Global Slowdown is Bearish for Barclays

Share On Facebook

Stock markets rallied yesterday, the S&P 500 in particular was very strong. The US index has retraced nearly 62% of the recent decline from the all-time high. The FTSE 100 is lagging, the UK index has retraced 23% of its decline. Both FTSE 100 and S&P 500 are in a second wave up. Second waves are generally large, a near 62% retracement is good enough for a second wave, so it is possible the rally in the S&P is done or nearly done. If so the FTSE will struggle to rally further. Yet a fair target for FTSE is 7400, may be the weak pound will help the FTSE.

©

I am not sure the pound will drop, the dollar chart looks bearish and this is bullish for GBP/USD. I expect another leg down in the dollar, this would push GBP/USD higher. I am also not sure why the S&P was so strong yesterday, the US index rallied nearly 2%. There are rumours US companies bought back their own shares, taking advantage of lower prices after the recent slide. This makes sense because share buybacks are the fashion at the moment. But where do companies find the cash? They have been buying their own shares at a record pace this year, yet they are buying more. Surely in a fragile economic environment, cash should be saved and not invested in the stock market. If the stock market goes down companies will lose money which will be reflected in lower stock prices.

This trade war is far from over, the economy will suffer, this is why the dollar will go down. Look at the US 10Y bond yield, it is falling again, as long as it falls the economy will suffer. Look at the amount of negative yielding bonds in the world, another indication the global economy is in trouble, it has been decelerating since 2008 but the central banks did not want you to know so they inflated with QE. Now we know the central banks made a mistake because we are on the way back to lower growth and declining stock markets. The banking sector will suffer in this environment, and we get a warning from Barclays chart.

 

The Banking sector has never recovered from the last financial crisis in 2009. In a recovery bank shares move up in five waves which is the impulse pattern of an Elliott wave. Barclays chart shows that from the low in 2009, the share price has gone sideways. This pattern is not an impulse wave but a bearish descending triangle [A,B,C,D,E]. Triangles are corrective patterns, this one is a correction in the long term downtrend. Indeed, Barclays has never left the bear market, all it did was to pause before the next collapse. This collapse is coming because the triangle is complete, this triangle is wave (2) of the decline. The next move is wave (3) down, the share should break below 43.7 which is the 2009 low.

Thierry Laduguie is Trading Strategist at www.ftse100trading.uk

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20191121 11:01:42