 New Gold Bull Market Rally Or A Bull Trap Gold has started 2017 similar to 2016 with a strong performance, as well as outperforming most asset classes year to date. (See chart below). This out performance so far has shocked the market as Gold had been under performing the market since Trump won the election in November. Now that Gold has rallied strongly in the first 2 weeks many investors and traders are now wondering if Gold will continue its out performance and generate another positive year for Gold.  Gold YTD strongly out performing major asset classes. Click chart for source Gold Monthly Chart Review The monthly trend of Gold since 2011 does not bode well for the shiny metal over the long term. Since reaching the highs of just over $1,900 some 6 years ago, Gold has been on steady decline and still well within its long term downtrend. This is despite recording a positive gain for 2016. The recent strength of Gold in January has pushed the price above resistance of $1,205, which is its first level it needs to close above by the end of the month. With approximately 2 weeks to go before the month is over its early to confirm the break of resistance. Provided it can sustain the rally in price this month Gold will find its next level of resistance along its blue down trend line, which is currently around $1,310 - $1,315. If Gold were to continue its strong performance over the next few months closing above its downtrend and $1,350 resistance level on a monthly basis. This would result in Gold making a reversal of its 6 year downtrend and starting a new bullish uptrend. This scenario I believe is unlikely based on the current trend as well as the technicals. Monthly Momentum Suggests Rally Is Temporary Within the monthly chart I have added a Stochastic indicator that measures momentum. I utilize this indicator to assist in determining the overall strength of the trend and for trend reversals. In 2016 the stochastic momentum was bullish as the Gold price for the first 7 months was rising. Once Gold stalled and began to fall as it reversed its trend, the Stochastic indicator had crossed over to the downside and began to fall, confirming the uptrend was over. (See circled area within Stochastic indicator) Observing the stochastic indicator on the monthly chart you can see that momentum continues to head lower suggesting the reversal that started in August last year will continue over the longer term, despite the strong rise of Gold this month. Note: 1. Stochastic Indicator is a lagging indicator. 2. The Stochastic indicator should not be utilized in isolation but rather in conjunction with other indicators to determine direction.  Weekly Gold Chart Review The weekly chart of Gold suggests there is potentially more upside coming in the medium term as the price heads towards its weekly alternate downtrends. (See chart below) Gold comfortably surpassed its prior $1,176 resistance level and now forms as new support level. This new support level is an area to watch out for when Gold retraces. Key Levels To Watch As Gold Rally's For investors and traders looking for higher prices for Gold, the key areas to watch as it moves higher is the $1,250 resistance level. In addition its important to note the 2 alternate downtrend lines that have developed to watch out for as overhead resistance. These downtrend levels are $1,240- 45 & $1,285 -90. Weekly Stochastic Turns Bullish One of the reasons I believe at least within the medium term that Gold will make higher prices is the fact that Stochastic has crossed to the upside and confirms the change of trend within the weekly chart. (See circled areas on chart) This also suggests that momentum is on the bulls side for now. Most likely target over the coming weeks is for Gold to hit resistance level of $1,250 before consolidating, as this target area has previously struggled to initially close above in 2016. Lastly for the weekly chart review, if Gold fails to hold above the $1,176 support level in the coming weeks. Look for Gold to retrace all the way back to $1,132 support level.  Gold Daily Chart Review The price action of Gold on the daily chart has been very strong over the last 2 weeks, with the vast majority of trading days Gold has closed higher as shown by the consecutive blue candles. This sudden burst has created a very sharp uptrend line for Gold as shown by the blue trend line at the bottom right of the chart. This is important to note because usually the steeper the trend line in either direction the harder it is to maintain the trend. Overnight the price closed above $1,207 resistance level and now forms support on a daily basis. The next major level for Gold to reach is the $1,250 level of resistance. However based on the current downtrend that Gold is still trading within, I believe Gold will also find it difficult to close above the resistance of the first downtrend line of $1,242 -44. Gold's Momentum Approaching Peak Level The stochastic indicator shows that momentum is still in support of the current rally on the daily chart with blue line above the red line. However the Stochastic indicator in most instances peaks out above the 90 level and eventually begins to fall. I have circled the prior 2 instances this has happened on the daily chart to illustrate what to look out for. Note: The price action can continue to move higher in the short term if the Stochastic is above 90. It's more ideal to wait for stochastic to cross over and move lower for confirmation of potential reversal of trend. Summary From the review of all 3 time frames for Gold I believe we will be seeing a consolidation / pullback in the price of Gold soon. After a brief consolidation Gold will make another attempt to head higher over the medium term. However the longer term prospects for Gold are not as favorable as Gold will run into strong resistance around $1,310 - $1,315 level based on the 6 year long downtrend line on the monthly chart. Therefore the recent strong rally of Gold is most likely going to be a bull trap for investors who are holding it for the long term. However if your time horizon is shorter there will be opportunities in 2017.  Thanks for checking out my latest chart review on Gold.
