2013.01.09 the Global Capitalist - Edition 11

7/30/2019 2013.01.09 the Global Capitalist - Edition 11

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Where do you want to be?

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ANALYSIS INSIGHT AND COMMENTARY TO HELP SHORT, MEDIUM AND LONG TERM INVESTORS IMPROVE THEIR

INVESTMENT DECISION MAKING PROCESS, ENHANCE RETURNS & BETTER MANAGE RISK IN TODAYS CHALLENGING AND FAST

MOVING GLOBAL CAPITAL MARKETS.

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PERSONAL ADVICE. YOU SHOULD CONSULT YOUR ADVISER OR A UGC ADVISER BEFORE ACTING ON ANY OF THE

INFORMATION CONTAINED IN THIS REPORT.

THE GLOBAL CAPITALISTEdion 11

9th January 2013


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Where do you want to be?THE GLOBAL CAPITALIST

BOTTOM LINE: The general technical picture for global stock markets is bullish for 2013, albeit some markets and stocks look a lile

stretched in the short term. The vast majority of major global stock markets appear to be placed bullishly above their medium term

and long term moving averages and many commodies and risk on currencies look poised for a break to the upside if this hasnt

already occurred. This all bodes well for a posive year, at least for the moment.

Chart 1 - S&P 500 Daily

Taking a longer term view of the US S&P 500 index, the US stock market looks poised to connue its move higher over the

coming 12 months. The S&P 500 is trading nicely within the converging support and resistance lines. Should this price acon

connue to hold within these ranges, this all bodes well for a broader move upwards over the coming 12 months, albeit withsome correcons along the way.

I have extended the rising wedge paern out to 2014. Should the wedge paern connue to unfold as it is, this suggests that

we should have relavely clear skies for close to 12 months and maybe longer.

As technicians we need to be mindful that things can change, so always remain prudent. Dont believe for a moment that the

soluons that repaired some of the damage of the Global Financial Crisis (GFC) have solved all our problems. Remember, its

oen the soluons to the previous crisis that create the next.

Right now the index is rising nicely on the back of the temporary resoluon to the scal cli and this has the S&P 500 sing

nicely above its 10, 35, 50 and 200 day moving averages (DMA). While these condions remain, we should remain upbeat.

History has shown over me that you should never discount the USs ability to rally and repair from mes of crisis. While I donot know the future, one should be mindful that there are some signicant long terms trends that are starng to turn in the

USs favour. These trends include the USs ability to innovate and create in areas such as informaon technology. The US is well

placed to benet from the most meaningful phase of the informaon technology revoluon. It also appears that its foreign

energy dependence will likely be solved within the next decade, thanks to new drilling and extracon technology developed for

the Shale Gas formaons deep beneath the earths surface. In fact these discoveries are so signicant and so large that energy

commodity prices such as natural gas and coal have plummeted as a result of these natural gas discoveries. Furthermore, US

oil inventories are bursng at the seams. And if these two major trends weren't enough of an emerging long term tail wind,

one must also consider that the housing bust appears all but over and the housing recovery now appears to be in its infant

stages of recovery.

While the world is a much dierent place today than it was before the GFC and no one can predict the future with any real

degree of certainty, I do suspect that if you are a long term investor with a 10 to 15 year investment horizon, then the greatest

risk to your wealth could be being too risk averse for too long.


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Chart 2 - S&P ASX 200 Daily

It appears that the Aussie stock market might also be emerging from its almost three year funk since the inial recovery from

the Global Financial Crisis.

There is now a clear breakout to the upside out of the 15 month trading range which commenced around August of 2011. The

ASX 200 is now charging higher, albeit on very modest earnings revisions at this stage.

The index is now placed nicely above all its medium and long term moving averages. For the moment, all technical signs are

poinng to higher levels over the coming 12 months albeit a correcon could be due in the short term.

Chart 3 - AUD/USD Daily Cross Rate

Probably much to the displeasure of the Reserve Bank of Australia, the Australia dollar is looking rather bullish against the US

dollar at the moment. The AUD has been consolidang for the past 15 to 17 months against the US dollar but it now appears to

be threatening an upside breakout, one that could take it as high as $1.15 or even $1.20 should it eventuate.

Right now the AUD is breaking above the 10, 35 and 50 DMAs and the 200 DMA has just started to turn up. Generally

speaking, Australian and US stocks, hard commodies and real estate should all benet should this upside break out emerge.

THE GLOBAL CAPITALIST


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Chart 4 - USD/EURO Daily Cross Rate

The USD versus the Euro has broken down conrming the potenal for further USD weakness.

