NZSX50 - Good News!

[Hoop]

NZ50 beginning to look broken?

It became technically broken last week (Monday 23rd) Belg. It broke a small support, the EMA50, and more seriously it broke the H&S pattern neck line all on the same day....see my last weeks chart 24th June Post#1678

The H&S (head & shoulder) pattern is very flat so one would expect the break would only create a small correction.
....however....
My discipline is similar to Phaedrus'..... when the index (where my shares are included in) breaks down I cease to buy new company shares (cease accumulating too) and strictly keep to the selling discipline, any sell signal MUST be adhered to...that mean't my favourite AIR shares that triggered sell signals had to be sold...

For me... it stays this way (no buying) until the NZX50 triggers buy signals again

[Beagle]

Treasury and Reserve bank have this wrong. Brakes are being applied too hard and too fast.
If you are a dairy farmer in the Waikato with no debt you're unquestionably doing well, although even then you're looking at a payout that's significantly reduced this coming season too what it has been.

Buesiness confidence is being sapped by higher interest rates and consumer confidence will follow.
NZX 50 forward PE ratio's are stretched to the limit and face an acid test against rising interest rates.
Further...we are seeing an almost unprecendented supply of new listings coming to the market so overall I think its hard to make headway when you appear to be swimming against the tide. Who could be surprised if the market corrects or at best goes sideways for the next quarter or two ?

[BIRMANBOY]

What buy signals will you looking for Hoop?

It became technically broken last week (Monday 23rd) Belg. It broke a small support, the EMA50, and more seriously it broke the H&S pattern neck line all on the same day....see my last weeks chart 24th June Post#1678

The H&S (head & shoulder) pattern is very flat so one would expect the break would only create a small correction.
....however....
My discipline is similar to Phaedrus'..... when the index (where my shares are included in) breaks down I cease to buy new company shares (cease accumulating too) and strictly keep to the selling discipline, any sell signal MUST be adhered to...that mean't my favourite AIR shares that triggered sell signals had to be sold...

For me... it stays this way (no buying) until the NZX50 triggers buy signals again

[Hoop]

What buy signals will you looking for Hoop?

BB...there are tons of TA indicators and various TA methods that others may prefer..The buy signals I will be watching will be the indicators that I'm personally comfortable with...I keep it simple with only a few indicators...using too many indicators can overcomplicate matters and affect decision making..
So..with reference to the charts I post on ST the signals would be from:
Charting
1....a clear break above the EMA50 currently at ~5150
2....a clear break above the 5150 (5160) resistance (ex 2 weeks ago support) line
3....Change of trend ...create a higher high..has to be above 5200
4....A failed H&S (head & shoulder) pattern....needs the index to break above the pattern's upsloping neck lines...say 5200 by this Friday or 5220 by the following Friday.
TA indicators...(all 3 are negative or downtrending atm)
5....OBV needs to reverse to an uptrend
6....RSI (14) needs to rise up to above 50 and/or confirm an uptrend.
7....DMI when +DI crosses to be above the -DI

Usually the TA indicators signal closely with the charting lines and patterns...sometime a "warning" divergence happens when "unusual" trading behaviour is detected by the indicators..

I take note but don't act upon a single buy trigger...I wait for confirmation from other signals...With a solid reversal many buy triggers will fire off close to each other or all at once...The more trigger signals firing the stronger the chance of that event will continue to happen.

Sometimes life can be a bitch and things get complicated...If I'm undecided or smell a rat I will look to some other specific TA indicators for help

NZX50 closed at 5146 up 5 (+0.1%)..It's not far away but more work has to be done to repair its technical damage...until that happens I stay on the sidelines.

Disc: Equities 60%(and decreasing) Cash 40%(and increasing)

[BIRMANBOY]

Thanks Hoop...interesting reading.

BB...there are tons of TA indicators and various TA methods that others may prefer..The buy signals I will be watching will be the indicators that I'm personally comfortable with...I keep it simple with only a few indicators...using too many indicators can overcomplicate matters and affect decision making..
So..with reference to the charts I post on ST the signals would be from:
Charting
1....a clear break above the EMA50 currently at ~5150
2....a clear break above the 5150 (5160) resistance (ex 2 weeks ago support) line
3....Change of trend ...create a higher high..has to be above 5200
4....A failed H&S (head & shoulder) pattern....needs the index to break above the pattern's upsloping neck lines...say 5200 by this Friday or 5220 by the following Friday.
TA indicators...(all 3 are negative or downtrending atm)
5....OBV needs to reverse to an uptrend
6....RSI (14) needs to rise up to above 50 and/or confirm an uptrend.
7....DMI when +DI crosses to be above the -DI

Usually the TA indicators signal closely with the charting lines and patterns...sometime a "warning" divergence happens when "unusual" trading behaviour is detected by the indicators..

I take note but don't act upon a single buy trigger...I wait for confirmation from other signals...With a solid reversal many buy triggers will fire off close to each other or all at once...The more trigger signals firing the stronger the chance of that event will continue to happen.

Sometimes life can be a bitch and things get complicated...If I'm undecided or smell a rat I will look to some other specific TA indicators for help

NZX50 closed at 5146 up 5 (+0.1%)..It's not far away but more work has to be done to repair its technical damage...until that happens I stay on the sidelines.

Disc: Equities 60%(and decreasing) Cash 40%(and increasing)

[macduffy]

From Robert Shiller . OK, he's talking about the USA - but does it apply to the NZX as well?