For Crush The Market's most recent chart review article click: Suncorp Group Set To Break 2 Year Slump For any one who may of missed a previous macro article or wants a refresh on some of Crush The Market's 2016 macro posts you can view them by clicking below: Holiday Macro Reading Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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I would like to personally thank all the viewers of Crush The Market. Crush The Market has been running for only a couple of months now and already I have received so much support, with followers sharing/liking posts. Without you the viewers, there would be no Crush The Market, so thanks for providing the opportunity to share my thoughts and ideas to you in 2016. I would like to also wish everyone Happy Holidays and a safe and relaxing time off over this period. Holiday Reading / Entertainment For any one who may of missed a previous macro article or wants to refresh on some of Crush The Market 2016 macro posts you can view them below: The Perfect Storm Set To Pop Aussie Apartment Bubble Bringing The Economy Down With It Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy US Economy Continues To Weaken As Warning Signs Flash Recession Ahead How We Lost Control Of The Real Economy By Trying To Control Everything Global Real Estate Bubble Begins To Pop Like Dominoes Macro Views On the US and Global Economy - Peter Schiff One of my favourite places I visit weekly for macro views on the US and Global Economy is the Peter Schiff Channel. If your not familar with Peter Schiff and would like to check it out click below: www.youtube.com/user/SchiffReport Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. If you have done so already to Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar.  Suncorp Group (SUN) Chart Review - Monthly Chart NB: Charts prepared before the close of 19/12/16. Suncorp Group shareholders have something to cheer about this Christmas in 2016, after several years of slow declining prices Suncorp Group looks set to finally close above its 2year downtrend. For this chart review I have pulled the data over a much longer period than usual (Hence chart appearing condensed) to give you a good overview of the performance of this stock since 2007, together with some longer term resistance levels. The first initial thoughts are that you will notice that the stock has still not recovered from its 2007 highs around the $19 a share range. On the positive side after collapsing in 2008 and 2009 to a low of around $4 a share, the stock like the overall Australian stock market has made a strong recovery albeit not at new all-time highs at $13.47. Supporting Long Term Trend Suncorp is showing a strong and healthy uptrend since making the lows in 2009. You can see there were a few unsuccessful attempts to close below the uptrend only to recover during the month. After a few years of a consolidation within the bigger 9 year uptrend, Suncorp appears to be making a breakout higher with its first close above its 2 year downtrend. (See circled area on chart) The first level of resistance for Suncorp now after breaking past $13 level this month is $14.60 resistance. With the strong momentum this month and usual bullish tendency of December trading month there is a good chance Suncorp may reach the $14.60 area with only a few weeks left in the month. Since its the 19th of December with a little under 2 weeks to go, there is a potential possibility that Suncorp retreats and falls back within the downtrend line. Given the bullishness of both the US and Australian markets this month this scenario is only a remote possibility. Lastly having shown a longer period for this monthly chart you can see that there are still several levels of resistance for Suncorp to clear before reaching its previous all time highs. After the near term resistance of $14.60 there is $16.00 a share as well $19 a share to reach before it can begin to attempt new all-time highs.  Weekly Chart The Drought Has Ended Three weeks ago Suncorp was able to finally break its long term down trend on the weekly chart with a confirmed close above its downtrend. (See circled area below) Prior to the break out Suncorp had been experiencing a long term downtrend since late 2014, as the stock failed to make higher highs. After reaching the lows of the year at $10.11 in February the stock has been able to make a staged recovery. With momentum rising for several weeks, the move higher over the last 6 or so weeks has been well supported by strong momentum indicating strength behind the rally higher. Suncorp is now fast approaching its next level of resistance at $13.70 with around 20c to go before reaching the level. The stock make initially struggle at this level as the previous two attempts failing to move higher. Therefore the $13.70 level is a critical price point for Suncorp over the last few weeks of the year. A failure to close above the next resistance level could see the stock fall back to $12.85 level of support.  Daily Chart Trump Effect Since the day of the US election when the news of Trump winning shocked the markets into freefall temporarily, Suncorp has been able to enjoy a spectacular move higher for a alrge cap stock. After closing at $11.47 on the 9th of November the stock has rallied $2 a share or over 17% in a 6 week period. Due to the fact that the rally has been so strong the daily chart uptrend is quite steep. (See chart below) The reason why I'm mentioning the steepness of the trend is because the steeper the move of a trend the shorter the trend normally lasts. This is because buyers quickly disappear with such a large move forcing the price to fall violently on most occasions. Warning: I suggest to wait for a retracement / pullback in price before considering this stock due to the very strong run up over a short period. I have drawn in the uptrend line to carefully watch for a reversal to occur. Given that volume has also been above average which is a very bullish sign, Suncorp most likely will reach the $13.80 resistance level first before experiencing a pullback in price. Overall Suncorp looks very bullish on all 3 time horizon charts following the big banks higher in the month of December. I have indicated the resistance and support levels to watch out for over the next couple of weeks. Lastly be mindful of any sharp increases in volatility over the holiday period we are entering into now with low volume over the holidays the markets can move erratically. Back in the last week of December last year and the first week of January 2016 the markets had the worse start of the year, after the FED raised interest rates in December 2015, just like they have in 2016.  Thanks for checking out my latest chart review on Suncorp Group.