This provides further support for a broad rally in risk assets.

Right now the USD versus the Euro has broken below the 10, 35, 50 and 200 DMAs. The possibility of fresh USD lows versus

the Euro could be on the cards.

Chart 5 - EURO STOXX 50 Daily Futures

The Euro Stoxx 50 Daily Futures is also posioned in a rather bullish posion, sing nicely above the upward slopping 10, 35,

50 and 200 DMAs.

Be sure to click here to look at the fundamental investment prospects for the European region over the next 12 months.

Right now it would not hurt to start considering Europe as a place to deploy fresh capital. Many would be unaware that the

Euro Stoxx 50, despite Europes troubles, has risen 30% since September 2011 and the trend looks anything but weak.

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Chart 6 - London FTSE 100 Daily

The FTSE 100 is also making a move to higher ground and at this stage I see lile reason to suspect that the move higher wont

connue for much of the next 12 months, albeit with correcons along the way.

Remember, the US isnt the only country prinng money in an eort to smulate economic growth. Similar policies are being

employed in Japan, Europe, and the UK. This should be medium term posive for risk assets and precious metals such as gold

and silver.

Chart 7 - German DAX 30 Daily Futures

The German DAX 30 Futures has been on a tear since the middle of 2012 and this index is now threatening to break its pre-

Global Financial Crisis high.

While the DAX 30 appears to be geng a lile frothy, based on the Relave Strength Index, momentum is certainly on its side.

All things being equal, while it might be a bit risky buying in today given the recent move, a buy the dips strategy will more

than likely prove fruiul over the coming 12 months but there are probably beer value markets about.



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Chart 8 - Hong Kong Hang Seng Daily Futures

The Hang Seng has also found its mojo in recent mes but it too looks a lile frothy at these levels.

The move higher has been strong with relavely lile reprieve. A so pull back in the short term would be a very healthy and

welcomed development and would likely go a long way for further increases throughout 2013.

Chart 9 - Japanese Nikkie 225 Daily Futures

Could it be that Japans 20 something year bear market is over?

Unfortunately the Nikkie has been prone to numerous false starts over the past 20 years and the odds of this one being just

another false start are probably much higher than not. Nevertheless, to borrow a football analogy, the more losses you have in

a row, the closer you are to your next win.

One posive sign is that although the Nikkie made several good aempts at trying to retest the GFC lows over the past coupleof years, it has been able to hold above them. There is clearly a oor under this market around 8,400 but a 22% move in two

months is probably a lile rich in the short term.



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Chart 10 - Light Crude Oil Daily Futures

Right now, US Light Crude Oil is locked in a bale over who is going to control the price acon, the bulls or the bears?

Right now US oil inventory is at an all me high on the back of surging US oil producon. As a consequence of new hydraulic

fracturing and horizontal drilling techniques, new and vast amounts of new shale hydrocarbon reserves can now be accessed.

At the other end of the spectrum, middle east tension and unprecedented amounts of money prinng connue to put upward

pressure on the oil price.

Given the pennant consolidaon paern that is forming, we might soon know who the victor is. Watch for the breakout.

Chart 11 - High Grade Copper Daily Futures

The copper price is also consolidang and a break out appears just around the corner.

This could be a very good me to start looking around for copper producers.

If you like the sector and believe that the break out will be one that is bullish, now is as good a me as any to do your homework on the producers you want to buy if the breakout to the upside comes.



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Chart 12 - Spot Gold Daily Futures

Right now it appears as though the gold price likely has further consolidaon ahead of it before it musters a further move to

the upside.

There is very strong support for gold around USD$1,520. If it gets close to that level again, I believe that would be a good place

to be accumulang more exposure.

It appears that in the recent Federal Reserve minutes that some of the members are ancipang a withdrawal of QE at some

stage throughout the year. For this to be a plausible outcome, which would be negave for gold, one would have to be a

believer that the US government would stop running decits, that the Treasury would stop issuing bonds to pay for the decits

and that the Fed would stop prinng money used to buy the bonds the Treasury issues to keep interest rates low. Do you really

believe that such a large scale change will take place this year?

Chart 13 - Spot Silver Daily Futures

Silver is basically following golds lead and the paerns are similar. Major support is at USD$27.

If gold is likely to connue to correct for the me being, its hard to see silver diverge from that.



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Corporate Authorised representave (416388) of Avestra Capital Pty Ltd (AFSL 292464)

Phone: 61 3 8459 2121 | Fax: 61 3 8459 2121 | Website: www.ugc.net.au | Email: [email protected]


2013.01.09 the Global Capitalist - Edition 11

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