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Stock market review (weekly) after 1st June, 2012.

I don’t know whether Greece or anything else is causing this fear in the market but again stock markets see the negative days in the month of May, now it is up to experts to refer it as “sell in May and go away”. Somewhere I was reading that this month geek election helped to wipe near about $3trillion from global equity market. Many stock indexes have lost most of their gains in 2012. The way US Treasuries and German bunds are reacting, it clearly shows the condition of the risk assets. Spanish banking problems have created lot of fear this week as we saw that Italy missed their borrowing target.

INDEX
1st June, 2012
5/25/2012-6/01/2012 (%)
5/18/2012-5/25/2012 (%)




Dow
12118.57
-2.69
0.69
Ftse
5260.19
-1.71
1.59
Cac
2950.47
-3.19
1.33
Dax
6050.29
-4.57
1.09
Australia S&P
4063.9
0.86
-0.43
Shanghai Com.
2374.33
1.73
-0.45
Hang Seng
18558.34
-0.83
-1.26
Sensex
15965.16
-1.56
0.4
Russia :Titans
5495.72
1.29
1.15
Bovespa
53402.9
-1.95
-0.09
Argentina: Merval
2215.18
-5.34
9.62
South Africa
33107.46
0.35
-0.47

Last week I was talking that some stock indexes have created a very short-term positive patterns but most of them got the initial resistances so they did not react on it, which I mentioned in past week forecast. I was little surprise by the movement of US and Euro zone stock indexes in the last day of this week; this is after considering the reversal in Euro. Most of the macro reports from different part of the world, especially the jobs reports and GDP figures and PMIs were not good this week.



Stock market forecast for coming week.

It is surprising to see that market is focusing more on Spanish banking problem than Greece election, look like they are preparing the list that will be next after Greece! I don’t know whether Spain needs the bail-out money but it will be better for market if authorities deal with the bad loans than other things.

Everyone is talking about recession in Euro zone and US but if we see the statistics, MSCI BRIC index dropped more than 20% from its March peak. So that means they BRIC nations are facing bear market and on the other hand many US stock indexes lost most of their gains in year 2012. But in this moment it will not be good to talk about specific part when global economy is suffering very hard times. It is good to see that Brent crude is below $100 and in coming days if Gulf problems get a solution then we may see more drops in Crude price. But liquidity conditions of some of the nations are still in worse. So in spite of being eventful days, day traders are facing difficulties in these nations.

I think the way USD is moving up and if it continues then markets have to suffer more pain in coming week. Why I am saying this because it looks like that except the technical indicators, all are supporting USD to move higher. USD showing over-bought condition and that is the only good thing stock indexes expect at this moment. But US and European stock indexes plunged in the last day in spite of a correction in USD or I would say a reversal in Euro, is quite surprising! Markets may be considering this move of Euro is just a technical and not fundamental or should I say that something is coming which market doesn’t know yet!

If stock indexes maintain their initial support levels in early days of the coming week then they may again try those higher levels which they failed to test this week. In this type of market condition it is getting hard to predict the markets in advance, here it is better to take calls on daily basis. Anyway, let talk about different stock indexes.


Last week I was talking that if Dow Jones I.A. does not break 12600 then there is a good chance that it may drop in middle to later days of this week.
DOW is trying to break 12200 level and in early days of the coming week if it drops more then there is a chance that it will test 11800 level in the downside. If these drops continue then we need to consider the lows of year 2011. 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. Though I am giving lower levels but I feel emphasis should be given on 11800–11850 level in the downside.
Now if DOW does not drop more in early to middle of the coming week then it will again try to test 12600 level in the upside and then next resistance level is at 12800. If in early days it test little more low levels and then again test higher levels in later part of the coming week; therefore the resistance level will be at 12400.
During last few weeks I was talking about two future options for DOW, now I think chance of creating lower highs & lower lows trend is more than the positive pattern which I was expecting in past. Coming week may give us a solid hint of that.

German DAX couldn’t able to cross 6400 level and as I was expecting DAX dropped middle to later part of this week. In the last day things were really bad for DAX.
Though in last day DAX dropped below 6100 level but still I want to see couple of days more to take any new call. As I said in last week that 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. Looks like it is making lower highs and lower lows, in the upside it has a resistance at 6200 level.
I don’t know for sure what DAX is going to do in coming week! I think now emphasis should be given on the moves of early days of the coming week. If DAX tests lower levels then we must think about 5800. Technical indicators are not showing that DAX is too much over-sold condition so more drops are quite expected. On the other hand there is a possibility that DAX may make small moves to test levels around 6200 in the middle to later part of the week. Though these predictions will not be true if in early days of the coming week DAX reverses in a big way after last day’s big correction.

Shanghai Composite stayed above 2350 but it still cannot trigger its bullish pattern. In coming days if it break 10 DMA which is at around 2365 then there is a chance that it may try to test 2300 level. 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.
If Shanghai Composite maintained its 10 DMA in early days of the coming week then there is a chance that it will go in the upside in later days and may test 2400 level. Still 2300–2350 level is acting as an important zone for Shanghai Composite. If I have to give direct view then I have bullish approach for Shanghai Composite provided it maintains its initial support level.

S&P/ASX 200  has faced support at 4000–4050 level and it bounced back from that level but considering its over-sold position I was expecting that it may test around 4200–4250 level but it got the resistance of 4100 level which I mentioned in last week.
Last few day’s closings were not good and technical indicators are also not showing any specific trend. So still I cannot say confidently that it will not again try to break 4000–4050 level to go around 3850–3900 level which I mentioned in last week about its bearish pattern.
But if it maintains 4000–4050 level and able to break 4100–4150 level convincingly then there is a good chance that it may test 4200–4250 level. On the other hand if it drops in the early days of the coming week then 4050– 4100 will be the resistance level in the upside. So emphasis should be given at 4100–4150 level in the upside and 4000–4050 level in the downside.

South Korean KOSPI was unable to cross 1850 levels but it is good to see that it did not drop in the later periods. Last week I mentioned that its reversal is below 38.2% Fibonacci retracement level, which is at 1864 level, this week it went more close to that.
Since KOSPI has not shown much change in weekly closing so I am still maintaining those levels which I talked in last week. If it drops from here then important level that needs to watch is 1750 in the downside, if it breaks 1650 level then things can be worse for it. On the other hand if it breaks 1850 level in the upside then it may test levels around 1900 but crossing 1950 will be hard job for it.
Still, I will give more emphasis on the movements in early days of the coming week and on 1850 level.


Reports due in coming days (from US)

Monday, 4th June, 2012 – Factory Orders

Tuesday, 5th June, 2012 – ISM Non Manufacturing Index

Wednesday, 6th June, 2012 – Productivity, Fed’s Beige Book.

Thursday, 7th June, 2012 – Unemployment Claims, Bernanke’s Speech.

Friday, 8th June, 2012 – US Trade Deficit


Market is waiting for liquidity flow and after this week’s bad macro reports from around the globe and last day’s correction in leading stock indexes, many will shout loudly for another round of Quantitative Easing from US Fed. In this point of time market will not mind if another “Operation Twist” type of liquidity flow comes in place of QE–3. But before that market is expecting a similar stimulus package from ECB too and if markets get lucky then we may get a signal of that within couple of weeks.



NOTEPlease see the disclaimer of this blog.

Comments

  1. The market is going down and it becomes difficult to analyze that who will bring more traffic.

    Stock, BSE, NSE Tips

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