The Election Honeymoon Is Over

It appears the honeymoon has ended for Trump and the markets after sparking a major rally in both the US dollar and the stock market since the election result.

The US dollar after topping at the end of 2016 has now started in a new down trend after falling steadily in January. It's now at the same level reached just after the election results in Mid November. (See chart above)

Over the last 2 trading days the US stock market has fallen the most in 4 months, as a series of actions taken by president Trump over its immigration policy in the last few days has shocked the market and brought about uncertainty and fear. Ironically the actions taken by Trump was already raised in his election campaign promises.

Adding to further uncertainty and fear in the market Trump decided to fire the acting attorney general for not following on his executive order over his immigration ban on seven countries. (For further information you can click the headline below)

DOW Reverses Breakout Trade

The Dow Jones Industrial index made a breakout out of its tight trading channel last week after moving sideways for nearly a month. However the last 2 trading days losses has seen the index fall back within the channel as the 20,000 level support failed to hold.

For traders and investors interested in the Dow index, watch the index to see if the previous support line shown in the chart will hold. A close below support could easily see the Dow fall back to pre-election results levels around 18,600.

Nasdaq Still Bullish Despite Uncertainty

The Nasdaq composite has been on a steady uptrend with little hesitation / pullback in price since the election rally begun. As a consequence of the strong uptrend rally late in the year the Nasdaq has made multiple record highs in January 2017.

Even though the index has fallen the last 2 days the index continues to remain well within the uptrend as well its current support. Compared to the Dow index the Nasdaq is showing strong bullish technicals despite the minor pullback in price from Trump's recent actions.

Note:

Despite the relative strong performance of the Nasdaq Composite, a potential close below its current uptrend line could see the Nasdaq fall back to the 5,500 level in price. With the current uncertainty and fear that is currently gripping the markets its quite possible for a reversal to occur.

S&P 500 - Hanging On To Breakout

The S&P 500 has experienced a minor pullback so far this week and depending on how you look at it, is just above or just below its breakout level that it crossed over in last week's breakout trade.

With the last 2 trading days showing some buying support despite falling both trading days, indicates the S&P 500 is likely to respect new support level around 2,275 - 2,278 in the short term. On the flip side with recent above average volume on both down days for the index does not bode well for market sentiment as fear remains within the market.

Weak Economic Data Adding To Market Weakness

Last Friday the US released its first look at last quarter's GDP as well durable goods orders for last month. Both pieces of key economic data missed market expectations, with GDP coming in at 1.9% versus 2.1% expectation. Durable goods missed heavily coming in at -0.4% vs 2.7% expected. 

Interestingly after the release of the key data the market barely responded initially. However after the unexpected immigration ban placed over the weekend by Trump's executive order and the firing of the acting Attorney General yesterday the market decided to react the recent deluge of negative news and shocks with the 2 day declines.

Market Bullish Exuberance Not Broadly Supported

Another key risk for the markets on top of the recent market uncertainties from Trump's actions, is the lack of bullishness among the majority of the stocks within the S&P 500. If you look at the chart below, the percentage of stocks above their 200 day moving average has diverged from the index back in September last year.  This indicates the larger stocks within the S&P 500 are driving the recent strong performance as the remaining stocks under perform. A divergence this large will most likely result in a reversal in trend to coincide with the overall strength of the index.

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China Braces For More Pain Ahead As Economy Slowdown Accelerates

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Gold begins the year strong will the bullish run continue for 2017?

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.

China's amazing GDP growth and recovery experienced since the 2008 - 2009 crisis is slowing down. The rate of growth continues on a downward trajectory, as more economic problems begins to emerge that are accelerating its slowdown for the economy and global growth. These problems have been building for some time now and many of the problems now faced by China have stemmed from the economic policy decisions that the Government implemented to fight off the last crisis.

How Did China's Economic Problems Start?

China's economic recovery from the 2008 crisis has been remarkable as the country was able to quickly adapt to the global challenges that swept through and effected its own economy. China was able to shift the focus temporarily away from exports, to their own domestic economy as they began to accelerate spending on fixed asset expenditure on various large infrastructure projects around the country.  This was funded by lowering interest rates and accelerating the use of debt to spur their own economic recovery. By implementing this strategy it also spurred demand for overall consumer spending as more credit began to flow through their economy. 

This strategy worked very well and within a short period of time the flow of credit and spending began to shift the growth of China's economy higher once again. As a result, it lifted the global economy higher as China grew imports to fuel its large fixed investment expenditure projects and increased consumer spending. This allowed many commodity based countries like Canada, Brazil, US and Australia among others to bounce back quickly from the 2008 economic crisis. The increase growth in consumer spending in China also facilitated countries with a large manufacturing base like the EU region to also return to growth.

As a direct result of China's return to strong GDP growth, global foreign capital investment in China  soared, as investors were attracted by the growth rates.

