City AM reports today that, based on data from MSCI, global stock markets saw their value slashed by $2 trillion in the month of May alone. Caused by escalating global trade spats, gloomy economic outlook, and the usual financial wobbles, stock indices around the world lost on average 0.8 per cent, US ones faring worse, the S&P 500 off 6.6 per cent (its worst monthly performance since 2011 and the worst May in decades).
After May’s abysmal showing in the European parliamentary elections, and row between German Chancellor Angel Merkel and her chosen successor Annegret Kramp-Karrenbauer, the former decided to ‘unretire’ from the CDU last week. On Sunday Andrea Nahless, head of the SPD (which also did very badly in the EU elections) stood down putting the viability of the coalition government between these two parties into doubt. Today she will step down as head of the SPD’s parliamentary group ahead of regional election in 3 key states in September.
DAX 30
Closing on Friday below the neckline of topping activity in April and May, and below the neckline of the massive head and shoulders that has dominated since early 2017, the index looks increasingly top-heavy. A drop back to December’s low is likely.
SHORT TERM TRADER: Short at 11870; stop above 12200. Target 11325.
POSITION TAKER: New short on Friday’s close at 11700; stop above 12000. Target 11000.
FTSE 100
Retracing just over a Fibonacci 38 per cent of this year’s rally, putting the market back to where it slipped to in February last year. A drop back down to the 6800 area is likely.
SHORT TERM TRADER: New short this morning at 7100; stop above 7320. Target 6875.
POSITION TAKER: Short at 7275; stop above 7320. Target 6875.
S&P 500
Retreating for a third time from the high area first established in February last year. Still working inside the very large broadening top, as are several other Western indices. As President Trump’s first state visit to the UK kicks off today, he’ll have plenty to distract him – and his voters – from the escalating effects of his trade policies.
SHORT TERM TRADER: Short at 2880; stop above 2845. Target 2720.
POSITION TAKER: Target at 2740 met and took profits. Looking to re-sell shortly.
BRITISH POUND/US DOLLAR
Last week’s brief dip below 1.2600 might have been a false break, then again, it might not. With 13 contenders for the Conservative party leadership, many mishaps might happen.
SHORT TERM TRADER: Small long at 1.2675; stop well below 1.2600. Target 1.2925.
POSITION TAKER: Square.
EURO/US DOLLAR
Scraping itself off the bottom for a 6th consecutive week as Italy’s economy minister, Giovanni Tria, says his country doesn’t want a fight with the EU over its budget deficit.
SHORT TERM TRADER: Long at 1.1195; stop below 1.1100. Target 1.1400.
POSITION TAKER: Square.
GOLD
Rallying to retrace over half of the drop since February’s high. Impressive, not what we expected, but not outstanding. Note that platinum had a sorry time in May.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
Nicole Elliott is a long-standing member and Fellow of the Society of Technical Analysts and has taken over the IC’s trading coverage. She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.
