Technical weekly 08/14/2012
7
1 Equities -Most indices are now at a key juncture trading close to their March highs. The trend evidence leans bullish but equity markets are short term overbought. We do not expect major bearish reversal because the trend is so strong and many investors wished to be positioned earlier and many of them will not take the risk of waiting too long for a steeper decline to return. This will limit the potential bearish waves in the short term. Conclusion : weekly indicators are calling for more upside to come with some daily indicators are calling for (short term) cautiousness. -The technical picture of the Stoxx 600 is improving, as you can see the weekly momentum has now turn bullish and Europe is outperforming the rest of the world since May.60% of European markets trade now above their 200 day MA and have rising 200 day MA. Since 1986 they have gained an annualized 13,7% when more than 50% (slide 2) of them have traded above their rising 200 day MA. -The S&P500 is also close to resistance zone, (slide 3&4) the US Economic Surprise Index is rising from low level, the model giving a buy signal for the S&P500 in late July. Profitable long trades track record since 2003 is close to 86% with the S&P500 gaining 14.2% per annum (Buy and hold 4.6%) -Bovespa (Brazil-one of the worst equity markets in recent months) validated a bullish reversal pattern. (slide 5) -Bonds&Currencies&Commodities -The trend of the €/$ is still down but is showing signs of exhaustions with bullish divergence on the Macd weekly (that is close to give a buy signal) and extreme pessimism. (slide 6) - Bund future : As the recent early June high have not been reached (around 146), the correction should continue towards 142 and may be towards the confluence of the 200 day MA and the breakout point made in April.(around139.5-slide 7).We will also be vigilant in the coming weeks to the eventual formation of a major double top pattern.
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Transcript of Technical weekly 08/14/2012
1
Equities-Most indices are now at a key juncture trading close to their March highs. The trend evidence leans bullish but equity markets are short term overbought. We do not expect major bearish reversal because the trend is so strong and many investors wished to be positioned earlier and many of them will not take the risk of waiting too long for a steeper decline to return. This will limit the potential bearish waves in the short term. Conclusion : weekly indicators are calling for more upside to come with some daily indicators are calling for (short term) cautiousness.-The technical picture of the Stoxx 600 is improving, as you can see the weekly momentum has now turn bullish and Europe is outperforming the rest of the world since May.60% of European markets trade now above their 200 day MA and have rising 200 day MA. Since 1986 they have gained an annualized 13,7% when more than 50% (slide 2) of them have traded above their rising 200 day MA.-The S&P500 is also close to resistance zone, (slide 3&4) the US Economic Surprise Index is rising from low level, the model giving a buy signal for the S&P500 in late July. Profitable long trades track record since 2003 is close to 86% with the S&P500 gaining 14.2% per annum (Buy and hold 4.6%)-Bovespa (Brazil-one of the worst equity markets in recent months) validated a bullish reversal pattern. (slide 5)
-Bonds&Currencies&Commodities -The trend of the €/$ is still down but is showing signs of exhaustions with bullish divergence on the Macd weekly (that is close to give a buy signal) and extreme pessimism.(slide 6)- Bund future : As the recent early June high have not been reached (around 146), the correction should continue towards 142 and may be towards the confluence of the 200 day MA and the breakout point made in April .(around139.5-slide 7).We will also be vigilant in the coming weeks to the eventual formation of a major double top pattern.
2
Stoxx 600Supports:lower part of the bullish channel, 200&50 day MA, 240Resistances: March high around 270
3
SP500Supports: lower part of the bullish channel, 50 day MAResistances: 1420
4DAVIS183 © Copyright 2012 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.
See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer towww.ndr.com/vendorinfo/
S&P 500 and the Citigroup US Economic Surprise Index Daily Data 2003-01-02 to 2012-08-10 (Log Scale)
DAVIS183 © Copyright 2012 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved.See NDR Disclaimer at www.ndr.com/copyright.html For data vendor disclaimers refer towww.ndr.com/vendorinfo/
S&P 500 and the Citigroup US Economic Surprise Index Daily Data 2003-01-02 to 2012-08-10 (Log Scale)
Citigroup US Economic Surprise Index (9-Day Exponential Smoothing)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
699
735
773
812
854
898
944
992
1,043
1,097
1,153
1,212
1,274
1,339
1,408
1,480
1,556
699
735
773
812
854
898
944
992
1,043
1,097
1,153
1,212
1,274
1,339
1,408
1,480
1,556 Profitable Trades: 71.4%
Profitable Long Trades: 85.7%
Gain/Annum: 14.2%
Buy/Hold Gain/Annum: 4.6%
Latest Signal: 07/31/2012 = 1,379.32
B
S
B
S
B
S
B
S
B
S
B
S
B
S
B
Sell signals are generated when the smoothed
Surprise Index crosses below the upper bracket
and buy signals occur when the smoothing rises
above the lower bracket.
Source: S&P Index Alert
-125
-100
-75
-50
-25
0
25
50
75
-125
-100
-75
-50
-25
0
25
50
75
Source: Haver Analytics, Citigroup 2012-08-10 = -33.3
Citigroup Economic Surprise Index for the US
measures how much data from the past three months
is beating or missing median estimates in Bloomberg surveys
5
Brazil Bovespa reversal pattern
6
€/$Support: LT Target&Support : 1.20 (reached)Resistances:1.263 then 1.3
7
Bund FutureSupports :142, 140, 200 day MAResistances :146Target : 146 (reached)