For more Crush The Market's chart review articles click: Ford Outperforms Tesla Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.  Ford Motor (F) Chart Review - Monthly Chart Ford like many of the auto manufacturers in the US was able to take advantage of the surge in demand for new cars in the US. Looking at the longer term chart below you can see the strong run up from 2012 as it climbed from the low $9 price, all the way to the mid $17's a share in just over a year. Since reaching the $17.40 - 17.50 level on 2 different occasions, the stock struggled to move higher and started to move down for the next 2+ years to form a new downtrend. Potential Breakout December 2016 appears to kind to Ford this year as the stock is performing strongly as it follows the overall strong performance of both the DOW (Ford is a Dow component) and the S&P 500. We are approaching the mid-point of the month and if Ford stays at the current level or higher for the rest of the month Ford will have reversed its long term downtrend with a breakout to the upside. Since it's still early in the month we can't review volume to see if the rally is supported, however momentum has been rising for several months making higher lows and higher highs supporting the move higher. The $11.75 support level has held up well over the last 2 years as the stock respected the level and bounced higher. Looking at the moving averages the 50 month moving average is comfortably above the 100 month moving average. This indicates support for the longer term trend. In addition the current price is sitting above the 100 month moving average. Caution: Ford has on a few occasions over the last few years made an attempt to reverse its downtrend on the month chart, only to fail and reverse and fall back within trend. It's ideal to wait for at or close to the end of the month for confirmation of the reversal of the down trend. A close above the declining trend line and the current resistance of $13.85 would a very bullish sign for the stock going forward. This is a likely possibility given the bullish indicators present on the monthly chart and several weeks to go to the end of the month.  Ford - Weekly Chart The medium term outlook with the weekly chart for Ford shows a less bullish picture overall, with the share price still conforming within the downtrend line on the weekly chart. I have noted on the chart at least 2 prior attempts to close above the down trend line which quickly failed. With the chart showing the closing price from last week, the stock is currently sitting on the trend line, with the current week trading key for the direction of the stock. The key bullish signs for the stock is that momentum is rising and is now positive at 1.06 on the weekly chart. I have not included in this chart but Volume has been above average supporting the strong rally of Ford over the last 3 weeks. Similar to the monthly chart review, the weekly chart needs to close above the $13.85 resistance this week to confirm the reversal of the downtrend. Failure to close above this level could lead to the stock falling back down to support at $11.30, with this scenario unlikely to happen.  Tesla Motors (TSLA) Chart Review - Monthly Chart The long term shareholders of Tesla have done extremely well, especially if you purchased the stock prior to 2012. At the end of 2012 year Tesla was trading around $34 a share and with the current price at $192.18 a share, shareholders have experienced a 460+% return over that period. Loyal long term shareholders have been well rewarded, however the last 2 years have been more frustrating as the stock has been stuck in a sideways consolidation period. The US stock index's over the last few weeks have experienced a strong rally since the election in late November, however Tesla has not really participated in the bullish euphoria compared to the general market. Hence with Ford strong performance this month, Ford has been able to outperform Tesla recently which had been a rare occurrence. The positive for Tesla is that for now the support level of $188 - $189 is well respected with every attempt to fall below that level quickly reversing. The current price has for now continued to respect the 50 month moving average, with the current price beginning to bounce of this level. (See chart). For Tesla to begin to recommence its longer term uptrend the stock would need to close above its resistance level of $270 level, to confirm the trend has reversed. Potential Break Of Key Support Since Tesla has failed to join the overall market rally, with the momentum on the monthly chart extremely weak as it makes lower lows and lower highs. There is a strong probability that Tesla will break its support level of $188 and make its way to the $127 level. All it would take would be a negative company announcement from Tesla or a brief correction with the overall market to break its support level. For investors and traders interested in this stock make sure you watch the key support level.  Tesla Weekly Chart The weekly chart offers no more hope for Tesla than the monthly chart did. Although Tesla finished last week up for the week, the stock looks vulnerable to breaking support at $185 and moving to the $141 level. Since Mid August Tesla has failed to retest the $279 resistance level as it continues to generate lower highs to form the current downtrend on the chart. The stock may be able to move towards the downtrend line (see blue line) with the current market bullishness. The longer term prospects though are bearish for the stock. Momentum is currently at -13.22 confirming the bearish outlook for the stock as momentum has been making lower highs and lows indicating no strength in the stock to move higher. Watch The Support Levels Similar to the monthly review the key support level to watch on the weekly chart is $185 a share, which is slightly lower than the monthly support of $189. Depending on your time frame that you utilize for stocks will determine which chart time frame is the most important for you to follow going forward. Wildcard - FED Meeting This week is the last FED meeting for 2016 and also the last time for the FED to decide whether it will raise rates. Currently the market is pricing in a 90%+ chance of a rate rise this week at the meeting. The last time rates rose in Dec 2015, it was followed by heavy volatility only a few weeks later. With US market highly elevated the FED's meeting could provide the catalyst for the market to experience a minor correction.  Thanks for checking out my latest chart review on Ford Vs Tesla.
