After a strong advance, the DAX and FTSE are pulling back gently. That is a strong clue that the larger trend remains upwards, at least to me. Signs of renewed life on Wall Street yesterday cannot be a bad thing either. A bit of leadership from the US indices right now could reignite the rally over here. Even if the correction of the last couple of sessions has further to go, I think it will be a mild one in the scheme of things. Make no mistake, I do expect another significant shakeout in 2013, of the sort we have had in each of the last three years. Equally, though, I do not think we are there yet. I am still seeking longs in the DAX and FTSE, and also in EURGBP.
for analysis of some leading European markets.COMMODITIES OUTLOOK
The very big trend in EURUSD is downwards and it has been since the summer of 2008. I expect this to persist over time. If the Euro is to survive, it absolutely must cheapen. Major wage deflation is the only alternative to Southern Europe’s chronic lack of competitiveness and this solution would be totally unworkable. Therefore the single currency must come down substantially. The current rally is thus a counter-trend move in the bigger scheme of things. For the moment, though, my only thoughts are with long trades.
WALL STREET OUTLOOK
11.36
The resilience of the US indices is heartening. While they are currently pausing, the inability of the bears to generate any downwards momentum is indicative of the strength of the trend here. There is no obvious sign of exuberance, though, with the latest AAII sentiment survey showing a 16.6% gap between bulls and bears, in favour of the former. The danger level for me here is 30%, and even then only once sentiment has remained stretched for some time. I am still looking to buy moves higher, especially in the Dow.
for analysis of the Wall Street indices.Please note that the IC website does not alert me when a comment is left. If you want a guaranteed reply to your comment or query, please write to me at dominic.picarda@ft.com