“I am definitely concerned. When was [the cyclically adjusted P/E ratio or CAPE] higher than it is now? I can tell you: 1929, 2000 and 2007. Very low interest rates help to explain the high CAPE. That doesn’t mean that the high CAPE isn’t a forecast of bad performance. When I look at interest rates in a forecasting regression with the CAPE, I don’t get much additional benefit from looking at interest rates… We don’t know what it’s going to do. There could be a massive crash, like we saw in 2000 and 2007, the last two times it looked like this. But I don’t know. I think, realistically, stocks should be in someone’s portfolio. Maybe lighten up… One thing though, I don’t know how many people look at plots of the market. If you just look at a plot of one of the major averages in the U.S., you’ll see what look like three peaks – 2000, 2007 and now – it just looks to me like a peak. I&rsq uo;m not saying it is. I would think that there are people thinking – way – it’s gone way up since 2009. It’s likely to turn down again, just like it did the last two times.”
Professor Robert Shiller, June 25, 2014, The Daily Ticker

[MAC]

Wow, Shiller sounds really schizophrenic there. I think we all are though. Fear of the unknown and all that. All I know is there is a strong correlation between raising interest rates and a falling market, and that NZ has already started and the US is firmly on that track as well...

We’ll all forgive you Moosie because you are a humble TA.

Both history and fundamental analysis tells us that sharemarket’s typically prosper in rising interest rate environments, particularly growth stocks.

It’s when central banks consider it is time to reverse policy and stop raising interest rates that you need to be concerned about economic growth stalling, forward earnings projections dropping off, and resulting detrimental effects on the sharemarket.

http://www.sharetrader.co.nz/showthr...tes#post462006

http://disciplinedinvesting.blogspot...-good-for.html

[MAC]

Sorry, I should have elaborated on that a bit more. I meant high-tech/growth stocks with no/little earnings or profit will suffer in a rising interest rate environment as the cheap miney tap used to fuel them is turned off. We have already seen a shuffle from these stocks to the bigger, profitable companies within our market.

I was thinking of the all encompassing tech bubble in 2000 when I made the previous comment; everything was son intertwined that as soon as the Fed raised rates itall came crashing down! Of course the Nasdaq and Internet Composite suffered horrendously, but since the US economy was still growing quite well until 9/11 the DJI certainly outperformed until then.

Hope that clears it up!

Not so, growth stocks prosper for a couple of reasons,

Generally investor cash moves from cyclical stocks which tend to become fully valued on elevated PE ratio's to profitable growth stocks, or near profitable growth stocks, as investors seek the same returns that cyclicals no longer provide.

Also growth oriented companies with large piles of corporate cash, record levels as at present, will now start to apply that cash as capex in pursuit of taking profits from an improving economy. Investors will follow this growth and the shareprice returns it offers.

Any dip in growth stocks (not defined as spec tech stocks) with good fundamentals should be looked at as a gift about here.

[winner69]

Moosie - this guy agrees with you

Sharemarkets set for biggest tumble since GFC, says veteran investor Han K. Lee
http://www.canberratimes.com.au/busi...707-zsyj6.html

Thought of MAC when I read this bit - “Now the situation is even more perverse. It doesn’t matter whether the latest data is good or bad, brokers are finding a rationale to interpret everything as an excuse for why shares should continue to rise.” ....even PEB maybe

[Hoop]

We’ll all forgive you Moosie because you are a humble TA.

Both history and fundamental analysis tells us that sharemarket’s typically prosper in rising interest rate environments, particularly growth stocks.

It’s when central banks consider it is time to reverse policy and stop raising interest rates that you need to be concerned about economic growth stalling, forward earnings projections dropping off, and resulting detrimental effects on the sharemarket.

http://www.sharetrader.co.nz/showthr...tes#post462006

http://disciplinedinvesting.blogspot...-good-for.html

Partially Disagree.
Interest rates are not considered a driver of the Stockmarket...why?

Before the 1980s interest rates had a loose correlation with Equities..Yep..rising interest rates together with rising stockmarket ...All this changed with the introduction of Monetary policy...when the correlation flipped to reverse correlation when interest rates were used as a tool to control inflation..Inflation is the primary driver of the Stockmarket and as Monetary policy was introduced into the various countries their stockmarkets interest rates did react but only when inflation was present as well..
Most of the data from various "media researchers" don't allow for these differences and some mix the pre-monetary data with the post monetary data.. so some of it is muddled statistical lies..
I quickly dragged this chart of Google Search as this chart reinforces the story with the flipping of the loose correlation to reverse correlation occurring about 1982 with the S&P 500 in red.


As I don't want to bore everyone by writing a book on Sharemarket Theory..there is much written on this subject as studying the Secular cycles highlights the true drivers of the sharemarket which are inflation and the Annualised PE Ratio ...you see the interest rates don't seem to have a large effect in Secular bear cycles either with or without Monetary Policy...

So to make it totally plain to everybody..The only reason why the S&P 500 is considered overvalued but not well overvalued considering its historically very high PE Ratio is because of its driver (inflation) being in its sweet spot of 1 to 2% range.. when inflation moves either up or down outside of its sweet spot range the sh1t will hit the fundamental fan...

A lot of information regarding the interest correlation? subject is scattered throughout on the Investing Strategies and Secular Bear Markets thread