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Stock market review (weekly) after 31st August, 2012.

In spite of getting strongest affirmation from US fed, stock indexes have not shown satisfactory outcomes in last day of this week. In fact most of them have came-off from their highs. Overall market was in pressure this week and volume was concern.

31st August, 2012
8/24/2012-8/31/2012 (%)
8/17/2012-8/24/2012 (%)

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

Many Asian stock indexes fell on a monthly basis, in fact most of the leading stock indexes of the world fell this week. Brazilian Bovespa is facing 3 straight negative weeks.

Borrowing cost of different nations of Euro zone and US treasuries are dropping on the hope of future buying. Economic reports were mixed this week and many nations like Brazil are cutting the interest rate for economic recovery.

Stock market forecast for coming week.

Market is thinking that US fed gives a strongest signal this time but expectation was more. I think this may create more uncertain atmosphere because Bernanke was emphasizing on employment situation so what will be the case if next labor dept. employment report which is scheduled to be released in 7th September becomes good. In that case there will be no QE-3, is it that, what he wanted to say!

Though I can infer another meaning, Bernanke is first waiting to see another round of stimulus from Euro zone or I would say that Bernanke is indirectly compelling Euro zone authorities for stimulus. In coming week, if Euro zone gets a stimulus then Bernanke may wait for suitable time.

Last week I was talking about the bullish sentiment which is based on stimulus hints and not on solid base. Market is tired of holding these higher levels so if market does not get any of those things then there is more chance that market is going to drop from these levels. But even it drops then I don’t think that it is going to be too much, because –

1)    Considering the investments which different big institutes have done or is still doing in this year in different parts of the world.
2)    US presidential election.
3)    Implication of global stock market crash on problematic Euro zone nations and overall on Euro. e.t.c.

On the other side if stock market crashes from here though that will be bad for Obama but it will not be worse for US economy, especially when Euro will in trouble. So lots of calculations are going on in everyone’s mind. In this circumstance it is very difficult to take big exposures in the market.

Let talks about the stock indexes.

I am not pleased with DOW’s performance in the last day as it came down from higher levels. Now it may again try to test higher levels but first I want it to stay above 13100 in early days of the coming week. On the other hand if it failed to do that then Dow Jones I.A. may test around 12900 level. Unless Dow is coming out of 13000-13200 zones, it is becoming hard to take any concrete decision.
If we follow the recent trend then Dow may drop around 12800 (more than 50% reversal). The chance of further drop will be still there but I will be talking about the future bearish pattern when DOW tests level around 12500.
According to its medium-term bullish pattern Dow is expected to go upside but as I said in past that before proving that bullish pattern we may see little more correction.

I was suspecting about upside moves of German DAX but it was pretty flat this week. Right now it is hard to predict but 7000 is important resistance for Dax if it able to cross that then it may again try higher level. Here it is better to wait for concrete evidence. 
Last week I was expecting that if Dax corrects then it may reverse from 6800 level but if we go with recent reversals then it can drop up to around 6600 level (around 61.8% reversal).
Dax has formed a medium term bullish pattern and it is also vulnerable to bear trap if it drops below around 6000 level but guessing about 6000 is too much for now.
At past I was talking about the movements around 6400-6900; unless DAX is coming out from this zone, risk of dropping around 6000 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.

FTSE 100 got support around 5700 and now 5800 is important resistance for it. For any bullish movements it needs to stay above 5800 level. Last day’s move was not very pleasant so it may again try 5800 level in early days of the coming week.
Technical indicators are showing over-sold position but in spite of that if it drops from 5700 level or failed to cross 5800 level then next support is at around 5600 level. 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.
FTSE is making a long-term bearish pattern which it can trigger below 5000 level but this type of pattern is difficult to trigger. On the other hand higher lows which it made in last 1 year, says that FTSE will be testing upside in coming future.

Shanghai Composite is still not showing any definite sign of reversal. During last couple of weeks it is trying to make a base but still there is no development. So unless it shows any better thing it is hard to change opinions.

South Korean KOSPI was trying to stay above 1900 but it was not much successful in testing 1950 level. Now if it maintains this 1900 level in early days of the coming week then there is a chance that it may test higher levels.
On the other hand if it failed to cross 1930 level in early days then things may become difficult for it as it may test level below 1900. I think around 1850-1870 may act as a good initial support level for Kospi.
I am still holding that reverse symmetrical view about Kospi which I mentioned in past weeks. So if it follows that reverse symmetrical triangle then Kospi may drop more in coming future. I will change this view if Kospi breaks 1950 level in the upside.

I was expecting S&P/ASX 200 to go upside in later period of this week but it failed to cross 4350 level in the upside, though it is good to see that it gets support around 4300 level. Now I am not sure about its moves in coming week but if it able to cross 4350 level in the upside then we may see better days but I want it to stay above 4350 level in later days of the coming week so that S&P/ASX able to continue the bullish trend which it is showing during last few months.
But if it failed to stay above 4300 level then its initial support is at 4250 and if it breaks that then next support is at below 4200.
I am still positive about the medium term outlook of S&P/ASX considering its lower lows which it is making during last 12-13 months and it may breaks-out from that at around 4500 level. I will move away from this bullish approach if S&P/ASX breaks around 3850 level in the downside.

Reports due in coming days (from US)

Tuesday, 4th September, 2012 – US PMI Index, ISM Mfg Index, Construction Spending, Auto sales through day.

Wednesday, 5th September, 2012 – Productivity

Thursday, 6th September, 2012 – Unemployment Claims, ADP Jobs Report, ISM non-mfg Index.

Friday, 7th September, 2012 – Labor Dept Monthly Employment report for August

I have feeling that many markets have already started in discounting all those stimulus which may come from both sides of the Atlantic. So even if those events become positive in coming future then their implication may not be like past. On the other side, being a trader from a developing country I don’t like this stimulus steroids because they will create artificial increase in prices of many class of assets which will create more inflation, so stock indexes of these nation may not work like their peers in developed nations.

NOTEPlease see the disclaimer of this blog.


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