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Stock market review (weekly) after 20th July, 2012.

Chinese factor overshadowed all other topics this week. Most of the Asian investors and traders were surprised by seeing negative Monday, in spite of good closing in US stock indexes in previous Friday.
Spanish 10-year bond yields were again in 7% range this week. I was thinking that situation may improve after Euro zone finance minister’s approval of 100bn euro in the last day for its banks but reaction of different stock indexes have not shown that effect yet, in turn Spanish IBEX 35 has corrected more than 6% this week.

20th July, 2012
7/13/2012-7/20/2012 (%)
7/6/2012-7/13/2012 (%)

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

Not only Spain but Italy is also correcting during last 3 weeks, overall stock indexes were better than last week. Results were not something which will turn around the game, especially for big investment banks (considering there trading losses) and microsoft.

Stock market forecast for coming week.

Chinese factor is reflecting much these days, in other way I can say it is drawing a line between develop and emerging nations. So in coming future if situation remains same then many emerging markets may not follow the other leading indexes like Dow Jones, like what they did in this Monday. On the other hand never ending Euro zone debt problem may again come into headlines through higher Spanish bond yields.

During last few days I was staying away from market and while I was talking to many other traders from different nations, some of them said that they are also suffering this situation. In my earlier postings I told many times that intra-day opportunities are narrowing for some countries and even sometime situation for scalping is becoming tough for some well known liquid stocks. Many markets are in dilemma and investors are confused and why not they are when big investment banks are struggling in trading business. Therefore what is the significance of these short-term rallies which we are seeing, even if I consider this week’s positive movements for some of the leading stock indexes! Truly I don’t understand the fundamental reason behind this rally. I am not too much comfortable with smart money concept so unless I am getting good environment in respect of intra-day volatility and to some extent in liquidity position, I will try to avoid this market.

10-year US Treasury yields as well as the 10-year German yields is not showing that we are going to see better days in coming week. Right now USD is also not showing any definite direction so a clearance is needed from that side too. In spite of all of these I will say that some developed market may still continue this week’s moves and for others it is little confusing.

Let talk about different stock indexes.

Still it is not clear to me whether Dow Jones I.A. is going to trigger its short-term bullish pattern! Because though it remains above 12750 but it was unable to close above around 12990 (or better to say 12969 level), in fact in the last day it dropped from that level. 
So that means DOW is still keeping options in both the sides. In early days of the coming week if DOW maintains that initial support levels then again it will create a hope of triggering its bullish pattern but for that it needs to cross 13000 level convincingly.
On the other hand if it drops below 12750 level then 12600 level will act as a good support for it. Though DOW has chances to react on its patterns but basically DOW is moving side based with higher lows (or higher closings). So if it follows that then it may try to bounce again from around 12600 level. But if it drops below that then there is a chance that it may react on its bearish pattern which can take it towards 12000 level.        
Here I must say it again that in my past postings I told about a medium to long-term bullish pattern of DOW which it may trigger by breaking around13300 level and if DOW crosses 13000 level and triggers its short-term bullish pattern then the chance of making that medium term bullish pattern will be stronger.

This week German DAX  has shown quite good days as its new bullish pattern says that DAX can go above 7000 level but considering its success rate 6850–6900 is the average. So I can say that DAX has acted on its new bullish pattern and any more moves in the upside will be bonus. DAX is making higher highs and higher lows and now I want to consider on breaking around 6900 level (may be not this week) and if DAX is able to break that then there are better days waiting for it.
On the other hand minor pull backs (like what we saw in the last day) are quite possible, considering its moves in last few weeks. But unless it breaks solid levels like 6600 and then 6500, I will not be worried about that. If I consider its recent reversal then around 6562 (50% retracement) it will get the strongest support. Last week I was talking that DAX will create the bearish pattern if it tests 6150 level. That bearish pattern is still there but now I am not expecting that DAX is going to test such lower levels but after this week’s moves DAX may create a new short-term bearish pattern if it tests 6400 level in the downside.
So I will be looking 6600 very closely for any correction and if it maintains that support level then I am expecting more up moves in later days but I am not too much confident about levels above 6900 in coming week. Though things may become different if it does not correct in early to middle days of the coming week.

