This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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- S&P 500: Closed
- US 10-Year: 2.66%
- Dollar Index: 96.76 -0.15%
- Oil: $56.03 +0.79%
- Shanghai: +2.68%
- Nikkei: +1.82%
- Hong Kong: +1.6%
- Dax: +0.14%
- UK FTSE: Unchanged
Equities Continue to Rally on February 19
Stocks are likely to rally when trading resume in the US on February 19.
The international markets I am about to highlight are critical and give us many clues to the direction of not only our markets but the global economy. These markets are all very much export-driven economies. If these markets are rallying is because investors see their economic fortunes improving.
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China – Shanghai
Equities in Asia had a big day on February 18 with the Shanghai composite surging nearly 2.7%. The market has been red hot over the past few weeks and continues to surge towards 2,825, which would be a rise of about 3% from its current level of 2,754. Should their finally be a resolution to the trade-war, I can’t think of a stock market more likely to help.
Japan – Nikkei
The Nikkei in Japan continues to rally as well and has cleared resistance at 20,950, and it seems to be heading towards 21,981, which would be a gain of over 3%. Again this is another major export economy. In fact the third largest economy in the world, behind the US which is number 1, and China which is number 2. Even the trend in the RSI has shifted from bearish to bullish, and that would suggest that there are more gains on the way.
Hong Kong is another market that continues to act well and shows signs of continuing to rise to around 28,980.
Tencent (700 HK)
Just look at the path of its largest stock Tencent 700 HK, it continues to rise nicely along an uptrend on a road to 367.40 HKD.
ICBC (1398 HK)
Or its second largest company ICBC 1398 HK which appears to be forming a cup and handle and pointing to an increase to 6.40 HKD. Even more look at the trend in the RSI, which has turned from a negative to positive since July, a bullish reversal.
South Korea – KOSPI
The South Korean KOSPI is on the verge of a massive break out, which could send the index higher by as much as 7% to 2,350. No matter how you slice and dice the relative strength index, it has broken out suggest a significant shift in trend.
Look at Samsung and its recent rise above resistance at 799 KRW, and the potential to rise towards 877 KRW.
What about Hynix with its big break out underway.
International Markets Pointing to Improving Economy
When you look at the performance of the international markets, it is tough to deny that these significant Asian markets are telling us something that US investors just aren’t paying attention too, that their economies are likely on the mend. They all started peaking in early 2018, as the US market just continued to move higher throughout the year, entirely missing the global slow down that was occurring. Now once again these markets are likely signaling a bottoming process.
Then, of course, there is this data fresh Dow Jones S&P today, which suggests that earnings growth bottoms in the first quarter and re-accelerates through the end of 2020.
(Dow Jones S&P)
They also estimate that growth in 2019 will be nearly 8% and will accelerate to around 13.5% in the year 2020. Although the growth rate for 2020 has slowed some in recent weeks, the expected growth in 2019 has stabilized about 8%.
(Dow Jones S&P)
Global Growth Indicators
Hard to be bearish when key global export stock markets and some of their largest stocks are telling us that the economic picture may be improving. It is also hard to ignore the fact that earnings growth here in the US is bottoming and about to pick up steams. Additionally, critical global growth proxies such as copper are now again trying to break out, while the RSI is trying to do the same.
Or when a metal used so heavily in the Auto industry such as platinum is putting in a bottom around $770 –its 2008 lows.
Semiconductors are rallying hard off their lows, and the RSI is pointing to more gains in the future. What products in our lives doesn’t use a chip of one sort or another?
You want to bearish on this market? Be my guest, not me, that’s for sure.
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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.