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Another confluencing signal or just a coincidence

I posted a number of negative signals coming from forex, crude oil and then specific sectors in the US market i.e. Utilities and Energy, the last few days.. I see a confluence. Today I share a chart of the Straits Times Index for Singaporean readers.

 

Markets lining up for that one-for-all, all-for-one move?

Markets work in strange ways. I see strong correlations between different markets all the time but when you most expect or wish for them to move together, a slight divergence can go on and on to become a big one. However I believe that when many signals come together, it would be foolish to ignore. We should not be complacent when money is at stake.

This chart of the Straits Times Index shows the stock index at a strong resistance. Strong because there are two ideas here (equidistant channel, previous horizontal resistance) and because they come together very closely which I believe that there is a price reaction to based on the candlestick.

Straits Times Index monthly chart from mid-2010 to present

Straits Times Index monthly chart from mid-2010 to present | Chart: Amibroker with data from Datafolio

Additionally the blue horizontal line which price has reacted to, was a resistance back in October 2015 (marked by black arrows). Now this significant. If you recall, we had a horrible ‘Black Monday‘ crash in 2015 on 24 August. That was big. That October high in the chart ↑ was the highest point that the market could retrace to since Black Monday. We have not seen a higher move until this month. To me this is a additional significance.

In any case, one chart itself is no big deal. I think the more worrying development for investors is why so many negative signals are popping up at the same time. One is no big deal. Many? Maybe the stars are aligning themselves for something.

Just look at the market signals ↓ that are bearish in nature which I have posted recently.

Note: I think the Singapore stock market is a follower although it is definitely weaker compared to Western stock indices. The key mover in the next month is the March FOMC. I don’t see this as coincidence – my ‘whole’ world appears to be parked at resistance.

 

AUDUSD, AUDCAD and AUDJPY observations

Specifically note what I observed about AUDJPY in the last portion of this post.

AUDJPY has a very special quality to me – it has strong positive correlations to Asian stock indices like HSI, SiMSCI and also the venerable EEM. I have brought this quality up before. Because of this special quality, turning points in AUDJPY can be an accurate prediction for turning points in Asian stock indices. It doesn’t work all the time – I have ablog post here that describes this correlation and, it also turned out that the divergence in this post did not work out – you can take a look.

The point is IF you believe that AUDJPY is indeed at a potential point and IF the strong positive correlation remains valid, then it is time the next few weeks to pay attention to local stock markets.

 

XLE, Natgas, DIA and WTI signalling something?

This one looks at the troubling ‘old’ correlation between the Oil and Gas sector with the Dow Jones Industrial Average. Many people claim that it is no long true, that US becoming a significant oil and gas producer has changed the dynamics – I think that whatever the narrative is, look at the chart, compare for yourself the tops and bottoms.

XLE appears to be leading indicator

XLE appears to be leading indicator | Chart: Tradingview.com

If you believe it still works, XLE is a leading indicator.

And then there is this.

 

US stock investors doing that ‘flight to safety’ last week

XLU representing the US Utilities sector was the best performer last week over a 1-day and 5-day duration. Utility stocks have been the go-to investment when investors become risk-averse so this turns out to be another bearish signal.

It may be too soon, but we know that Utilities was the best performer last year (which was very volatile) and now which this chart and the 5-day performance, maybe investors are parting way with growth stocks and returning back to safety?

S&P500, DJU and XLU overlay from 2016 - Feb 2017

S&P500, DJU and XLU overlay from 2016 – present | Chart: Investing.com

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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