European markets reversed earlier losses and bounced back up at the
end of the week as investor confidence was boosted on the possibility
of more stimulus measures from the European Central Bank in
March. Indices in Sweden (+4%), France (+3.3%), Denmark (+3.2%),
Germany (+2.5%), Switzerland (+2%), Spain (+1.9%), and the UK
(+1.6%) had gains of more than 1% for the week.
Author: Neeraj Khanna
Global Focus Developed Long
The Australia ASX All Ordinaries Index gained 0.4% this week,
closing at the top of the weekly range. It bottomed on Monday, before
gaining in three of the next four days. It is in a Rally Attempt, but
remains 16% off 52-week highs and well below 10-week and 40-week
moving averages.
Global Focus Emerging Long
Mainland Chinese markets gained after two consecutive weeks of
extraordinary declines. The Shenzhen finished up 1.7% while the
Shanghai was up 0.5% for the week. Despite the gain, volume for the
week was not encouraging as it was below the 52-week average, giving
the impression that markets remain under heavy downward pressure.
The Shanghai remains the worst of the two indices, trading nearly 3%
below the 24-month moving average while the Shenzhen still trades
approximately 10% above the long-term moving average.
Global Focus Frontier Long
US Focus Long
U.S. indices continued to slide this week, now testing the lows from August last year. The
heavy selloff to begin the year has caused major technical damage in individual leadership,
leading us to believe any sustainable rally will unlikely occur anytime soon. The majority of
growth ideas will run into heavy overhead supply and resistance on any bounce in the major
averages. We recommend lightening up in all later stage extended ideas on a shorter-term
bounce, while rotating into stable defensive ideas that have been able to relatively outperform
year-to-date. This defensive stance remains the best approach as this is not the typical pullback
we have seen over the past few years. We remain watchful of secular growth as these ideas will
eventually lead once volatility subsides and the market finds its footing. The market has now
been in a Correction since December 11.
European Focus Long
European markets resumed their precipitous drop for the week
as steep declines in oil prices and volatility in Chinese equities
continue to fuel concerns of a global economic slowdown. Indices in
Denmark (-4.6%), Norway (-4%), Spain (-3.7%), Germany (-2.9%),
France (-2.7%), Sweden (-2.7%), Italy (-2.5%), the U.K. (-1.8%), and
Switzerland (-1.4%) notched losses of more than 1% for the week.
Global Focus Developed Long
The Australia ASX All Ordinaries Index fell 2% this week. It has now
lost 7.5% in two weeks after meeting resistance at its 40-week moving
average. The index finished at its lowest weekly closing level since July
2013. It is 17% off 52-week highs and is down 7.5% for the year.
Global Focus Emerging Long
Mainland Chinese markets plunged for the second consecutive week,
both falling approximately 9% on average. The Shanghai is now trading
approximately 3.5% below its 24-month moving average, or longterm
support. The Shenzhen still trades approximately 8% above
the 24-month with a high probability of at least testing it, in our
view. We expect volatility to remain next week with the 2015 GDP
announcement on Monday, January 18. Markets remain in a Correction.
Global Focus Frontier Long
US Focus Long
U.S. indices broke all support levels in heavy volume this week. Large cap leadership that was
propping up the market has now pulled back, while lagging sectors undercut their previous
lows. The range-bound market has picked a direction, aided by a severe drop in oil and a
10-15% drop in the Chinese market. With the market now trading ~10% off its highs,
we advise a defensive approach, avoiding any buys until a new Rally Attempt begins and a
follow-through day occurs. We moved the market back into a correction on Monday, after it
undercut December 14 lows.