FTSE 100 was more or less flat during last few weeks, it has formed a bullish pattern but it is not reacting on it. If that bullish pattern works out completely then it can go around 5900 levels. Last day was not good for FTSE, as it is getting strong resistance around 5700 level so it needs to stay above 5650-5680 level in early days of the coming week to react on that pattern. Here I must mentioned that if FTSE breaks 6000 level then in technical term it will not act on its medium to long-term bearish pattern.
At past I talked about 5600 level but considering its recent reversals, 5580 (50% retracement from 25th June low) can be a good support for it. But if FTSE breaks these and re-test around 5450 level then it has a chance of creating a bearish pattern, though it is in early stage. During last few weeks it is creating higher highs and higher lows and if it continues that trend then ultimately it has more chance to test higher levels.

Shanghai Composite is still facing the heat, as it failed to break 2200 level yet. But still I am confident about the long-term bullish pattern of Shanghai Composite as it was unable to close below 2130.
Since there is not much change I am still maintaining my last week view about Shanghai Composite, unless it is coming-out from its downward channel I am not too much confident about any up move. In this moment the only way it can come-out from this downward channel is by breaking 2200 level (or better to say 2250) in the upside but its last day’s move was not good and technical indicators are not showing any improved picture. So unless Shanghai Composite shows some signs of recovery it is getting hard to predict about its future.

South Korean KOSPI was unable to show any move, so I am still holding my last week’s view on it. Since it is struggling to break 1850 level so triggering bullish pattern is out of question for now. I will think about the bullish pattern when it will break around 1900 level. In coming week if it doesn’t break 1850 level in early days then there is a chance that it can drop to test lower levels.

 Few times ago KOSPI was looking to make reverse symmetrical triangle but last week I was suspecting about that and now after considering last few days moves I think it has a chance of making a descending triangle and its break out looks close. KOSPI is compelling me to guess about different options in both sides and sometime that becomes very confusing. Last week I was talking about a bearish pattern which could take it towards 1700 but yet there is no certainty about that because it needs more drops (around 1780 levels) in the downside to prove that pattern.

As I was predicting in last week, S&P/ASX 200 made a base around 4050–4100 level and this week it was just trying to prove its bullish pattern or I would say bullish patterns. If any of these patterns works out then it can test up to 4300 level. S&P/ASX is making higher highs and considering its last few higher lows, it is clearly indicating a change in environment. So in early days if it breaks 4200 level in the upside then there is a good chance of testing higher levels.
Though this week’s moves are giving positive hints but last day’s figure was not good, as things can change dramatically from this 4200 level. In the downside its initial support is at around 4150 level or better to say around 4120 (61.8% retracement), considering its recent reversal and I will not surprise if S&P/ASX tries to turn around from this level in middle to later part of the coming week. Now important matter for S&P/ASX is whether it continues higher highs and higher lows or it will follow the reverse symmetrical triangle which was true during last few weeks.
Here if I have to come into a conclusion then I will say, it is important to watch early days movements. Considering its overbought position if S&P/ASX drops below 4100 level then it is better to look around 4050 level. If S&P/ASX breaks that then things may not be that good as was expected after Thursday’s big move. On the other hand if I consider that S&P/ASX is moving in an upward channel then it will not drop below around 4100 level in coming days.

Reports due in coming days (from US)

Monday, 23rd July, 2012 – Chic. Fed Bus. Index

Tuesday, 24th July, 2012 – U.S. PMI Index, Home Price Index, Richmnd. Fed Index.

Wednesday, 25th July, 2012 – New Home Sales

Thursday, 26th July, 2012 – Unemployment Claims, Durable Goods Orders, Pending Home Sales.

Friday, 27th July, 2012 – 2nd Quarter GDP, Consumer Sentiment.

Though we may expect little better situation from Spanish property market after this week’s lending but their regional bail-out call was disturbing and many are not comfortable with the Chinese property control policies. Everyone is looking for stimulus steroids from many nations but authorities must be considering all those side effects which are going to come in post issue periods, this week Bernanke’s indication is good to fuel that approach.

NOTEPlease see the disclaimer of this blog.


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