Crush The Market's most recent macro article click: The Perfect Storm Set To Pop Aussie Apartment Bubble Bringing Down The Economy With It Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.  Domino Pizza (DMP) Chart Review NB: The charts shown in this review were taken prior to the close of trade on the 7/12/16. Domino Pizza is one of those stocks that if you never owned it wish you did. It has become one of those amazing success stories, where you can start off as a small company with a big vision and grow into a multi-billion dollar company. Domino Pizza has become a fast growing company with consecutive years of strong profit growth that now spans multiple countries. Due to its amazing growth the stock has gone from below $10 a share only a few years ago, to a stock that reached over $80 a share in August this year. Has The Dream Run Ended? Observing the monthly chart below of Domino Pizza, it would appear the stock looks to be in trouble as it's in the process of breaking its second uptrend. If you take a closer look at the chart below, you will notice that Domino's had previously accelerated its price growth on 2 occasions from its original long term uptrend. (See chart trend lines below) Currently in December it appears that the stock is slowing down considerably as it heads back to its original long term uptrend that began in 2013. (See chart) Although Domino's would be considered to be in a very strong uptrend based on its long term history. The current price action suggests that if Domino's was to trend towards its original long term uptrend, the stock has a long way to fall before it reaches its destination. The nearest support line to watch out for Domino's on the monthly chart is at the $63.90 level. If the stock closes below the support level on a monthly chart, it will confirm the break of its second uptrend, with little support for the stock to head lower. I have circled momentum on the chart to highlight that even though it's still positive at 7.30 it has fallen considerably from the highs as it heads toward zero momentum. Since its still early in December it would be appropriate to take a wait and see approach towards the end of the month. NB: Global and Aussie stock markets are quite bullish presently heading into the Christmas rally, so to see Domino's weak in this environment doesn't bode well for the stock.  Weekly Chart - Key Levels To Watch The weekly chart shows the stock is at a current key level in terms of trend and support levels. If Domino Pizza were to close below the $64.40 level by Friday's close it would confirm the break of the long term weekly trend as well support. This would be an extremely bearish sign for the weekly chart. Provided we close below the nearest support, the next step for Domino's is $60.50. With momentum at negative 7.67 and heading lower the probability of break of trend on the weekly chart is high. If buyers were to step in by the end of the week and hold support of $64.40, look for the stock to move towards resistance level of $70.30 and make another attempt to close above this level.  Daily Chart - Multiple Bearish Indicators Domino's Pizza on a daily chart is at a critical price level, as the stock approaches support of $63.85. Currently the price is below the 10, 50 & 200 day moving average suggesting the stock is under heavy selling pressure. Many traders and investors use the 200 day moving average as a key indicator for a stocks trend. Momentum is negative 5.05 and falling, showing the selling strength is accelerating and supporting the price lower from here. As previously mentioned since the stock is weak in an overall bullish environment for Aussie stocks, suggests that the stock is no longer popular to own for its potential share price growth prospects in the short to medium term. Potential Death Cross Watch the support level of $63.85 over the next few trading days for this stock, because if the stock continues to fall from these levels it will pull the 10 & 50 day moving average below the 200 day moving average. If this occurs it would form what traders call a 'death cross' which ultimately confirms that the stock is in a downward cycle in price. Overall the stock appears quite bearish on all 3 charts presented, even though the stock is still comfortably above it long term trend on the monthly chart. Over the longer term the stock could resume its upward trend and respect its longer term trend, however over the next weeks and months may continue to struggle relative to the performance of the ASX market.  Thanks for checking out my latest chart review.
To view Crush The Market latest macro article click: The Perfect Storm Set To Pop Aussie Apartment Bubble Bringing Down The Economy With It Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.  Amazon (AMZN) Chart Review Amazon has been on an incredible bullish run over the last 6+ years for investors and traders that have held long term positions in Amazon. For the loyal shareholders they have been well rewarded as the stock has climbed by over 370% since the lows reached in March 2011. If you had held the stock over a longer period the returns would be even higher. Back in April of last year it broke out of a consolidation period and accelerated its uptrend pace as the stock started to climb faster, as the stock continued to make new record highs reaching a closing high back on the 5th of October of $844.36. Fast forward to the end of November 2016, and it appears that Amazon has broken its most recent uptrend (See chart below) with the current price sitting at $762.52. Amazon's Uptrend Within An Uptrend The good run for Amazon appears to be slowing down for now, as the current uptrend has ended on a monthly chart. With one more trading day left for the stock it appears unlikely to jump back within the uptrend. If the break of the uptrend occurs the most likely target over the medium term for Amazon is a move towards its previous uptrend which is highlighted within the chart. The first level of support for the stock to reach is around the $676 level. Given the price is above $500 per share you have to give a little bit more flexibility with support and resistance levels as the levels are not as closely defined. Consolidation Pattern Possible Amazon may not necessarily fall considerably over the next few months, as its a very strong bullish stock relative to the S&P 500 market. Its quite possible that you could see the stock struggle to move higher with the likely outcome that it move sideways to slightly down as it heads for the previous uptrend forming a consolidation pattern. Lastly the momentum has fallen sharply over the last few months making a lower low even though the stock is near all time highs, indicating there is divergence and the rally is running out of steam.  