Here below the award winning Swiss team’s usual weekly technical analysis of the world’s major asset markets.
We have breakouts in western markets and very promising developments in Japan and China. The Nikkie has scored a high momentum break out of her 6 month price distribution range and is threatening her May highs.
The Chinese SSE has broken out of her down pattern in the Swiss team’s view. By my price work I don’t have her there as yet but she is now very close and given the positive tail winds of long term correlated markets rising its reasonable to think the breakout can occur/sustain.
On China for a moment. In spite of all the doom and gloom on the Chinese credit problems the charts of the Chinese banks look very promising and have recently performed well. They are a positive beta on the wider Chinese market in fact which may surprise, given the headlines.
On US markets they make the case that its “bullish but limited upside” due to AAII sentiment survey. (The latest reading as reviewed a few days ago by JPM in their equity report, has fallen a long way, note! It is no longer at contrarian levels). The put call ratio is in contrarian territory. On Market breadth its more complicated than the team illustrate. Yes there was a non confirmation in market breadth for the NYSE and Russel2000 and Nas100 but the Dow and S&P500 and Dax and many other indexes did confirm. The market breadth picture is more positive that it was a month or two ago. The large caps are price over bought but over bought levels can sustain for an extended period an ratios of over bought have a poor record of being an accurate near term signal.
Dollar basket wise they sight the 81.48 cash level as a key ‘game changing area’ (81.6 on the dec DX futures contracts). The inverse correlation to risk assets could be meaningfully negative for equities, and gold!
Of the European Indexes the Spanish index, the ibex offers the most upside here and has a positive bull flag formation with 10,300 or so beckoning for YE window dressing which is a move of 7% or so from current levels. The IBEX fell today by 1.6% and is very close to the 9615 support level the team outline. (As a trading stock pick for the YE Banco Santander is providing a trading entry alongside the SX7P ‘euro finance index’ being at a trend line support. Whether she is the beta in the IBEX is another matter. Quite possibly a stock like Fomento de Constr y Contratas offers the +beta as its at a trading support, is cyclical component to the Spanish, apparent, recovery. As its a high volatility beta the downside risks are also greater. Higher risk higher return, of course.
Without more delay here the report :
Rich
(12 votes, average: 5.00 out of 5)
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