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Stock market review (weekly) after 11th May, 2012.

Probably this is the first time that world financial market is feeling the heat of Greek election. Election result in France was not problematic for market but post election situation in Greece is getting too much complicated. Investors were eagerly looking to get positive information from Greece but they were disappointed with the outcomes, in fact still there is no outcome. Market is calculating on different options, especially after remark from German finance minister.
Property market exposure of Spain’s banks was frustrating for market, which later came down through confirmation from Spanish central bank about partly nationalization of Bankia. Most of the world stock indexes were down this week as we can get the environment of riskier assets from German bund figures.

INDEX
11th May, 2012
5/04/2012-5/11/2012 (%)
4/27/2012-5/04/2012 (%)




Dow
12820
-1.67
-1.44
Ftse
5575.52
-1.41
-2.11
Cac
3129.77
-1.02
-3.19
Dax
6579.93
0.28
-3.53
Australia S&P
4285.1
-2.52
0.78
Shanghai Com.
2395.4
-2.31
2.32
Hang Seng
19964.63
-5.32
1.66
Sensex
16292.98
-3.19
-1.77
Russia :Titans
5773.51
-0.17
-5.94
Bovespa
59445.21
-2.26
-1.41
Argentina: Merval
2304.61
4.03
-2.49
South Africa
34038.46
-0.26
-0.36

New macro reports from Germany and US were not much effective for market; in fact weak trade balance figure may be concern for US. Prediction about economic contraction of Euro zone and JP Morgan’s loss made their contribution in the last day.



Stock market forecast for coming week.

In coming days if Greece finds a solution then we may expect a better environment for market, I am not sure whether that has the capabilities to reverse the market! It is true that these days market is focusing more on Euro zone problem but as I told in past that I think what PIIGs nations are facing, mostly these are their traditional problems (think about Japan, what it has?) and it will take time to come out of this. So if in future suddenly market moves its focus from these, then we may face a changed situation but here the problem is where market will shift its focus!
Now many stock prices are in December, 2011 level, so those are again knocking investor’s memory. Many investors are feeling that they are just steps away to jump for the opportunities, which is coming to them. But I am little confused about the role of big institutes, they are mostly immune and it is very frustrating for market. I still think that only liquidity can stimulate this market, unless Greece decides something different! 

On the other hand, the way US dollar is moving, if we consider our past experience then it is not good sign for stock market. Here I must say that most of the stock indexes are not showing any particular trend for coming days. But many of the major markets around the world are facing significant corrections and some are in very short-term over-sold position, considering that a short-term reversal is due, provided Euro zone supports that.


Let talk about some stock indexes.

Last week I was expecting that Dow Jones I.A. may test 12700 level and if it reverses then its resistance will be at around 13000 level.
In past week I was talking about a pattern which is clear now. But that does not guarantees that DOW will start dropping more from Monday. I think that there is a chance that DOW may test higher levels, as indicators are also showing oversold zone. Therefore the initial resistance is at 13000–13050 level. Here I must say that there is a chance that DOW may test around 13300–13350  level in the upside in coming future.
On the other hand if the bearish figure acts then DOW can move up to 12100 level but it may take time for that. I will not be surprise if it moves around 12700 to 13000 levels in early to middle of the coming week. I think for bearish pattern, emphasis should be given at level below 12600.
I don’t know for sure that whether DOW is going to react on the bearish pattern or it will break 13100 level and test around 13300–13350 in the upside to built a new positive pattern (which looks to me in the early stage). So for this moment I think macros can help us in this matter.

I was expecting that if German DAX breaks 6500 level then it will get support at 6400 and I was also expecting reversal of trend in middle to later part of this week.
Last few day’s moves were good; here it is getting resistance at 6600. From here DAX has two alternatives for upside movement. It may move around 6600 level for few days and then may make up moves in coming Tuesday or Wednesday; on the other hand it may just make one or two day’s little correction and then makes the up moves. For both these two conditions I will give emphasis on moves above 6600. Last day I was talking about lower highs and lower lows pattern, if it follows that then it will not rise above 6875 in coming days.
Now if it does not cross 6600 level convincingly then it will start dropping to test lower levels. In this case it may drop below 6400 levels and may be testing 6200 levels. In case of violent selling things can be worse.
Technical indicators are not showing any specific trend for sure so emphasis must be given in 6600 level and on movements in early days of the coming week because these can set the trend for whole week. Here I must say that this week DAX was trying to make a base around 6400 level so in the downside that level is important.

I was expecting that Shanghai Composite will not correct much and it closes above the support level of 2385–2400, which I mentioned in my last week’s forecast. Now early days of the coming week are very important for it. If Shanghai Composite drops in early days then it has a chance to test lower levels but as I said in past that I will think about Shanghai Composite if it crosses 2300.
I am still positive about the medium term bullish pattern of Shanghai Composite provided it does not go below 2130. If Shanghai Composite able to maintain this 2400 level in early days of the coming week then it has a chance to trigger the bullish pattern which I talked during last few weeks. But before that it has to break 2450 level. I think Shanghai Composite is in better position than many of its peers and if this bullish pattern works out then it can go above 2700.

I was sure that if Brazilian BOVESPA fails to test higher levels in early days of this week then it has more chance to drop. Now it is looking for a support above 59000 but I have doubt about this level. BOVESPA is in over-sold zone so it has a chance to make higher moves in early days of the coming week but even if it makes positive moves I am not too much bullish about that. It looks like that even if BOVESPA test level above 61000 in early days of the coming week then there is a chance that it may drop later.  But if it drops in early days and breaks this 59000 level then it may test level below 55000.


Reports due in coming days (from US)

Tuesday, 15th May, 2012 – Consumer Price Index, Retail Sales, NY Mfg. Index, Housing Market Index.

Wednesday, 16th May, 2012 – Housing Starts, Industrial Production, FOMC Minutes.

Thursday, 17th May, 2012 – Unemployment Claims, Phil. Fed Index, Leading Economic Indicators.

Friday, 18th May, 2012 – TBD


There is not any better economic situation which can stimulate the market; obviously I am talking about the both sides of Atlantic. Stock indexes are down from its top levels this year, yet there is a fear of more. Last time in November-December investors were expecting same thing and later markets went out of their hands. I don’t know whether in coming future many investors will again face that disappointment but it is true that this time market is missing something.


NOTEPlease see the disclaimer of this blog.

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