The break of the uptrend for weekly chart below is not as clearly defined. The stock had recently closed below the uptrend 4 weeks ago only to pop above the uptrend again, with a rally to coincide with the overall market move higher from the US election results. With only 1 trading day completed into the week the stock has once again closed below its uptrend. As its a weekly chart it would be ideal to wait for a completed weekly candle at the close on Friday to confirm that Amazon has also closed below its uptrend on a weekly chart. If the confirmation is complete for a reversal in trend, expect the stock to move towards its first support level around the $681 - 682 level. If support is respected and it holds that level you could see the stock once again attempt to reach its prior all time highs around the $842 - 843 resistance level. I have circled the previous false attempt to close below its uptrend back in February this year, so make sure to be patient and seek confirmation. Momentum is only marginally positive at 2.38 haven fallen from over 157 several weeks ago. This indicates that the strength of the trend has practically disappeared. Look for momentum to move to the negative soon to coincide with the stock moving towards support.  The trend is clearly over on the short term daily chart, where I have circled on the chart where it popped lower closing below the long term uptrend. After breaking its previous support of $788 it proceeded to the $717 / 718 level of support, after retracing back to the new resistance level of $788 creating a change of polarity. Once it reached resistance it has proceeded to begin falling again confirming the new resistance level. This is a bearish signal as the bears are now in control on a short term basis. The price is currently sitting below its 50 day moving average and the 10 day moving average has crossed below the 50 day moving average signalling a reverse in trend. Caution Ahead Normally based on the price action only I would say that the stock is moving next to its $717 / 718 support level again. However the momentum indicator is showing divergence having recently turned positive and accelerating higher. This indicates to me that we could see Amazon make a push higher to break above resistance of $788. If this was to occur it would also reverse it new daily chart downtrend. Based on the conflicting indicator we would need to see more price action from Amazon to determine its likely direction in the short term. By the end of the week we should have confirmation on all 3 charts the trend of Amazon moving forward.  Thanks for checking out my latest chart review.
To view Crush The Market latest macro article click: The Perfect Storm Set To Pop Aussie Apartment Bubble Bringing Down The Economy With It Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services. Telstra (TLS) - Chart Review NB: The charts presented are prepared using data at the close of Friday 25th November. Telstra has been struggling to move higher in price since breaking its long term uptrend back in October last year. ( See circle over blue trend line below) However in November it has made a strong recovery after being as low as $4.70 early in the month, to close at $5.03 last Friday. Must Stay Above Support At $5.00 On the monthly chart below Telstra is showing signs of a reversal as the current price is slightly up for the month, with a long tail pointing down representing buying pressure. In addition the price recovered to be above the critical support level of $5.00. With 3 trading days left in November it's critical that Telstra can close on the monthly chart above $5.00, in order to give it a chance to move higher in December. Lastly on the Monthly chart , momentum has also made a strong recovery over the last few months as it moves closer to being positive. Currently it stands at -0.33, however its moving in the right direction to confirm the support of $5.00 price level.  On the weekly chart below it's not looking as bullish for a reversal just yet, as there are few things still required to confirm a reversal. The positives: *The current price on the weekly chart of $5.03 is above the 10 week moving average of $5.00. *In addition the previous week strong up week was on above average volume which is a bullish signal. The Negatives: *The price action on the weekly chart is currently below the resistance level of $5.10. (See chart) *On a weekly basis the chart is still within a down trend, with a close above $ 5.60 - $5.70 required for confirmation. *The 10 week moving average is below the 50 week average showing bearish cross. *Volume on the week just completed was below the average showing that there was a lack of conviction with the move higher. Overall we would need to see on the weekly chart the price move above $5.70 level with above average volume to confirm that the current reversal taking place is valid.  Reversal Of Downtrend - Daily Chart The daily chart is showing good signs of a reversal in trend. The first important thing to note is that the downtrend that started back in July this year has ended, as the current price is clearly above the downtrend line. (See circle in chart below) The closing price on Friday of $5.03 is now above the previous resistance level, which is now the new support of $4.94. Its important to stay above this level to confirm the reversal. Lastly the price is above the 10 and the 50 day moving average which is also a bullish sign. Caution Ahead - Where Is The Volume? One of the most important things in trading after the price action is volume. Whenever you are trading and you are looking to go long (price to go higher) its essential that you have above average volume for confirmation to ensure the market is behind you with your trade. You want to be with the herd to catch the biggest moves not against it. If you take a look at the chart, I have circled the volume below. With the last 5 days trading volume all below the daily average volume. This is a bearish signal. Because there is a lack of conviction with buyers on the daily chart, I would wait for the chart to move above the next level of resistance at $5.22 - 25 with an accompanying above average volume to confirm the reversal has taken place. There is a high possibility that Telstra could fall back within the down trend and close below support of $4.94 in the short term due to a lack of volume with the current price action.  Thanks for checking out my latest post.
To view Crush The Market latest macro article click: The Perfect Storm Set To Pop Aussie Apartment Bubble Bringing Down The Economy With It Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services. 