So why does China have some many problems effecting its economy in 2017?

One of the main causes is because China's economic recovery was predominately achieved by utilizing record amounts of debt to stimulate demand and now the debt load is becoming an anchor to their economy. (See chart below)

Before the 2008 / 2009 crisis, debt to GDP in China was moving sideways at around 130%, as new debt growth offset new growth in GDP.  After the crisis hit the debt to GDP skyrocketed, meaning the new debt was no longer having the same effect on demand and GDP growth like it did prior to 2008 -  2009 crisis. The probably cause for the shift in effectiveness on GDP growth after the crisis, was due to increased debt towards inefficient projects designed only to spur immediate demand regardless if the projects were financially viable.

Since demand  now has been effected by the debt levels of mostly inefficient debt accumulation, it began to hamper growth and the economy began to slow after a few short years.

Now that the economy slow down is accelerating, the capital that came from abroad during the China growth recovery, together with domestic savings of China's citizens is fleeing China, in search of new growth opportunities in other countries.

The capital flight of over $1.2 trillion since 2015, is impacting on China's financial system and its currency the Yuan as financial conditions have tightened. This has impacted demand in China as access to credit becomes more difficult. This in turn spurs more demand for capital to find a new home globally as the currency becomes weaker as well as growth.
 

How  Are The Economic Problems Impacting China's Growth?

Real Household Disposable Income Growth Falling

Prior to 2008 - 2009 crisis, China's real household disposable income was growing above 10% (See chart below). It reached a temporary high of 14% y/y on growth just after the crisis took hold as the stimulus spurred growth and incomes for a short period. After the crisis was in full swing the real household disposable income slowed to 6-7 % growth.

After peaking in 2012 income continued to decrease, as it made its way to just above 4% growth in real household disposable income in 2015. A level of growth that was considerable lower than the trough reached in 2009.

Since the new debt that flowed into the economy during the recovery was not introduced in an efficient way, the increased debt provided only a short term spike in growth rates. This most likely caused the slow down in real household disposable income growth as the debt began to wane on overall demand rather than expanding it.

China's Capital Flight Explained

The flow of capital leaving the country has been accelerating in late 2016 and 2017. This short video below explains why the rush of capital out of China is occurring.

China Tries To Stem The Capital Flight Problem

Since record amounts of capital is continuing to leave China each month it has placed an enormous amount of pressure on the financial system, as the outflow pressure is tightening financial conditions and liquidity within China. To tackle the tightening conditions, the Chinese Government has been adding massive amounts of liquidity that spiked in 2016 to attempt to stem the pressure. While they continue to add billions in liquidity the People's Bank Of China (PBOC) have had to sell their foreign reserves assets to fund their liquidity injections and support the currency.

The Outflow Pressure Continues In 2017

The chart below highlights the fact that China continues to struggle with managing their financial conditions as their financial system has once again required a surge of liquidity injections to ease the tightening conditions. Over the 5 day period from the 16th to the 20th January 2017, the PBOC had pumped in $1,130 billion Yuan into the system.

Without these injections the banks would face a cash crunch and the whole system would seize up and their economy would go from slowing growth to a crash in GDP.

Defending The Yuan To Slow  Capital Flight

The existing policy of China is to have an orderly and planned depreciation of the Yuan currency relative to the US dollar, in order to keep their export driven economy competitive internationally.

However, as the capital flight began to increase in reaction to the Government decision to devalue the Yuan by larger amounts in August 2015, the currency has become more volatile on the market as the Yuan began to depreciate at a faster rate to what the Government had planned. To reduce the pace of devaluation, the PBOC has been actively supporting the Yuan by selling their foreign US dollar reserves to allow the Yuan to appreciate and offset the selling demand from capital leaving the country. By engaging in continuous support of Yuan they have depleted their reserves of US dollars by over $800 billion to support the Yuan.

Depleting Foreign Exchange Reserves

Since the Yuan is pegged to the US dollar, with a small allowance for market swings from the set daily spot rate, the Chinese Government has created another problem as it tries to control their currency devaluation to spur exports. The PBOC is rapidly depleting its reserves to control Yuan currency market. With the current pace of depletion of reserves the PBOC will run out of foreign reserves in only a few years time. So their current strategy to control the exodus of capital leaving their country by actively intervening in their currency is running out of money and time.

This is why the calls from economists around the globe to allow their currency to be fully floated rather than be pegged is growing. This will allow the PBOC to retain their reserves as they no longer need to intervene. The downside is that the reaction from the market from a free floating dollar is that the currency will most likely experience a sharp fall once floated, compounding the problems for China.

