By Dominic Picarda, 21 February 2012
EQUITY INDICES
Greece bailed out anew, world safe again. Except, of course, that it isn’t and most sensible people are saying so outright. The situation of Greece is dire and the latest fudge is unlikely to be enough to avert further crises of confidence going forwards. Such inconvenient details don’t seem to bother the markets too much for now, though, with the indices extending their run yesterday. And despite a bit of selling this morning, there is no technical reason to believe that the recent uptrend is yet coming to an end.
Admittedly, certain indices are looking very stretched indeed right now. I’m thinking particularly of the DAX and the Nasdaq, both of which are sporting significantly overbought daily momentum readings, and have been for some time. A look back over the last couple of years shows that this situation can be resolved without too much bloodshed, which is what I expect will happen this time round. In the meantime, I look for small buys in the likes of the Dow and FTSE.
Click here for analysis of some leading equity indices.
COMMODITIES
The stage is set for a potentially significant turn in the US dollar in the coming weeks. The 77-day cycle is due to bottom out around 12 March. This is one of the most important rhythms in the currency markets and has correctly identified some of the most important turning-points of the last year or so, especially the last two major highs. If the dollar is destined to weaken further as we head into next month, this is most likely helpful to the prospects of the present rally in equities and commodities.
I still absolutely love the look of crude oil, despite it being somewhat overstretched. But gold is beginning to look interesting once more as well.
Click here for analysis of some leading commodities.
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