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Stock market review (weekly) after 17th August, 2012.

Market is still not dropping in with the hope of stimulus, this week a further stimulus expectation added in the list and that is from Japan. If this type of thing goes on then I can draw one conclusion that most of the nations are trying to come-out from this problem by using stimulus steroid with their own brand.

INDEX
17th August, 2012
8/10/2012-8/17/2012 (%)
8/03/2012-8/10/2012 (%)




Dow


0.85
Ftse
5852.42
0.09
1.03
Cac
3488.38
1.54
1.82
Dax
7040.88
1.39
1.15
Australia S&P
4370.1
2.17
1.32
Shanghai Com.
2114.89
-2.49
1.69
Hang Seng
20116.07
-0.09
2.39
Sensex
17691.08
0.76
2.09
Russia :Titans
6147.72
0.32
1.74
Bovespa
59082.37
-0.33
3.54
Argentina: Merval
2459.95
2.04
0.59
South Africa
35547.33
-0.08
0.94

Stock indexes of problematic countries are showing better results in recent weeks, that is a good sign. Except nations like China, most of the stock indexes were in green this week. China is feeling tough pressure but I feel that it may be creating more opportunities than other leading markets. During last couple of weeks I was talking about the low volume and now same reports are coming even from US equity market.



Stock market forecast for coming week.

Few weeks ago I was talking about the reversal percentage for stock indexes from their May, 2012 tops but now many of them are close to deliver 100% reversal from their highest point of 2012. So in this circumstances market is in a situation from where it may break that highest point or gets the resistance and drop to test lower levels. Technical indicators are mixed and macros are not worse. Most of the investors are thinking that market is going to correct heavily in coming days and this week’s flat movements is giving fuel on those thoughts.

Frankly I don’t have total view about the market but definitely I have a contrarian views about some leading stock indexes. Higher lows (long-term) which stock indexes have created, Euro and some indicators are compelling me to say this, even at these higher levels. I think only aggressive investors should take calls in this level and for non-risk taking investors it is better to wait until market decides a trend.


Let talks about the stock indexes.


In the last day German DAX crossed 7000 level but I am not pleased with that move, I was expecting bigger moves. Now if Dax continues this positive trend then it may test 7200. But the way it is showing small moves I don’t think that even if it goes up, it will be testing 7200 levels in coming days (unless things change dramatically in coming week above 7000).
On the other hand DAX may drop from this level, considering its over-bought zone. In that case its initial support level will be 6800 and later 6600. Last week I was talking about the movements around 6400-6900; unless DAX is coming out from this zone risk of dropping around 6100 level will be there.
DAX is making higher highs and higher lows, considering that if DAX breaks 6600 then I don’t think that it is going to drop below 6400 level, in fact we may consider around 6562 (50% retracement) as important support level for it.


During last 1year, many times Dow Jones I.A. has failed to stay above 13300 and now it is again trying that level. This time I think the chance is more especially considering the higher lows but this is one positive point and not any guarantee.
If DOW fails to break 13300 then there is a risk that it may drop from this level. Since DOW is making higher lows (or closing) so even if DOW drops from this level, that drop may remain limited. Levels around 12900 may act as a good support for DOW in the downside. The chance of further drop will be still there but I will be talking about the bearish pattern when DOW tests level around 12500.


FTSE 100 remains flat during last few days, that is little disappointing. Last week I was talking about 6100 level if FTSE fully reacts on its bullish pattern and I am still maintaining that level. Though it is getting resistance above 5800 but some technical indicators are not showing over-bought condition for FTSE. I have a feeling that it may try to test higher levels in coming week but I am not sure about the exact time.
After early days of coming week if FTSE drops from 5800 level then 5700 will be its initial support and then 5600. If it drops more then I will think about a bearish pattern if FTSE breaks 5500 level but that may not be necessary in coming week.


Last week I was expecting that Shanghai Composite may re-test 2150 but it dropped more and that clearly reflects the pressure on Shanghai Composite. It is good that its close was higher and I feel that it may make a positive pattern from here (if it does not drop more) and therefore we may see Shanghai Composite is testing 2250 but that is a prediction not totally for coming week. On the other hand if it breaks 2100 then it can drop more.


After later days movements in last week’s I was expecting little correction but South Korean KOSPI’s moves were different this week, as it was flat during whole week. Now this is clearly showing that kospi is getting good resistance. Technical indicators are also showing that there is a chance of correction from this level. 1850 is a good support for Kospi, if it breaks that then I will be looking around 1800 level.
But looking at last few day’s move I have a feeling that it may try to break this 1950 level in coming week and I am not sure about the exact timing but may be after couple of bad to flat days. At past I was talking about a bullish pattern and according to that Kospi’s target is 2050 level in the upside but for that first it has to cross 2000 level.


There was an expectation that if S&P/ASX 200 maintains 4270 level then it may test 4350 level in the upside. Now I need confirmation whether it able to stay in this level. Around 4400-4450 level has act as a good resistance in past so even if it maintains this 4350 level it will be hard to say that S&P/ASX  is going to break that stronger resistance. Here I must say that during last 1year it has tried many times to cross that resistance level so this time things may turn-around as some of the technical indicators are also showing that opportunity.
On the other hand S&P/ASX 200 is showing upside trend from June and considering the stronger resistance level of 4400-4450, correction is due and that chance will be more in later periods of the coming week.



Reports due in coming days (from US)

Monday, 20th August, 2012 – Chicago Fed's National Business Index.

Wednesday, 22nd August, 2012 – Existing Home Sales, Minutes of last FOMC meeting.

Thursday, 23rd August, 2012 – Unemployment Claims, PMI Mfg Index, New Home Sales, House Price Index.

Friday, 24th August, 2012 – Durable Gds Orders.



NOTEPlease see the disclaimer of this blog.

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