The Aussie apartment boom that has turned into an epic bubble with record sky high prices, is showing all the signs for the perfect storm which will ultimately pop the apartment boom bubble. With the popping of the apartment boom, it will simultaneously bring down the Australian economy, as the apartment market is set to have a sizeable correction in 2017 and 2018.
A short Look At Australia's Real Estate Market. Australian real estate prices have been going up for over 25 years with hardly a pause in between since the late 80's. The last time real estate prices fell considerably was when Australia last had an official economic recession back in 1987, when interest rates skyrocketed to around 17-18%. The chart below show the price growth of real estate, rents and CPI since mid 1987. Initially the price growth of Australia's real estate market climbed steadily taking 11 years to double in 1988. From there the price growth continued to accelerate with the next 100% increase in price taking 4.5 years to reach. An interesting observation on the chart below is that real estate prices have risen by over 700% since 1987, yet rents have risen just under 300% over the same period. This chart clearly shows that the majority of the price growth was not supported by a fundamental increase in rents to support the higher prices, but rather an massive surge in mortgage debt over the same period drove prices higher. 
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Rising Credit Leads To Booms & Contractions In Credit Lead to Busts
Professor Steve Keen in the interview shown below highlights his own reasons why he see's a recession coming in 2017 for Australia. Steve highlights a number of reasons for his prediction, including a deteriorating terms of trade, the ending of the mining investment boom, the Government's pursuit to cut spending and a reduction in foreign buyers for real estate among others. However, the most important reason is a deceleration of credit / mortgage debt. Based on Steve's research and economic models the deceleration of mortgage debt growth is the leading cause for all economic downturns globally including the US, Japan and Europe economic recessions, with a correlation close to -1. What all his research showed is with the deceleration of mortgage debt growth, lead to a collapse in real estate prices which then lead to an economic recession in those countries. Due to this research, Steve believes Australia will react the same way as other countries based on slowing growth in mortgage debt. Especially, as the conditions have already begun to slow based on the bank's tightening their standards overall. However, most of the lending restrictions imposed from the banks are for off the plan apartments and existing apartments within most major cities around Australia. Given Australia was recently ranked number 4 in the world in the UBS global real estate bubble index, see: Australia's debt addiction fuels record real estate bubble, its easy to see that prices could fall over 20% as lending conditions continue to tighten and their effects take hold. Why Are Banks Tightening Lending Conditions With Record Real Estate Prices? The simple reason is that the banks do not want to be caught in a credit crunch like they faced back in 2008 and 2009 where they had to have the RBA and the US FED provide considerable financial assistance to keep them afloat. Right now the banks can see what everyone else can see if you look at all the data publicly available. Australia will face a major oversupply of apartment dwellings over the next 1 - 3 years from a major ramp up of approvals of apartments. The growth of approvals over the last 7 years which you can see in the chart below, is leading to a big jump in the construction of apartments with a number of them being competed in the next 18 months. 
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Due to the rapid increase in approvals there has been a massive spike of cranes currently being deployed in Australia, to handle the apartment boom that is currently taking place. As you can see below in the chart Sydney and Melbourne are leading the way in Australia, dwarfing most major cities in the US including New York and LA.
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With all the current construction for apartments taking place from the buildup of approvals, especially in the last 3 years, Australia is facing a glut of new apartments that are about to be completed in 2017 and 2018.
Knowing the upcoming glut of apartment completions is about to come available on the market soon, the banks have taken action to protect their capital by providing most of their tightening around new and existing apartments within the CBD's of Sydney, Melbourne and Brisbane where most of the construction has taken place. 
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Highest Housing Completions = Biggest Housing Price Fall
The chart below shows a comparison of house prices in Australia, UK, Spain, US and Ireland with an accompanying housing completions chart. The most obvious data from the chart is both Ireland and Spain had the biggest fall in prices during the GFC in 2008 relative to the other countries shown. Those 2 countries also had the largest ramp up of new housing completed from 2000 - 2007. 
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Surging Bond Yields Leads To Higher Mortgage Rates In Australia.
Back in October US Government 10 yr bond yields were sitting at around 1.55%. Fast forward one month and rates are now sitting at around 2.3%. A 0.8% increase from the October levels (see chart below). The reason why this is a big deal, is that the US Government bond yields are what are utilized to benchmark most of the different types of retail and commercial loans. In Australia the banks also rely heavily on overseas markets and especially the US markets to provide the necessary funding to support their loan book. So as bond yields have skyrocketed in such a short period in the US, it has already led to the banks in Australia lifting rates by between 0.20% - 0.60% on their fixed loans as their funding costs have jumped dramatically. With mortgage rates rising and lending conditions being tightened its becoming more difficult for developers to sell their off the plan apartments as investors find it more difficult to access bank lending to finance their purchases, resulting in a slump in demand for off the plan apartments. Melbourne Developer Offers $21,000 To Encourage Buyers In an attempt to lure buyers to a new off the plan development in Melbourne, a large well known developer is now offering $21,000 to investors in an attempt to sell their $420,000 1 br apartments in Southbank Melbourne. The idea is to match the investor or first time buyer's 5% deposit of $21,000 to least assist them in meeting a 10% deposit. The problem that this Melbourne developer and other developers will find, is even with this huge financial incentive, many of the banks in Australia have lifted their minimum deposit requirements for off the plan apartments in major cities to between 15% - 25% deposit. 
