The selling in European equities yesterday was brutal. I went into the day looking for further mild gains, hoping to buy on a small dip. Instead, the DAX and FTSE crashed through the lines where I was seeking to get long. The German index shed 2.8% from peak to trough, while the UK market dropped 2.4%. The turnaround came totally out of the blue, and there was little or nothing to herald it technically.
Nasty though the downside was, I think it is important to keep a sense of perspective here. The FTSE remains in the range in which it has been trapped since mid-September, as does the DAX. Both are well above their 200-day averages. While the US markets are in a much worse state on the charts, I am not about to head for the hills on the strength of one bad day. The correction is ongoing, but new highs in 2012 are still my favoured scenario.
COMMODITIES OUTLOOK
09.33
After Tuesday’s promising turnaround, I was ready to buy after the first pullback in gold, silver and Brent, so long as it was a gentle one. However, the move lower yesterday was anything but gentle, so I did not end up buying, and thank goodness. The only one I can really claim to have got right here was copper, which triggered exactly the negative set-up I had envisaged.
The most interesting charts at the moment are gold and silver, which have actually held up reasonably well. However, I am somewhat wary, given the risks facing EURUSD right now. I am not expecting a Eurozone disaster, but it is too early to call a continued uptrend in precious metals. My longer-term targets of over $2400/oz and $50/oz remains unchanged, though.
for analysis of some leading commodities and EURUSD.WALL STREET OUTLOOK
10.54
I was expecting further weakness in the US indices at the start of yesterday, but the scale of the selling really shocked me. As a result of the intraday bloodbath, we got a Dow-theory sell-signal, as both the Dow Industrials and S&P 500 broke below their previous correction-lows. According to Jack and Bart Schannep, today’s most successful Dow-theorists by a country mile, the average loss in the S&P after a traditional sell-signal is 14.8% over 6.2 months.
For what it’s worth, I don’t imagine we’ll see such losses, and I am standing by my call for new highs in the US markets in 2012 or perhaps in early 2013. However, for now, I am respecting the signal and continuing to look for short positions on Wall Street.
for analysis of the US indices.
