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Stock market review (weekly) after 7th September, 2012.

Draghi Magic lasted for one day because market has already discounted it, beside that some conditions of bond-buying might not be very comfortable for nations. We may draw another conclusion that investors are afraid in carrying the open positions in next week, especially after disappointing August US job reports in the last day.

7th September, 2012
8/31/2012-9/7/2012 (%)
8/24/2012-8/31/2012 (%)

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

Most markets were in green, problematic Euro zone nation showed 6-7% appreciation in this week. It looks like that gradually they are making-up the gap. German DAX and Shanghai Composite were extremely good.

Spanish 10-year bond yield which is below 6% and the record gap between Spanish 2&10 year bond yields are definitely showing better picture for overall financial market. On the other hand PMI reports were mostly bad; Moody’s outlook on EU, Australian slowing growth these all are overshadowed by expectation from ECB and hope that has been created by Bernanke.

Stock market forecast for coming week.

Last week I was talking that markets may have already started discounting stimulus packages, as we have already seen in past that Ecb’s stimulus failed to cheer the market for longer time. Now those words will also be true if any QE-3 comes from US fed in coming week. After yesterday’s job reports, demand for QE-3 will be more but still I don’t think that now it is the perfect time, considering the level where the stock indexes are. But if we think about the future worst situation (without QE-3) then they may like to take pre-emptive strike before the election.

Most of the stock indexes are in a position where they may try to cross their previous recent highs in coming week but if they fail then things will not be good for the market, in fact middle to later days are very crucial.

Let talks about the stock indexes.

I was expecting that Dow Jones I.A. may show little more corrections but it hardly went below 13000. Now it is again testing 13300 and that makes it better from some of its peers because they are struggling to test their recent highs where Dow is easily testing 13300.
In coming days it can try to trigger the medium term bullish pattern by breaking 13300 but that is a big hurdle for Dow. Unless it is showing concrete proofs of breaking 13300 I am not confident about a new trend. On the other side considering its last day close and over-sold position it may face small correction but that may not be more than 13100-13200.
Dow is in a zone where from it can correct, if we follow the recent trends 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.

German DAX has shown best result among the stock indexes which I cover, in respect of crossing its recent highs and it is good to see DAX keep the upside momentum in the last day. 7200 is important resistance level for DAX which it failed to break last time so I think it is better to wait for some consolidation before jumping into the market. For coming week it is hard to specify any level in the upside but we may see 7100 level on any minor pull-back.
Now Dax has reacted on its bullish pattern though it may go around 7500 if it reacts fully on that bullish pattern. If we consider that 6900 is it recent base then that also indicates more up moves. If Dax drops from 7000 level then 6800 will be a good support for it. On the other hand if we go with recent reversals then it can drop up to around 6600 level (around 61.8% reversal).

FTSE 100 was trying to stay above 5750 level in the last day, now if it able to maintain that in coming week then we may see FTSE crossing 5800 level. But that may not be in early days of the coming week; as such it may deliver flat movements in those days.
On the other hand if it drops from 5750 level then it will be looking for support around 5650 levels and next one is at around 5600 level. I will think about a bearish pattern if FTSE fails to break 5850 level in the upside, though that is in early stage but if it triggers then FTSE may go below 5500.
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.

South Korean KOSPI move in the last day is forcing me to move away from reverse symmetrical triangle. As now it is important for Kospi that it must stay above around1910 so that it can go upside. Even if it gets down in early days there is a chance of up moves in later days of the coming week, in fact in the early days it may remain flat. I will be talking about a new trend when it breaks 1950 level in the upside.
Here I must say that if Kospi failed to break levels above 1950 then there is a chance that kospi may create a short-term bearish pattern which may take Kospi around 1800 level. But this pattern is in its early stage so it needs some more time to prove. 1870 level is very important to look in the downside.

S&P/ASX 200 has performed less than its peers. Last week I was specifying that I want it to stay above 4350 to show the continuation of the bullish trend which it failed to do. I still think that it may go upside provided it stays above around 4300-4320 levels.
Its last day close was not good so if it fails to stay above 4300 level then its initial support is at 4250 and if it breaks that then next support is at below 4200. In fact if it does not go past 4400 then it may create a very short-term bearish pattern which can take S&P/ASX around 4150 level but this type of pattern is very difficult to work out in shorter time period.
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, 11th September, 2012 – NFIB Small Bus Sentiment, U.S. Trade Deficit.

Wednesday, 12th September, 2012 – FOMC meeting

Thursday, 13th September, 2012 – Unemployment Claims, Producer Price Index, FOMC announcement.

Friday, 14th September, 2012 – Consumer Price Index, Retail Sales, Industrial Production, Consumer Sentiment.

If we consider that stock market is the barometer of the economy then macros do not permit these levels of stock indexes. If all those ECB, US Fed and PBOC …….. Steroids come into the market then financial market around the world will face new kind of energy but it is really a matter to see that how long they can sustain!

NOTEPlease see the disclaimer of this blog.


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