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Apartment Bubble Bursting Leading To Australian Recession
Similar to Professor Steve Keen's prediction that a recession is coming to Australia in 2017 or early 2018, I also believe that the perfect storm of conditions are developing that will soon pop the apartment bubble that has been taking place in Australia. When the correction in apartment prices takes hold, it will have a domino effect on the Australian economy, leading to a contraction in economic activity in Australia. The reason for this is because the real estate industry and related industries now has the largest contribution to GDP at around 28%. (See chart below) With record amount of apartment construction taking place over the last few years, fueling a considerable amount of GDP growth, I believe the slowing of the construction industry will start to subtract heavily on GDP growth in 2017 and 2018 leading to Australia's first recession in over 25 years. 
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Thanks for viewing Crush The Market latest post.
Remember to share this with your friends by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Additional Sources: www.afr.com - 1 www.afr.com - 2 - Subscription required On Friday the Australian big banks which make up the majority of the Financials Sector finally were about to break out of its year long resistance, as it finished just above its 6,820 resistance at 6,823. The strong performance from the banks on Friday also lifted the Aussie XJO 200 index higher to 5,359. Since the US election results were released some 2 weeks, the US markets have been on a strong V like sharp recovery which had lifted most world markets with it. This included the Australian stock index XJO 200 which up till recently had been struggling. The bullish performance of the US markets had also been the catalyst for the reversal in banking stocks higher in Australia. Which in turn significantly helped the XJO index with its recovery. The Key Questions To Answer Going Forward Is the Financial sector breakout a false breakout, or will the financials sector hold its bullish momentum going forward? Can the financials continue to lift the XJO 200 higher out of its downtrend and back into an uptrend? Lastly will the strong run from the US markets continue and support the XJO 200 index higher? Can The Financial Breakout Be Trusted? Since the breakout on Friday for the Financials sector excl A- REIt's was not exactly an overwhelming strong breakout, as it closed 3 points above its year long resistance. The most sensible idea would be to wait for more information from the market. Overall the technical's looks good for the sector, however it's usually best to wait to see if the sector moves higher and can be supported by the strong momentum. If the sector can than retrace and rests on its old resistance level of 6,820 to form a new support level this would confirm the breakout. If the sector moves higher from here this week and later reverses to close considerably below the 6,820 level, to say the current 6,580 support level this would confirm it was a false breakout. Considering this is the seventh attempt this year to break out higher there is a higher probability that it will not be able to maintain the breakout. Note: Why The Financials? For investors and or traders who are not aware of the significance of the financials sector in driving the overall performance of the XJO 200, I wanted to quickly highlight that financials excl A REIT's sector has the largest weighting on the XJO 200 index. With 4 out the top 5 largest market cap stocks within the XJO 200 belonging to this sector.  Big Picture Review - XJO 200 The XJO index has had a mediocre calendar year so far, however before having a closer look at what's been happening I wanted to quickly review the long term chart for perspective. The first thing to note is that even though the index is currently been trending lower, the index has been able to hold its 5 year long term uptrend. This is despite being within a mini downtrend inside its longer setup uptrend. You can see on the chart below that on a monthly basis it touched its trend line 4 times over the last 5 years and respected the trend before heading higher each time. Currently in the month of November you can see that the index had fallen considerably touching a low of 5,052 which was the day of the US election results. However just like the US markets the XJO was able to rally stronger to close on Friday at 5,359 and is currently up for the month. Since it respected its uptrend and has completed recovered from its earlier monthly losses it's behaving very bullish on a monthly chart and based on previous history since 2011 it would indicate that the index will be heading higher over the coming months. To confirm the bullish action and a continuation of its uptrend on a monthly chart, we would need to see a monthly close above its down trend as indicated in the chart below with the rectangle box area. Otherwise its possible we could see a reversal of its uptrend if it its unable to close above the down trend and it respects the downtrend line.  Within a weekly chart (See chart below) the index does not look strong when compared to the strong uptrend performance over the last 5 years. After reaching multi year highs in March 2015 the index has been steadily heading lower and has now formed a down trend that it has failed to close above on a weekly chart. I have circled on the chart action the 2 times in the last 18 months where it has failed its uptrend. Once in August last year and again this year in late October. The first time it happened in August you can see the index fell sharply for several months. Since the momentum on a weekly chart is negative at -156 and the index is still within its downtrend, it's likely we could see the index move higher in the very short term to the downtrend line (shown on the chart) before pulling back. On the chart I drawn the 2 possible scenarios I see that could happen over the coming weeks. 1. We see the index move higher, than have a slight pullback before continuing higher and closing above its downtrend. (The Financials sector would have to hold its breakout to support the XJO 200) 2. The index moves higher, touches the downtrend line and reverses back down to 5,030 support level.  