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Stock market review (weekly) after 25th May, 2012.

One of my friends was asking me about Nostradamus predictions (21st December, 2012!!!), practically I don’t believe these things but if Greece exits Euro then it will open a Pandora’s Box. I think then many astrologers may think twice about 21st December, 2012.
This week Euro zone leaders are talking about Euro-bond but for that they need to melt an iceberg, which up to now they failed to do that. Market is closely watching new interventions of Spanish government.

INDEX
25th May, 2012
5/18/2012-5/25/2012 (%)
5/11/2012-5/18/2012 (%)




Dow
12454.83
0.69
-3.52
Ftse
5351.53
1.59
-5.52
Cac
3047.94
1.33
-3.89
Dax
6339.94
1.09
-4.69
Australia S&P
4029.2
-0.43
-5.57
Shanghai Com.
2334.01
-0.45
-2.12
Hang Seng
18713.41
-1.26
-5.07
Sensex
16217.82
0.4
-0.86
Russia :Titans
5426.16
1.15
-7.09
Bovespa
54463.16
-0.09
-8.29
Argentina: Merval
2340.26
9.62
-7.37
South Africa
32992.25
-0.47
-2.61

It is good to see that some markets are showing positive figures but things are not same for those problematic nations of Euro zone. Better US home sales report in the beginning and consumer confidence report in the last day did not affect much. Where as PMI manufacturing reports from China and Euro zone were not good. In early this week Fitch downgraded Japan on concern of high level of debts, I think it was long due comparing to the PIIGs nations.



Stock market forecast for coming week.

Market is now eying on Euro bonds, experts are expecting that it may create a good atmosphere in the financial market. But I am not sure whether that has the capabilities to make a reversal! Market is not going to make a new run from here; we may see a short-term change and that in-turn may create more opportunities for shorts. Gulf related problems may find a solution in coming month so crude oil may not disturb market.

Liquidity is still a problem and I think one of the main causes of this is day traders and big institutes who are not jumping in a big way that they used to do. I have a feeling that investors will think twice before making any new investments because market is not reacting like past. Banks which are exposed to the Greece debts may see a drop and things will be more vulnerable if any new rating downgrade comes on these banks. In spite of that I will say that since there is less new bad news and next big things are waiting in coming month so overall markets are expected to see better days in coming week.

Technically it looks like that many stock indexes are making some kind of double bottom (or I would say “W” pattern) for very short-term period and if they break out then we may see positive days in coming week. But if those stock indexes maintain their resistance levels in early to middle of the coming week then they may not break-out and in fact they may drop later. It does not look like that US dollar is going to see much corrections and especially when it is close to trigger a pattern for more up moves, so that may become an obstacle for stock market considering its recent moves. Now days investors need to watch USD very closely.

In this type of market condition it is getting hard to predict the market in advance, here it is better to take call on day to day basis. Anyway, let talk about some stock indexes.

Last week I was expecting that Dow Jones I.A. may get initial resistance 12600. DOW is not in over-sold zone as it was in past week so if it doesn’t able to break this 12600 level then there is a chance that DOW may drop from here. Therefore 12200 is the important level but if DOW chooses to drop below 12100 then next important support level is 11800. For coming week emphasis should be given on 12200 level in the downside.
Though DOW is getting resistance around 12600 but its closing in last few days were better considering its lower positions. If it goes in the upside and breaks 12600 level then next resistance level is at 12800.
I want give emphasis on the movements in early days of the coming week. Because frankly speaking it has a chance to move either way. But if I have to choose between options then I will go for bearish view if it doesn’t able to break 12600 in early to middle of the coming week.
I am still expecting that DOW is going to make a bullish pattern in future, provided it does not go for lower highs and lower lows. We have to wait some more time to get a clear picture on this.


Last week I mentioned that German DAX is making a base around 6200 level. I was talking about an aggressive call that DAX may bounce around Tuesday to Wednesday this week, as such it tried to bounce in Tuesday but it was getting a resistance there.
Chart is not giving any clear signal. If we consider that DAX made a base around 6200 level then it is expected that it will bounce from here. But I think it has the chance to go up if it able to cross 6400 considerably. But for now 6600 may act as a good resistance for DAX, here if it follows the recent trend then it may not go more than around 6500 level (50% Fibonacci retracement level).
On the other hand there is a chance that DAX is making lower highs and lower lows, therefore it may drop more, may be around middle to later part of the coming week. If it breaks 6200 then 6100 is the next support level. In worse case scenario, 5800 will be an important support level for DAX.
Last day’s closing was not good and in this moment technical indicators are not showing any specific trend. So moves in the early days of the coming week are very important for DAX. It will be frustrating if DAX moves flat around 6200 to 6400 in coming days. I think emphasis should be given at 6600 level in the upside and in the downside it is 6100.

Shanghai Composite remains flat this week. Still it is not clear to me about its future move. Technically it is in over-sold zone so it has a chance to go in the upside and the bullish pattern that I am saying during last few weeks is still open for it and it can test level above 2400. On the other side as I told in last week that if it breaks around 2240 level then it can trigger the bearish pattern and may test around 2000 level. If this bearish pattern works out then I afraid that the above mentioned medium to long term bullish pattern will not work for Shanghai Composite. Because if it breaks 2130 level in the downside then it will be out of that bullish pattern.
I think that early to middle days of the coming week is very important for Shanghai Composite. If it cannot break 2350–2400 level then there is more chance that it may drop from here.

On longer term horizon Australian S&P/ASX 200 may test 3600 level but for that it needs time. For short to medium term it makes a pattern which can take it around 3850–3900 level, here it has an important support around 4050, which looks like that it broke or is trying to break.
Technically it is in over-sold zone, but in spite of that it can drop little more. In early days of the coming week it is important to look movements around 4000 level because in last week it did not able to break that level. So it may try that again. But if it again faces support in this 4000–4050 level then there is a good chance that it may reverse its position, therefore important resistance level is at around 4200–4250 but for that it needs to cross 4100 level.

At past 1770-1780 has acted as a good support for South Korean KOSPI and 1850 as a good resistance. Last day’s close was not good so I think that if it unable to cross 1840–1850 levels in early to middle days of this coming week then it may drop from here. Therefore the important level that needs to watch is 1750 in the downside.
KOSPI is not in much over-bought zone and it dropped rapidly in this month so a reversal is due. Where its retracement level is below 38.2% Fibonacci level, which is at 1864 level. So considering those it may test level around 1900 but crossing 1950 will be hard job for it.
KOSPI has different position from many of its peers and I am not sure about its up moves in early days of the coming week but it has a chance to move around this 1850 level in early days so emphasis will be on that level.


Reports due in coming days (from US)

 Tuesday, 29th May, 2012 – Home Price Index, Consumer Confidence, Dalla Fed Mfg. Index.

Wednesday, 30th May, 2012 – Pending Home Sales

Thursday, 31st May, 2012 – Unemployment Claims, ADP Jobs Report, Q-1 GDP Revision, Chicago PMI.

Friday, 1st June, 2012 – labor Dept. Jobs report, Personal Income & Spending, ISM Mfg. Index, Monthly Auto Sales, Construction Spending.


Politicians are now talking openly about Greece exit from euro. General investors are nervous about Greece issue and why not be! This Greece panic is spreading into the minds of investors in other problematic nations of Euro zone, as we are hearing about the decline rate in household and corporate bank deposits of these nations. Now what will be the situation of these nations, if Greece really exit euro!



NOTEPlease see the disclaimer of this blog.

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