As the market struggles to successfully break above the psychologically important 3000 level, signs of near-term investor complacency are building.
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Technical work is weakening for the USDCAD (USD weaker, CAD stronger) and we’re looking for it to work lower still, in favor of CAD. Here’s why: (1) Currently below downward-sloping 50, 100 and 200-day moving averages, (2) Daily momentum and weekly momentum (see bottom chart), too, are negative which means that momentum favors CAD vs. USD, (3) As the top chart shows, the USDCAD relationship has been of the distributive variety since its early 2016 peak with a high, followed by a lower high and another lower high to go with a low and a subsequent lower low. It might be a bit too aggressive to estimate that the USDCAD, based on the trajectory / set-up for its pattern, can put in another lower low below the 1.20 level from 2017. But we don’t believe it’s too aggressive to look for a first target of 1.30 and then 1.20.
Technical positives for the Postal Savings Bank of China (1658 HK) include the following:
(1) 5-month price high
(2) Above upward-sloping 50, 100, and 200-day moving averages
(3) Technical Score = 4 (Scoring Range = 0 – 4; 0’s & 1’s = weak; 2’s = neutral; 3’s & 4’s = firm / strong
(4) Positive daily momentum (below)
(5) Positive weekly momentum
(6) Monthly momentum thisclose to moving into positive territory
and (7) the 4.5% dividend yield adds a very nice kicker to this trade idea.
While finding effective shorts is always a frustrating process, when accounting, quant and technical come together the results can be quite promising.
The original XFL – a joint venture between the World Wrestling Federation (now WWE) and NBC – played its only season in 2001. As the X in XFL suggests, the league was a bit more eXtreme than the NFL with fewer rules, rougher play and a good number of iconoclasts who were known, not by their given names, but by their nom de guerre: Chuckwagon, Death Blow, Baby Boy and, our all-time favorite, He Hate Me (Rod Smart).
Trying to identify successful short candidates is always a difficult task, but one where your odds of success can be enhanced when your bearish thesis is confirmed by three distinct investment disciplines - Accounting/Strategy, Quant and Technical.
Long-time Japan watchers / investors will likely agree that the Nikkei has been, over-time, a case study in agita, or the Japanese equivalent. After all, the Nikkei’s all-time peak occurred in December 1989 (if you were in the business for that peak, we will buy you a ramen lunch!). But there have been periods when Japanese stocks work and work very well. For example, in recent years there was, first, an internal bull market (not apparent by looking at the Nikkei) begun in 2012 and then, secondly, an external bull market (apparent by looking at the Nikkei) which finally pulled the index higher from 2013 – early 2015. All in, from July 2012 – June 2015 the Nikkei gained +152%. It then fell -29% over the following year, back to the 15,000 level, and then a +62% push occurred that saw the index work to the 24000 level in Jan 2018. A minor new ephemeral reaction high occurred in the autumn of 2018 and then, like most global equity markets, the Nikkei dropped (-22%) into late 2018. From late 2018 – April 2019 it added 18% but has been largely sideways since (chart top left, p3).
We’ve got 15 pages of market items in today’s “Charts Are the Language of Wall Street” (10/11/19) that might help to make some sense of what’s occurring beneath the surface.
Chris Senyek had his latest “Short Stock Screens” report out this morning and we have always found it an extremely useful tool in helping to identify compelling shorts or longs that should be seriously questioned. His short screens comprise the 13 most potent valuation, earnings quality, capital creation, capital allocation, and sentiment metrics that they have found to be most useful in searching for ideas on which to complete additional fundamental analysis.
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