Daily Chart - Downtrend With Bullish Indicators Whilst the daily chart is currently in a downtrend and has broken its long term uptrend, the chart has a number of bullish indicators present that could see the index reverse its downtrend. * The momentum indicator has recently turned positive and is now at 130 after its strong rally from the lows reached on Election day. * The current price of 5,359 reached on Friday is above the 10, 50 & 200 day moving average. * After breaking support of 5,195 on the 9th of November the XJO 200 index quickly reversed back above its previous support level the next day, indicating a false breakout of support. The Key Levels To Watch For the daily chart of the XJO 200 to continues its strong move higher and reverse its current downtrend, we would need to see a confirmed close above its 5,390 resistance level. If it can close above that level and its downtrend line marked on the chart, we could see the index continue back on its previous long term uptrend. Failure to close above 5,390 resistance and its downtrend line would result in the index most likely falling back to the 5,195 support level.  To finish the review of XJO 200, I wanted to take a look at the price action of the US S&P 500 index since the US markets usually moves the Australian index with it. S&P 500 Stuck At Resistance On Friday the S&P 500 index briefly touched a daily high of 2,189.89 which was just slightly below its current resistance level of 2,190. You can see on the chart below that the index had reached the resistance 2 prior times already back in August this year before fading lower. Considering the US index has had a strong rally higher since the Election results came out 2 weeks ago, the likely outcome in the short term is that the US index will pull back briefly over the coming days. Its even possible that after such a string of higher days over such a short period that the index could fall back to the 2,155 support level, before considering another attempt to close at an all time high. If the S&P 500 index is unable to climb higher in the very short term, it would have a negative impact on the Australian XJO 200 index in its attempt to continue higher. So to sum up the review there are another factors in play that could effect the XJO 200 direction. The biggest factor in the short term being the strength of the US markets, which directly impact the direction of the Australian financials sector which considerably impacts the bigger XJO 200 index overall.  Thanks for checking out my latest post.
Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services. Source: Dividend.net.au Gold has been on a wild ride since the US election results last Wednesday, climbing to a high on the day of the election of $1,336 before slumping lower at the end of the trading closing at $1,277. Since last Wednesday investors have continued to dump the precious metal as the selling accelerated. On Monday morning the selling resumed as the world and investors continued to digest the shock victory of Trump and what this means for the US and the World. During Monday's trading day Gold slowly recovered some of its losses to find support as investors bid Gold higher into Tuesday's trading, where it currently sits at $1,227. Gold Chart Review To gain a better understanding of the where Gold is most likely heading over the coming weeks, its always ideal to take a look at a longer term chart to see where its been in the past. If we take a look at the weekly chart of Gold below, you will notice that bullish uptrend that began in late December last year ended in September as it was unable to stay above its trend line. (See circle over price chart) Since September Gold has been on a steady decline lower even though it made an attempt to climb higher towards its new down trend line (now at 1,300 level), before reversing and heading back down again to the current price of around $1,227. Presently its only 15 dollars off its support line at $1,212 which previously was a strong support level during its uptrend cycle back through February to May this year. Failure to hold the $1,212 level on a weekly basis, Gold's next support level is around the $1,176 level. If it was to reach the lower support level that would be another $36 lower from the $1,212 support level. Given the big selloff last week, its quite possible that we may see a temporary rally higher potentially back to the $1,295 -$1,300 level before once again reversing and falling below the $1,212 support level towards $1,176 support as indicated in the chart. (See black lines on chart) Lastly I have included the momentum indicator on the weekly chart, which is currently sitting at -93 to show that Gold is in a strong bearish position and firmly stuck in a new down trend. Now that the market has decided that the big risk factor of the US election is over, the market has chosen the direction for Gold. Given the current technicals its unlikely the overall long term down trend direction will change for some time.  With the daily chart below you can see that the selling as stopped for the time being as the $1,212 support level held after consecutive days of selling. Similar to review of the weekly chart, its likely that Gold will stage a rally higher off the support level over the coming week or two. The most likely targets are the first resistance level at $1,254, followed by the new down trend resistance level. The downtrend resistance is indicated with the arrows within the chart with the first resistance around the $1,285-90 level followed by the original downtrend resistance at $1,330. Once the short term rally has exhausted itself over the next 1-2 weeks, we could see Gold reverse as it heads back down to $1,212 support. Given its downtrend trajectory and the technicals showing bearish signals, we would most likely see Gold fall below the $1,212 support to the next support level of $1,168 - 70 support level over the medium term. December Wild Card For Gold Keep in mind the wild card that is coming up in December is the FED committee meeting, where the market is currently pricing in an over 80% chance of an interest rate rise in December. If this occurs in December its possible that Gold could react similar to last December FED decision. If you recall nearly a year ago Gold spiked significantly higher reversing the downtrend and beginning a new uptrend.  Thanks for checking out my latest post.
Remember to share this with your friends & colleagues by clicking on the Facebook & Twitter Icon's Below. To Subscribe to Crush The Market click on the 3 options: Facebook, Twitter or RSS Feed on the top right side toolbar. Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services. |
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