Technicals | Aug 08 2012
By Rudi Filapek-Vandyck
Yesterday, FNArena published the view of The TechWizard (see below) that the present rally taking place across global equity markets is characterised by weak inner strength on his technical analysis. Thus the Wizard concluded we would soon witness downward pressures kicking in. Other chartists are not necessarily sharing this view. While many acknowledge the Wizard's observation of "weak strength", most seem of the view this rally has further to go still, before a potential reversal will announce itself.
Technical market analysts at Barclays, for example, recently revised their bearish view for a more constructive view and their analysis continues to point into a more supportive environment for higher risk assets; at least for now. As such, the team has adopted a positive view on crude oil futures and on copper, while observing technical indicators for equities have been improving in recent sessions.
The upswing in WTI has now reached the team's initial target near US$93.25/bbl and the analysts are now looking for an extension toward US$95.00. Note: they do anticipate this will mark the top. For Brent the target is towards US$113.00/bbl.
Having abandoned their previous bearish sentiment on base metals, Barclay's chartists now anticipate "better levels to sell" (as in: prices will move higher first). They would fade copper against US$7815/tonne and aluminum against US$1995/t.
Technical analyst Daniel Goulding, publisher of the weekly Sextant Report, shares the same concern as the TechWizard in that global equities continue showing weak signals while surging higher. This then leads to his conclusion "The internal backdrop suggests the current rally is countertrend". Thus, predicts Goulding, "Some type of pullback is on the cards – the only questions in my mind are how big and from what level?"
In the short term, Goulding suspects the ASX200 might target 4420 but this will be the peak, he predicts. He thus disagrees with the Wizard and believes overall sentiment will remain bullish at least for the remainder of this week.
Longer term, Goulding remains among the most bearish analysts in the Australian share market, predicting the ASX200 will ultimately return to levels below those reached in March 2009. On the flipside, he does see the start of a new prolonged bull market, probably around 2016.
The above views seem to fall in line with the latest projections by Swiss-born highly respected investment expert Marc Faber, also known as "Dr Gloom" because of his oft left-field warnings. In his latest interview with CNBC, Faber cites slowing economic growth and downward pressures on US corporate earnings as reasons for concern. In the short term, however, Faber thinks the S&P500 may well rally as high as 1500 which implies the present rally can potentially last into September. He does think the overall environment will get more hairy in the September-October-November period.
To view the Faber interview: goo.gl/u1dY9
In summary, Goulding, in this week's edition of The Sextant Report, probably summed up the underlying sentiment best among those technical analysts with a bearish view: "While the technical evidence is bearish, further deterioration is likely required before a significant move lower can unfold".
Here's yesterday's story from the TechWizard: "TechWizard Spots Inner Weakness For US Rally"
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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