I am not a huge fan of pattern analysis, believing it to rely too heavily upon subjective interpretation. However, there are some formations that are so stark and widely-watched, that I simply have to pay attention. The FTSE 100’s upwards breach of its multi-month “triangle” pattern is exactly one such formation. If the UK large-cap index can build upon its recent progress, some very substantial gains indeed could be in prospect. A major challenge is close at hand, though, in the form of its 2011 highs at 6107. I would expect some hesitation at these levels, culminating in a successful move above them.
I am looking to buy the DAX and FTSE on dips. GBPUSD is too messy for my liking right now. I await a recovery in EURGBP.
COMMODITIES OUTLOOK
09.32
The dollar’s strength could continue to weigh on the commodity complex for the near term. I do not necessarily view this as the start of a new era of dollar appreciation, however. Rather than a sustained US economic recovery and monetary tightening, I foresee further stop-start growth and further stimulus from the Fed. This should keep a lid on the dollar’s upward progress. In the meantime, Brent and copper have the most attractive charts of the materials covered here. But this is only relative, however. In the bigger scheme of things, I see more appealing opportunities in the equity indices on both sides of the Atlantic.
for analysis of some leading commodities and EURUSD.WALL STREET OUTLOOK
12.25
Talk of an end to the Fed’s monthly bond-buying programme has created a bit of unease among traders. Monetary stimulus is a big reason why I am a bull on US equities, so a slowing or halt to bond purchases “well before the end of 2013” would be a dent to my optimistic case, to be sure. I daresay the Fed will indeed attempt such a move in a bid to move back towards normality. Another correction on Wall Street will likely follow, and perhaps worse, depending on how high stocks have been bid up by then. But I doubt the next withdrawal of stimulus will prove to be the end of unconventional monetary policy. More stop-start QE will ensue, I believe.
Meanwhile, sentiment among private investors is under control. The latest AAII data showed 38.7% bulls and 36.2% bears, a gap of 2.5%. The three significant tops in the S&P since early 2009 have been accompanied by a gap of more than 25%. Bottom line: the current un-exuberant sentiment leaves scope for further market gains over coming weeks.
The S&P, Dow and Nasdaq remain at or around intraday overbought levels as of this moment, and need to come off further in order to set up more lasting gains. I want to get long once this has happened.
for analysis of the US markets.
