Daryl Guppy

[winston]

Bearish investors live in hope as markets rise

Market bears are excited by rising inflation in Japan which have the potential to drive the yen up and encourage Japanese investors to exit US investments as this will cause a market collapse and deliver profits to them

by Daryl Guppy

With debt-to-GDP at 260 per cent, an ageing population and rising interest rates, fears of a Japanese default are intensifying.

A shock to Japan’s bond market could ripple globally – further spiking US yields, trashing the S&P 500 and triggering panic.

Inflationary threats are rising in Japan and putting pressure on the Bank of Japan to raise rates. This has the potential to drive the Japanese yen much higher, which will encourage Japanese investors to move out of US investments.

Over the next 10 years, the US will add another US$20 trillion in debt. Foreign buyers may not keep buying US debt, so just who will buy it.

In the US, surging bond yields will pressure real estate with higher mortgage rates. Stretched equity valuations will see price-to-earnings multiples compress significantly.

A significant drop in US asset prices will drag the US economy into a sharp downturn. This risk is amplified by historically high household exposure to equities and record levels of leverage.

A breakout above 6,000 confirms continued bullish pressure. A trade-band projection gives a target near 6,200. A move below 5,700 signals continuation of bearish pressure with support near 5,200.

Source: Business Times

https://www.businesstimes.com.sg/wealth ... rkets-rise

[winston]

Make hay while the Trump shines

by Daryl Guppy

A sudden change in the uptrend includes a painful but temporary retreat, a sudden slowing of momentum or a radical readjustment in trend behaviour. All of these options have the potential to do serious damage to investment portfolios.

The first focus is obviously the equity market but attention also needs to be paid to associated markets such as the US Dollar Index.

Currently, there is no indication of any end of uptrend pattern developing. This includes patterns such as rounding tops, double tops and other trend-exhaustion behaviours.

The significant feature on the DXY chart is that there is no strong historical support until US$0.90.

Source: Business Times

https://www.businesstimes.com.sg/wealth ... ump-shines

[winston]

Finding markets’ floor

Markets slosh around with waves of money and can rise far higher or fall further than we can imagine

The Dow may consolidate between 42,100 and 44,400 before developing any new trend behaviour, says the writer.

by Daryl Guppy

Terms such as support and resistance are areas where there is a higher probability that the market will pause.

Every index is based on survivor bias. This means that, over time, the index inevitably rises.

The index always rises over time because losers are regularly culled from it, and winners are added.

The Dow Jones Industrial Average is an example of this survivor bias. Today, it contains just one stock from the Dow of 1959.

Rather than attempting to catch a falling knife (or market), investors will wait for proof the floor can hold.

Existing investors can use these as pain points to decide if they can bear the loss if the market moves to these support levels.

In both the US and Chinese markets, the key feature for investors is consolidation around a support level.

When markets recover, they do so from established support levels. Rebounds may occur from a point between these support levels, but they are rarely sustainable.

Source: Business Times

https://www.businesstimes.com.sg/wealth ... kets-floor