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Stock market reviews (weekly) after 16th December, 2011.

This week started with the fear of imminent rating downgrade by S&P and ended with the cut of Belgium’s credit rating by Moody’s. It is very interesting to see that these rating agencies are doing everything to create panic in the market whether by rate cut or by lower outlook of nations or banks like BoA, Goldman Sachs, Barclays, e.t.c. It is sure that I am against these agencies but some of their steps sometime create lot of opportunities for intra-day trading.

12/9/2011-12/16/2011 (%)
12/2/2011-12/9/2011 (%)


Except one or two reports from US there are not much things for the stock indexes to rise from here. Whether it is slowed industrial output in India, cutting economic growth forecast in South Korea or Switzerland, rise in unemployment rate in UK, pessimistic Japanese manufacturers’ sentiment. These all shows negative for world equity market, despite the fact that some better reports from US or Chinese policy maker’s manifestation about guarantee growth in 2012.

Stock market (Index) forecast for Coming week

Fitch and Moody’s have expressed some of their views this week, after EU summit but S&P’s view is due. What I think that market is already discounting some of the rating downgrade of big Euro-nations. So we may not see a big drop in the stock indexes if those types of events come in future. But I think stock indexes are still acting like a falling knife and unless some solid news comes from Euro-zone I am not going to invest much.
One thing I am watching in different stock indexes that some indicators are showing that they are in over-sold zone but in spite of that they are forming such a pattern, from where they can go either way.

It is true that market is not satisfied with the EU summit outcomes, last week I was talking that STRAITS TIMES can trigger a bearish pattern if it break 2650 level. Now it is very close to that zone, so it will be a testing time for it. If it drops from this level then it has a chance to go up to 2400 level, this type of things can happen only if foreign institutes start violent selling is short span of time. Now if we consider the bullish pattern (as some indicators are saying that it is in short-term oversold condition) then as I said in past it can only trigger that if it crosses 2900 level. Right now it will be two much of expectation but it is sure that coming week may decide the whole game of up or down.

So DOW is finding hard times to break 12200-12300 level, actually there is not much news which can trigger the bullish pattern which it is creating. So if it breaks this level then it can test 12400-12500 levels. Last day’s move with high volume was not good, so if it drops from here then it can trigger a bearish pattern at 11200 level. But first it has to cross 11600 level, right now this 11600-12200 is the important level for DOW.
I have not changed my stand on DAX. I still think that if it drops below 5300-5400 level it may trigger the bearish pattern which it is forming.  But if we consider in shorter time horizon then it is creating a bullish pattern (2nd pattern which I talked in last week), which can trigger at around 6200 level. But now, as it looks like the first pattern which I said during last few weeks is too far or we may talk about that if this short-term bullish pattern (2nd bullish pattern) triggers first.
BOVESPA failed to cross 59000 level and look like it is negating the bullish pattern, now 54000-55000 is important support level for it. If BOVESPA drops from this level then it can trigger a bearish pattern, therefore it can go up to 51000. Unless it crosses 59000-60000 level it has less chance to create big up move.
Last week I was expecting that Shanghai Composite will drop more, as such it broke 2300 level. Now if it chooses short-term reversal then it will get resistance at 2300. Otherwise if it drops more then it can go to test 2000 level. But as shanghai Composite decouples from others during last few weeks and it is in over-sold condition so some reversal is due.

Reports due in coming days (from US)

Monday, 19th December, 2011 – Housing Market Index
Tuesday, 20th December, 2011 – Housing Starts
Wednesday, 21st December, 2011 – Existing Home Sales

Thursday, 22nd December, 2011 – Unemployment Claims, Rev. to 3rd Quarter GDP, Chicago Fed Index, Consumer Sentiment, Leading Economic Indicators.

Friday, 23rd December, 2011 – Durable Good Orders, Personal Income & Spending, New Home Sales.

Now some are focusing about the exposures of US in Euro-area, as we have already seen the threat of rating agencies about the exposure of big banks. What I think that if all the documents regarding CDs and CLNs come then it can be a long story and no one can be immune from that. On the other side fillings for foreclosure have dropped in November but numbers of homes scheduled for bank auction have increased significantly, this indicates that we may see more foreclosure in coming future.

What I think that problem this time is different from 2008, in fact it is bigger this time. If all those big institutions which are in trouble, suddenly sell their investments in abroad to bring money back in their home then it will be worst situation for investors. Though their immediate funding problems have solved but who knows what is coming ….

NOTE :  Please see the disclaimer of this blog .


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