Research & Investment | Hope isn’t a strategy

Research & Investment

 

Hope isn’t a strategy

By Colin Twiggs
June 16, 2016 4:30 p.m. AEST (2:30 a.m. EDT)

Advice herein is provided for the general information of readers and does not have regard to any particular person’s investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.

Cautious optimism has evaporated after poor recent polls favoring a BREXIT. I hope that sanity prevails but, as the saying goes: “Hope isn’t a strategy”.

Better to have a Plan A and a Plan B to cope with the two alternatives. But if enough investors decide their money is safer in the bank, then expectations of a fall are likely to become a self-fulfilling prophecy.

The S&P 500 does not appear unduly alarmed but a sharp fall on 13-week Money Flow warns of selling pressure. Reversal below 2000 would warn of another test of primary support (1820 to 1870).

S&P 500 IndexDow Jones Industrial Average shows a similar picture. Breach of medium-term support at 17400 to 17500 would warn of another test of primary support at 15500 to 16000.

Dow Jones Industrial AverageA CBOE Volatility Index (VIX) spiked to 20, indicating increased market risk. Long-term measures remain unaffected.

S&P 500 VIX

Europe

Germany’s DAX retreated below medium-term support, warning of another test of primary support. 13-Week Money Flow below zero suggests a primary down-trend.

DAXThe Footsie broke support at 6000 warning of a test of 5500. Reversal of Money Flow below zero would suggest a primary down-trend.

FTSE 100* Target calculation: 6400 + ( 6400 – 6000 ) = 6800

Asia

The Shanghai Composite Index continues to range between 2700 and 3100.

Shanghai Composite IndexJapan’s Nikkei 225 Index broke support at 16000 and its lower trend channel, warning of another decline.

Nikkei 225 Index* Target calculation: 15000 – ( 18000 – 15000 ) = 12000

India’s Sensex remains bullish, with a short retracement below 27000. Bearish divergence on 13-week Money Flow would end if the descending trendline is penetrated.

SENSEX

Australia

The ASX 200 broke medium-term support at 5200, warning of another test of primary support at 4750. Expect support at the former level of 4900 to 5000 but it is questionable whether this will hold. Combination of a seasonal sell-off and BREXIT fears are going to test buyers’ commitment.

ASX 200The Banks Index fell sharply and breach of support at 7200 would offer a target of 6400*.

ASX 300 Banks* Target calculation: 7200 – ( 8000 – 7200 ) = 6400

Health Care is experiencing a strong sell-off, led by CSL. This is a good long-term stock but exposure to the UK/Europe has spooked the market.

ASX 200 Health Care

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