to see a true correction until this sector will continue to record new tops as it did last week.

 

 

The chart shows the performance of the S & P Information Technology sector index, which closed on Friday March 9, 2018 at 262.68 and has bullish targets not yet reached at 271.27 and 279.26. This main sector index will not record major primary corrections as long as the psychological level of 225.00 will support the current bullish long-term trend. Therefore, now we cannot prefigure a primary corrective phase precisely because objectively there are neither signals nor premises.

It is true that the strongest are the last to fall, but until in an economic and technological revolution, such as the one we are experiencing in recent years, this index will not give in and I do not think that the global stock environment can detect significant corrections. Read more: S&P Information Technology.

U.E. Also in Europe the Technological and Industrial sectors are the strongest of the Stoxx600 index. The technology sector (closing at 457.66 on March 9th, 2018). It has recently given a buy signal, destined to test soon the resistances of the reported area 464.00 / 468.00.

 

 

 

Until it is detected at psychological levels below 400.00, this sector index is bound to violate the most important resistance present at 468.74 then go to record a new top in detection area 490/510. Read more: STOXX600 TECHNOLOGY

The industrial sector (closing at 528.86 on March 9, 2018) is preparing to give the same signal shortly.

When the supply resistance of 536.10 will be violated on the upside, the index will go to test the next resistance present at 562.85, which, if violated, will allow reaching new highs in detection area 580/590. Just below 486.62 will be a bearish perspective. As long as this last level will support the corrective stages, the chances of registering new highs will always be greater. Read more: STOXX600 INDUSTRIAL

 

 

Styles: the synthesis

In line with what was reported, the US Large Cap Growth gives the operational synthesis to us. That in fact defeated the forecasts made a year ago by the main Market Strategists, tending to recommend reducing the weight of the US area to the benefit of greater presence in the U.E.

The US technology sector is stronger than the European one: it has already recorded new highs and can count on a basket of world-class stocks.

Well, the strongest fund, in terms of trend and momentum, of the Large Cap Growth category is the Morgan Stanley Investment Funds US Growth Fund A (EUR) (isin code: LU0073232471). This fund has recorded new highs recently and shows no signs of deceleration.

 

 

On March 9, 2018, the NAV was recorded in Euro at 111.25 (there is also the B version in USD) and until it will record a lower value of 104.32, it will reach at least 116.00.

Alternatively, after evaluating the costs, you can bet on two ETFs, the first of which always refers to the Information Technology U.S.A. (Lyxor Ucits Etf Msci World Informat Tech  isin code: LU0533033667 – EUR) while the second to the Industrial Robotics sector (Robo Glob Robotics and Auto Go Ucits Etf isin code IE00BMW3QX54 – EUR).

 

 

Regarding the first, which closed Friday (on March 9, 2018) at 221.40 the level of protection is at 208.50 and the minimum targets at: 214.15 and 235.00. In this case, the weight of US stocks is reduced to about 85% in favor of other Japanese and European securities. The difference is minimal compared to the fund, because even in this case we register new tops even if with a lower acceleration.

 

Finally, with regard to robotics, the buy signal took shape on Friday March 9, 2018 with the closing of this ETF at 13.81. In this case, the stop loss level is at 12.50 and the attainable targets are planned to 14.40 and 14.80.

 

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