Chinese Citizens Buy Bitcoin To Protect From Devaluation Of The Yuan

The Chinese people are fully aware of the Governments plans for a continued devaluation of the Yuan as one of the economic policies to spur GDP growth for China. This has led to Chinese citizens sending large amounts of their capital in 2014 & 2015 overseas to purchase foreign assets like real estate in Vancouver, Sydney and New York to protect themselves from devaluation. To combat this the Government has implemented stricter capital controls to slow the capital flight by limiting the annual limit of capital leaving China to $USD 50,000 which is one of the many recent capital controls put in place by the Government.

To get around the capital controls the Chinese citizens have had to become creative and finds new ways around the capital controls. One of the big trend in 2016 to get around the capital controls, was to buy Bitcoin in China.  When they want to sell their Bitcoin investment, they sell on a foreign Bitcoin exchange rather than the Chinese exchange meaning their capital is now outside of China.

This strategy became very popular last year and was one of the main reasons why Bitcoin was the best performing currency in 2016 with an approximate 100% return priced in Yuan / Rmb currency. (See chart below)

If the Government decided to also crack down on the use of Bitcoin as part of their capital controls, we could see a sizeable correction in the price of Bitcoin in 2017.

Global Economy Slowing As Trade Volumes Show Anemic Growth

Global trade volumes are barely growing and have been experiencing anemic growth since 2012. (See chart below). Like many of the charts shown in this article, there was a spike in volumes in 2010 as stimulus measures impacted on trade volumes as they spiked to just under 20% growth. After the stimulus waned the growth rates collapsed as well and now are barely growing.

Since China is a major trading partner with most countries the trade volumes growth doesn't bode well for its exports. Together with China's other economic problems, China will struggle with its GDP targets for 2017 due to its export weakness. This is especially true as it appears that the low growth in volumes is slowly heading towards 0% growth.

Global Export Values Slowing

The global trade values show a similar picture to the trends experienced with trade volumes globally. After experiencing a sizeable correction in trade values in 2009, global trade was able to rebound and make new highs. However since 2010 - 2011 the global trade values have been trending sideways, with the last 2 years showing that global trade values have been steadily falling.

China's Growth Engine - Exports Records Worse Slump Since 2009

Recent data released last week showed that China's exports recorded its biggest fall in exports since the 2009 slump. Exports actually declined by 7.7% in 2016, while China's imports also slowed by 5.5% as their economy internal demand for goods continued to decline.

Now President Trump is officially in office, the Chinese Government are worried about the implications of an impending trade war that could begin under his Presidency, as he tries to restore jobs and begin to increase manufacturing of goods in the US. If tariffs are implemented in the US on foreign goods as previously suggested by Trump, China's exports would fall even further in 2017 and beyond which would encourage more capital to flee China.

China's Key Economic Data - All Trending Down

The four key areas the world monitors to gauge the health and prosperity of China's economy are GDP, Industrial production, retail sales and fixed asset investment. From the most recent data available provided by the Chinese Government (see chart below), you can see the long term charts of all 4 data areas, are trending down from 2010. The official economic data even though may be overstated by the Government on the true state of the economy, reflect the consensus that China is slowing by its own metrics.

The Market Reacts To A Slowing China

The market has taken notice on the shift of China's economy and the problems its currently faces, as traders have been steadily increasing the bets on the Chinese stock market that it will fall. The percentage of shorts over shares on the China A shares ETF has jumped from 1% in September 2016 to 13% in January 2017 as traders prepare for a correction in the stock market based on a deteriorating economic outlook for China.

China's Economic Challenges Face No Easy Solutions.

This article highlights the many issues at play contributing to China's slowdown of the economy for 2017. There are however several more issues currently at play that are not covered in this article.  See below a short video to highlight some of the problems discuss in this article, as well as others  not addressed that China need to solve for the long term viability of the economy and its people.

China & Global Economy Fortunes Tied Together

The implications of China's problems on the global economy are real and significant as the world relies on China's annual GDP growth to fuel global GDP growth. China also relies on the global economy for its export growth. This means that if China's growth slowdown is gathering pace in conjunction with global trade stagnating, it would appear the global economy is heading for another slowdown. If the slowdown persists this could easily turn into a recession. The only difference this time compared to  the 2008 - 2009 crisis, is that the stimulus plan that will be implemented by Central Banks and Governments might not work as effectively. This is because the global economy has already been subjected to at least one or more forms of stimulus continuously for the last 8 years to support global growth.

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China's debt bubble threatens global growth as debt to GDP nears 300%

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Gold begins the year strong will the bullish run continue for 2017?

Additional Sources:

Ft.com - Subscription required
Afr.com
The-japan-news.com
Chinatopix.com
Theguardian.com 

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 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.

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Suncorp Group Set To Break 2 Year Slump

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Holiday Macro Reading

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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.

Thank You For Your Support

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

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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.

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Ford Outperforms Tesla

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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.

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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.

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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.

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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.

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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.

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.

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.

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.

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.

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.

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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