Monthly Archives: September 2014
With gold charts in a long term downtrend there is continuing speculation about the future direction of the price of gold. Historically gold price is expected to rise in times of inflation so the current deflationary environment explains the lack of interest in gold. But this could change rapidly given economic and geopolitical issues in the world which could lead to a stock market collapse and a sell off of assets which would then make gold attractive.
Aside from gold being in demand in inflationary periods, the price of gold is inversely related to the value of the US dollar. Over the past few months there has been a big rise in the US dollar value partly due to a flight to safety of cash from Europe, the Middle East and Russia and in part due to United States Fed chair Yellen suggesting that higher US interest rates may be… Continue reading
The Australian equities market has now broken the long term trend line as shown on the weekly chart below. This correction has been anticipated from negative technical indicators such as oscillators such as RSI, wedges and others. But is this the expected very significant correction?
While I am very bearish on this market I suspect that we will see yet another rally in the Australian market before a serious correction. The reason for saying this is that when one looks at overseas markets the uptrend in the United States, Indian and Chinese markets remains very strong. This continued trend at least in the short term seems secure, after Fed chair Yelland’s comments that there will be no interest rate rises in the United States economy in the near term. Certainly the United States economy is improved but remains fragile despite longer term quantitative easing, so a rate rise would… Continue reading
As an investor I continue to look at factors which could have a significant effect on world markets and influence the way in which I invest. In speculating what might be the trigger to start the next bear market there are a number of possibilities but a new one has emerged that a month ago would have been inconceivable. On the front page of the UK Financial Times this morning was an article highlighting the “triple shock for the world economies”. The article listed three geopolitical situations: the Ukraine, the Middle East and Scotland as being the significant threats to the world economy.
It was inconceivable a month ago to suggest that Scotland, a fiercely nationalistic country with a mere 5 million people could have any influence on the world economy but with a yes vote for Scottish independence now a distinct possibility, this has now become a reality. A… Continue reading
As an investor who has been bearish for the past year while markets have continued to rise, I have continued to evaluate the economic and geopolitical events which have contributed to this extraordinary market situation. I now believe that the probability of a significant market reversal in the near term needs to be acknowledged based on both technical and fundamental data. Consider the following.
The technical perspective.
From the technical analysis view point, bearish signals are evident from a variety of different indicators. Just two indicators are reviewed here. The weekly chart below of the Australian index, the ASX200 shows the continued development of the bearish RSI divergence over the past 18 months. A fall through the base of the RSI pattern indicated by the red arrow would suggest the start of a very significant correction, if not a bear market.
The monthly chart of the ASX200 below, shows a… Continue reading
As an investor who has been bearish for a year, I continue to see little cause for optimism. However world markets continue to go to record heights buoyed by the hunt for yield because in an environment of record low interest rates and quantitative easing investors have little choice but to invest in equities. For several years this has been a great equities market for investors but how much longer can this last?
There remain two very different views of the market, that of the bears who have been predicting a world recession for about a year and that of the optimistic bulls who seem convinced that this bull market will last forever. Reality lies somewhere between these two extremes – but where?
In a quick review of the world economy, China is slowing but still growing at more than 7% per annum. The quality and sustainability of this growth… Continue reading