World Indices Roundup 2020

I’m optimistic that by simply holding ASX and Unhedged Global Equity index funds and rebalancing with new cash according to one’s chosen asset allocation should see it go to where it needs to be.

 

I wish I could recalculate XJO in real terms rather than nominal terms. It would be an interesting chart. The February 2020 peak would have to be lower than the November 2007 peak.

 

I should have really pointed out that although there have been increases (in some but not all cases) in real estate prices, stocks prices etc. in nominal and possibly in real terms, I'd suspect the increase in real terms is not as great as we might think and the rate of increase over say the decades since the '50s is decreasing. In other words, we are under the influence of deflationary forces and the good times are over. The charts below show the decade and multi-decade trend in CPI is down.



In the second chart "deflation" should be replaced by "decreases".

Source: Australia :: Deflation.com

 

Are you bored?

 

Yes, how did you guess?

 

That's me too - 50/50 ASX/world. When I made my plan I struggled though with the international side of things. I chose All World vs USA 50 hedged large cap / 50 mid cap (IJH). I must say though that the temptation is there to add some IJH after its big falls. Stick to the plan.....

 

I think I know what you mean Ross, I'm feeling similar that our recovery since GFC hasn't been as stellar as the US markets yet our fall (after finally just reaching the highs of 2007 - 13 years ago!) has been worse. As you say, we're back at 2006 levels for the broader market.

Having said that, we have some serious head winds. Our economy is built on a house of property cards which has been fuelled by low interest rates, low unemployment and fanned by speculation i.e the belief that property prices can only go up. And it does, until it doesn't.

We haven't had a recession in over 27 years, a large proportion of population have no idea what one means, they would have to look up the term Austerity and even most the older ones amongst have been spoiled over near on 30 years. I don't mean that in a derogatory way at all. It's fact and it's human nature. It's easy to get fat when there's plenty of hay.

Our property market is central to the wealth effect that has been the engine of our domestic economy. I'm worried that if enough jobs go here, for long enough, it's can have a big effect.

Nothing is inevitable and there's just as much chance that we, and the world get on top of this virus; China starts up again, kicks starts domestic infrastructure spending to boost its economy, fuelling demand for our commodities and everything starts going back to normal.

I just read the data for US initial unemployment claims come in for this week (welfare payments, their equivalent of Centrelink). The previous record ever was around 700,000 initial claims filed. During GFC it peaked at 665,000. Last week, 3.3 million claims were filed. For this week, predictions varied but ranged for 3.5 million to 4.5 million. The actual number just came in, 6.6 million claims filed.

Our economy and markets still have an elastic relationship to the US, as do much of the global economy. If they get a cold, we're probably not going to just get away with a sneeze.

 

Below is my summary for XJO. I have gone into far more detail than say if I was communicating with someone versed in the EWP and TA. The use of jargon is somewhat unavoidable, so I hope that is understood. I have provided the small booklet on the basics of EWP in an earlier post.

Preferred Wave Count

· Intermediate wave (A) of Primary wave ((2)) is complete.

· Intermediate wave (B) has commenced.

Price is currently in the vicinity of the 0.236 Fibonacci retracement level and so far has not exceeded the 0.382 Fibonacci retracement level. This would normally be viewed as being a weak retracement (assuming it is complete). Nevertheless, price has retraced sufficiently to overlap what has been labelled as Minor wave 4 of Intermediate wave (A). This suggests that the five waves of the impulse comprising Intermediate wave (A) are complete (this is referred to as “five down”) and supports that Intermediate wave (B) has commenced.

Some common retracement levels and wave extensions (which assume that Minor wave A of Intermediate wave (B) is complete) are shown which provide guidance as to where Intermediate wave (B) could finish, if it is not already finished.


Intermediate wave (B) has been contained within a parallel channel, although today’s price bar closed below the channel (see 15-minute chart). This often (but not always) tends to suggest the price action is a correction (but e.g. not a triangle), that is, it is countertrend price action and the dominant trend is still down. As price is now moving below the channel this suggests weakness.



