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Stock market review (weekly) after 15th June, 2012.

Markets are confused about the coming events and in the later days of this week things were very slow. Many investors were afraid in carrying the open positions. Markets were trying to gain on expectation of stimulus hope but European debt problems were always on top. Though stock indexes were better than earlier months but yet major stock indexes failed to cross their resistance levels.

15th June, 2012
6/08/2012-6/15/2012 (%)
6/01/2012-6/08/2012 (%)

Australia S&P
Shanghai Com.
Hang Seng
Russia :Titans
Argentina: Merval
South Africa

In the early days markets got good signals from Chinese report and Spanish bank rescue deal but in spite of that stock indexes were failed to show a big turnaround. Situation is quite understandable with the rising bond yield figures of Spain and Italy, especially after Moody’s rate cut. Banking shares got some support when news came that bank of England will launch new stimulus packages but reports from US were not good this week.

Stock market forecast for coming week.

Sections of the market still feel that Spain’s package is less and on the other hand Italy is next in the line. In coming days there is more chance that Greeks may elect an anti-austerity government and if that becomes true then financial market will be facing lot of unwelcome surprises.

One thing is sure that market needs lots of stimulus packages and that demand will be more if Greece exits Euro. In coming days G–20 will be meeting and I think they must be thinking about that. I am not expecting QE-3 from Bernanke in June, 20 because in last two weeks, US stock indexes performed quite well and they are not showing any indication of a major correction. Actually talking about events after Greece election is meaning less for now, because things can change lot with the outcome of election.

In this type of market most of the stocks are trading on narrower bands and as I said in past that many markets are facing liquidity problem. So in spite of being a volatile market, traders are not getting comfortable weather, as such risk-reward ratio is not much attractive. Currencies were giving a good indication but now they are also in a position from where they can surprise us. Here I must say that I will definitely go for a stock if it corrects around 20% from its short-term tops, irrespective of the market condition unless situation is completely exceptional. But frankly speaking in coming days I am not interested to put new money until I get clear direction of the market and some macro clearances.

Most of the stock indexes are not showing any particular trend, as they are unable to break their important resistance levels this week. So in this type of market condition it is getting hard to predict the market in advance. Here it is better to take calls on daily basis. Anyway, let talk about different stock indexes.

During this week Dow Jones I.A. showed couple of good moves among its peers. Finally it looks like that DOW has broken 12600 level though it may face little resistance around 12800. During last weeks I was talking about a short-term bullish pattern and if that pattern is true then it has a chance to test level above 13000 in the upside.

In past I was talking about two future options for DOW. Since now it looks like that it broke 12600 level (though it will be better to watch couple of days more) so now I will be giving more emphasis on short-term bullish pattern than that lower highs & lower lows trend. But if DOW got the resistance of 12800 then situation can change, as once again we will be talking about lower levels. If DOW drops from this level then its initial support level will be around 12400. But as DOW is following higher highs and higher lows trend (in long-term chart) from year 2009 so if it still maintains that trend then I don’t think that DOW will test 2011 low levels. Around 11860 is the 50% Fibonacci retracement level for DOW but if it goes more then 11506 is the 61.8% Fibonacci retracement level. I think for now the worse case scenario is 11200.

Last week I was talking that German DAX is showing different movements than many other leading stock indexes but this week it followed the overall global trend. Its closing in the last day was better, it looks like that we may see an upward moves in coming days but still I am not sure about it, though technical indicators are supporting the up moves. In the upside important level that should be watched is 6260 and if DAX gives closings above that then it has a chance to test level around 6500.
If DAX fails to break 6200 in coming week then it has more chance to continue with the lower highs & lower lows trend which it is following during couple of months. But the options of any reversal or some kind of bullish pattern will be there if DAX maintains the level above 5900. But if it goes below that then 5800 will be an important support level for DAX and if it breaks that then it has the option to test lower levels may be around 5400.

This week FTSE 100 followed an upward trend. I was expecting that it may show positive moves above 5400 but it is good to see that it did not drop in later days. So if it continues these moves then it may cross 5500 level (5524 is the 50% retracement level, considering the May top) in coming days. 5600 is very important resistance level for FTSE in the upside.
But if it got resistance around 5500 then it has a chance to drop (though it is still early days to refer whether it is making a pattern), in the downside important support level is 5250. If it breaks 5250 then next support level is at around 5100.
FTSE is making a long to medium term bearish pattern which can take it near around 4500 level. So considering that I think FTSE has more chance to drop in future and I will think otherwise if it breaks 5600 level in the upside.

Shanghai Composite was trying to break 2300 level but there was not much punch. Now it is in crucial point, from here if it goes above by breaking 2300 level then we may think about the long-term bullish pattern which I mentioned during last few months. In the upside 2350 will be its initial resistance.
On the other hand if it drops from here then it has the chance of triggering the bearish pattern by dropping below 2240. If this bearish pattern works out then 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.
But as some technical indicators are showing that Shanghai Composite is in over-sold zone so an up move is more expected than drop. I think initial days can give us a good indication of that.

South Korean KOSPI failed to react on its bullish pattern this week, as it followed the global trend. More it takes time to react on this type of very short-term bullish pattern, there is less chances of its success. Though it looks slightly over-bought but still it has a chance to go up.
On the other hand the chances of any other bearish patterns are still open for it. In case of reverse symmetrical pattern its upper boundary will be below 1900 level and in the downside expected range will be around 1700–1750 level. If KOSPI is following the bearish trend then there is more chance that KOSPI will drop in coming days.
KOSPI is making a medium to long-term bearish pattern and unless it crosses 2050 level in the upside I will not change my stand about this bearish pattern.

S&P/ASX 200 has not shown any trend this week, neither it tried to test 3985 level in the downside nor it tested 4122 in the upside. So I am maintaining same levels of past week.
Now one thing looks good about S&P/ASX 200 that it is making a very short-term positive pattern which can take it around 4250 level but for that it needs to break the 4122 level (4162 is its 38.2% retracement level) which it failed to break during last few weeks. Considering its over-sold position it does not look like that S&P/ASX 200 is going to face big corrections in coming days, in fact there is more chance that it may test higher levels.
In the downside it is not showing any bearish pattern but if S&P/ASX 200 drops more than 3985 then it may be making a bearish trend, especially considering its recent lows.

Reports due in coming days (from US)

Monday, 18th June, 2012 – Housing Market Index

Tuesday, 19th June, 2012 – Housing Starts

Wednesday, 20th June, 2012 – FOMC Announcement, FOMC Forecast, Bernanke Press Conference.

Thursday, 21st June, 2012 – Unemployment Claims, US PMI, Existing Home Sales, Phila Fed Manufacturing Index, Housing Price Index, Leading Economic Indicators.

Hearing different news reports it looks like that big guns will do lots to keep stability in financial market. Suppose we get a consensus way after Greece election then will that guarantee better atmosphere in future! Sooner or later many matters like, Euro Bonds will come and market is expecting strong messages, not a temporary solution.

NOTEPlease see the disclaimer of this blog.


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