In a proper uptrend, I think each pullback should ideally end above the previous high within that uptrend. The German index overlapped its previous high during Friday’s decline, which makes the larger move up from the early June lows look like it might be a correction. Still, I am not giving up on the case for gains in equities for now. The FTSE appears to be in rather better shape than the DAX and I am open to buying a decent bounce today, if it occurs.
COMMODITIES OUTLOOK
EURUSD is in a very sorry state indeed. Any feelgood factor following the Brussels summit has long since dissipated. It is now back at levels last seen at the bottom in the summer of 2010. This time round, however, there is no obvious sign of a bottom occurring. Indeed, I’d bet against that for now. There is plenty of scope for more weakness, both in the near-term and further out. The last two really significant lows in EURUSD – in 2008 and 2010 – formed only once the single currency had become very oversold on its weekly chart, something that it has not yet done this time.
The accompanying point-and-figure chart highlights an important target for EURUSD down at $1.1967.
US OUTLOOK
13.09: While I went into Friday bullish and looking to buy Wall Street again, I made a point of holding off until after non-farm payrolls were announced. My record of trading on NFP day is shocking. And had I gone long in advance of them on Friday, it would have become even more shocking still. I am glad that I hung back, although the big move lower certainly presents a challenge to my overall positive view of where the US indices are headed.
The accompanying chart shows the S&P’s action since December on a 4-hourly horizon. Compare the major rally that kicked off at the end of 2011 with that which back in June. The previous move up was smooth and steady, while today’s has been jolting and jagged. While I am keeping faith with the bulls for now, I do not like the shape of the action, I must admit.
for analysis of the Wall Street Indices