What is not known is whether Intermediate wave (B) is complete and secondly, what specific Elliott wave pattern will it form. As it is a correction, (in its simplest form) it will subdivide into a “3”, waves A, B and C. For example, Intermediate wave (B) could be a zigzag or develop into say a triangle pattern (a variant of a simple “3” – see also below) comprising five overlapping waves, each say being its own zigzag. This will not be known for certain until it is complete and it becomes clear the downtrend has resumed. If a triangle forms, this would mean Intermediate wave (B) takes far longer to play out. Given it is not known whether Intermediate wave (B) is complete, the placement of its subwave labels Minor waves A, B and C, although shown, are in doubt.

Judging the scale of Intermediate wave (B) is the difficult challenge. Scale includes both price retracement and duration. Will it retrace say 0.5 or 0.618 of the fall from the 20 February 2020 high? Will it last for weeks or months? Is it already over? It is convention to label a pattern (or what is part of a pattern) as complete as soon as its development meets the minimum criteria to be considered complete. This is why I have labelled the chart as I have. A downside of this is that this may be premature but the flipside is that being disciplined maintains a state of readiness for important reversals. Another downside is that the wave count may change as more and more price data discloses differing fractal patterns from those thought to be developing.

A break below 4402.5 would strongly suggest Intermediate wave (C) is underway. A breakdown in market breath would portend a breakdown in price. The other possibility is that this might be part of an expanding triangle, however, these are very rare.

Alternative 1: The 23 March 2020 low of 4402.5 is only the end of Minor wave 3 of Intermediate wave (A). The retracement in price since this low is all or part of Minor wave 4. This alternative has merit as IMO many other Asian indexes have ended their third waves and are in fourth wave retracements. A slight variation on this alternative is that Minor wave 3 is not yet finished and some further subdivisions are required to complete it.

Alternative 2: The 23 March 2020 low of 4402.5 is the end of Primary wave ((2)). The dominant trend is now up. Although possible, this wave count would not seem probable as IMO there is no countertrend wave of sufficient price retracement and duration to comprise Intermediate wave (B). The 8-day EMA (green) is below the 19-day EMA (red) and weakening, so this doesn’t yet support a resumption of an upward trend.


Other possible alternatives/variations exist that are not discussed. For example, a triangle might form in Minor wave B of Intermediate wave (B).

 

In general the news around this **** storm has not improved and if anything in general the world has gone backwards. Yet the markets are moving up. What a load of rubbish. With no end in sight yet for this problem who exactly is out there buying. No ones even knows the full economic impact of this yet. Really makes me question how much of this market is manipulated by a few big players.

 

Have liked listening to his views on economics lately on youtube. Pretty switched on individual.

 

Hopeful amateurs and professional Traders getting shorts in place for next down leg?

 

Me too. He's the guy from Allianz. Impressive and simple to understand.

 

As @Nodrog mentioned probably the retail (last money in) type of investor. I sold nearly everything mid last week after a reasonable run up. I have left some dogs (some with fleas) and will decide what I do with them in June. Probably the last clear out to offset gains.

Market could rally another 10-15 percent or more, so I could be wrong. It was an opportunity to clean one of our family trusts and our SMSF ready for the next buying spree. I need to start portfolios fresh. I did make a not insignificant sum in our SMSF with NAB and WBC (31% rise). in a week or so. That was just playing but a handy five figure multiple. My other orders were not filled when NAB and WBC were bought and have since been purged due to their cheekiness. I'm still waiting and keeping reserves. Liquidity to improve even further in the next 10 days as another two term deposits mature. No rush IMHO.

 

Yeah I don't know. I find it hard to believe that some silly retail investors are out there buying up enough to push markets up 10% considering the current climate. I am going to come up with my conspiracy theory. Some really big players colluding together say lets buy back in a little and push the market up some. That way all the sucker retail investors think I better get in before it runs back up. Once the sucker retail investors have bought back in the guys in the shadows will then say lets take this thing back down again and start dumping and taking profits. Then they will buy back in again and the recovery begins.

 

Think of players such as Blackrock for one.

 

Exactly that. Wouldn't be that hard for a player like that to manipulate the market, let alone if they are working in cahoots with another 1 or 2 big players.

 

Blackrock is the provider of ishares (index funds) as well as managed funds. Not normally known for the manipulation side of things although it is, on behalf of shareholders, pretty much an activist.

Tinfoil hats need not apply.

 

It sounds to me like you’re frustrated cause the market won’t go down so you can go bargain hunting.

 

Impatient Tsunami Surfer takes frustrations out on surfboard: