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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Global Economic Perceptions Are Shifting - Asia China Markets Risks

Stock-Markets / Asian Economies Dec 03, 2018 - 01:33 PM GMT

By: Chris_Vermeulen

Stock-Markets

The continued efforts of our research team to identify and quantify the possibility that the capital shift which has taken place over the past 18+ months may be shifting to other assets is in the interest of all global investors.  Is there a new, more opportunistic investment that will take away from the capital that has been rushing into the US equity markets over the past 2+ years or is the capital shift towards the US equity markets still intact?  These are the questions before us and these are the questions that will determine if the US equity markets continue to rally or continue to top out.


In part one of this research article, we began to explore the aspects of our research that we believe are key to understanding the future of the global capital shift phenomenon. In short, the capital shift is the movement of investment capital from one asset to another asset (from country to country, from one form to another or from one asset class to another) in an attempt to seek out and secure the best, safest and most secure ROI on the planet.  We believe this process has been a driving force behind much of the global markets success or malaise over the past 4+ years (actually starting near 2013 when wealth in China and capital controls forced investors to seek outside investment sources).

Additionally, in part one of this research article, we highlighted the traditional range channels of the US equity market and how these ranges have played an important role in identifying price support.  Currently, the US market is sitting at the middle support level of historical ranges after retracing from recent highs.  This is far from the “crash moment” that many are predicting.  The reality is that this is more of a reversion to support in a strongly upward sloping price channel.

Let’s start out by asking the question “what will happen to Asia/China over the next 2+ years and what will happen with the capital from Asian investors?”  Should we believe that China/Asia capital markets are healthy and robust for sufficient ROI in current form or are these investors seeking outside sources for healthier and safer ROI solutions for their capital?  And what should we expect over the next 18~24+ months beginning in early 2019?

Our Custom China/Asia Index has clearly shown that prices have reflected a downward trend since the top in early 2018.  This price decline has already breached the 50% Fibonacci retracement level and appear to be attempting a deeper price move lower.  We believe the banking/credit/expansion issues in Asia/China are related to this capital contraction and won’t abate until the majority of these issues are resolved.  In other words, there is far too much uncertainty in this area of the investment world to support a change in investor sentiment.  Yes, everyone wants to see Asia/China settle these economic issues and become poised for a stronger growth model going forward, but everyone is also waiting for the next shoe to drop to detail these expectations.  Housing, Trade, Credit Markets, Banking, Global Objectives, Regional Issues, Manufacturing??  Pick one and wait a few months for some news.  At this point, there is so much news originating from China/Asia that is pointing to a broad market correction that we are simply waiting for the next news item to hit.

The One Belt, One Road project is another concerning aspect to what China/Asia is capable of achieving.  This project is incredibly diverse – spanning dozens of nations/countries.  The reality of this project is that uncertainty abounds from all angles when one considers the routs this project is taking and the global uncertainties that originate from many of the areas on these routes.  Tehran, Kenya, Pakistan, Sri Lanka, Kuala Lumpur, Jakarta??  Sure, the land and sea transport solutions offer a very interesting and dynamic shift for economic growth, but this is all based on the assumption that wars, graft, politics and local/regional tensions don’t flame up to halt or block any of these routes and the future success of this project.

Already, Malaysia has terminated multiple projects related to the One Belt, One Road objective because of corruption and fraud against the Malaysian people.  We are reading news stories of Pakistan and other nations questioning the deals made with China in support of this project.  In our opinion, the land routes are much more fragile than the sea routes.  Ships can change course and head to another port if needed.  Train tracks are not easily relocated and shifted around to address regional issues.

Additionally, the global commodities pricing index (from Bloomberg) is suggesting that global commodities have reached a peak and are declining.  This puts pricing pressures on larger global projects like the One Belt, One Road project because profits from mining or manufacturing raw commodities and secondary commodity products are dramatically decreased.  This would also suggest that suppliers and manufacturers may be experiencing an economic stall in terms of growth expectations over the next few years.  If the commodities futures prices are declining, then global investors are not seeing any aspect of the global markets that would relate to higher demand, manufacturing or increased general consumption/use of global commodities.

Watch Crude Oil for signs of life in the economy.  The price of Oil is often a very good gauge of economic activity and expectations in terms of freight, shipping, consumer activities and more.  Oil has seen a very dramatic selloff over the past 2 months and is nearing levels that should be concerning for producers.  Oil price levels below $40 ppb could be a game changer for much of the Arab world.

Our conclusion is that until global investors see the true opportunity for Asia/China and see real strength in the global commodities markets, risks continue to outweigh opportunities in much of Asia/China.  Therefore, we believe the capital shift phenomenon originating from this region will continue to source more suitable returns in other global investments.  Should the commodity index break down or the Chinese/Asian markets collapse further, we believe the push for outside safety will increase.  This may be likely near the start of 2019.

Want to know what our predictive modeling systems are suggesting will happen in 2019 and beyond?  Are you searching for a dedicated team of researchers that can help you understand where opportunities are and how to find great trades?  Take a minute to visit www.TheTechnicalTraders.com to learn how we can assist you and help you find greater success.  Want to see how we’ve been calling the markets, visit www.TheTechnicalTraders.com/FreeResearch/ to review all of our public research posts.  2019 and 2020 are setting up to be incredible opportunities for investors – get ready for some incredible success with these bigger price swings playing out.

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

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