|
There is not much joy to be found in the new lunar
year. Markets look grim. There is no joy to be seen. A quick run around the markets tells me that
many markets look set to find four year lows.
Back to 2012 lows. That is not so
dramatic. But that is how it looks at
the moment. When we get to these lows we
need to reassess whether there is more pain ahead.
So in this review I look at the macro outlook and then
finish with the Australian market in particular.
Oil is maybe finding a low:
Click to Enlarge
We might see a small recovery in copper but a deeper low may
also be more likely:
Click to Enlarge
And likewise the FTSE:
Click to Enlarge
The USA S&P looks set to have a less dramatic year:
Click to Enlarge
In that the pullback is more likely to be back to be back to
2014 levels. Of course the USA has one
of the brighter economies but that also makes that market vulnerable to a major
pullback as the US equity markets have experienced an intense run up since the
lows of 2009. Higher you ride harder you
fall.
The Hang Seng, litmus for the Chinese market - looks the
most vulnerable of all – maybe back to 2009 levels:
Click to Enlarge
The China factor is also reflected in the Materials index:
Click to Enlarge
This is a broader index which covers agricultural as well as
mining materials. It covers basically
all that goes into manfucaturing.
Everything.
The Australian dollar preempted these lows and is already
down to 2009 levels:
Click to Enlarge
But may be reaching a low.
The XAO projection is less severe:
Click to Enlarge
But the Australian market could easily see 2012 levels in
just a few weeks.
What we rarely see on a chart is the capitulation
factor. For example in the above chart
we see a wave five low at about 4400.
This does not look too scary. But
if we were to see a sudden fall then this could cause panic and we might see a
more frightening low as investors just throw it all in and head for what will
be once again more crowded exits. ‘Get
me out at any price’ becomes the catch cry.
And yes cry as the greed now becomes fear.
So all in all this is not a great start to the year. It is early in the year to predict what sort
of finish to 2016 we could see. And
there is probably not much point in attempting such a forecast. We need to find a low first.
There are no good reasons to buy equities –
except maybe factious money. But there
appears to be more reason to sell.
Enjoy the ride
Tom Scollon
|