Lessons For The Coming Week And Beyond: What’s Behind The Rally & Headlines

Strategic lessons for investors in stock indexes, forex and other global markets, both technical and fundamental outlooks, lessons about what’s really moving markets now and what we need to watch in the future

The following is a partial summary of conclusions from our weekly fxempire.com fxempire.com ’ meeting about the weekly outlook for global equities, currencies, and commodity markets.

Summary

–TECHNICAL OUTLOOK: Modest upward momentum revives

–FUNDAMENTAL OUTLOOK: Near Term: Likely near term drivers behind the rally despite mixed data, longer term potential market movers on the horizon

–FUNDAMENTAL OUTLOOK: Longer Term: Longer term potential market movers on the horizon

TECHNICAL PICTURE

We look at the technical picture first for a number of reasons, including:

Chart Don’t Lie: Dramatic headlines and dominant news themes don’t necessarily move markets. Price action is critical for understanding what events and developments are  and are not actually driving markets. There’s nothing like flat or trendless price action to tell you to discount seemingly dramatic headlines – or to get you thinking about why a given risk is not being priced in

Support, resistance, and momentum indicators also move markets, especially in the absence of surprises from top tier news and economic reports.

Overall Risk Appetite Medium Term Per Weekly Charts Of Leading Global Stock Indexes

Lessons For The Coming Week And Beyond: What’s Behind The Rally & Headlines

Weekly Charts Of Large Cap Global Indexes February 10, 2013 To Present With 10 Week/200 Day EMA In Red: LEFT COLUMN TOP TO BOTTOM: S&P 500, DJ 30, FTSE 100, MIDDLE: CAC 40, DJ EUR 50, DAX 30, RIGHT: HANG SENG, MSCI TAIWAN, NIKKEI 225

Key For S&P 500, DJ EUR 50, Nikkei 225 Weekly Chart: 10 Week EMA Dark Blue, 20 WEEK EMA Yellow, 50 WEEK EMA Red, 100 WEEK EMA Light Blue, 200 WEEK EMA Violet, DOUBLE BOLLINGER BANDS: Normal 2 Standard Deviations Green, 1 Standard Deviation Orange.

Source: MetaQuotes Software Corp, www.fxempire.com, www.thesensibleguidetoforex.com

01 Jun. 01 09.44

Key Points

• Leading US and European Indexes mostly higher, all maintaining their slow but steady uptrends as continued low rates and supportive central bank policies outweigh the bearish pull of mixed economic data
  • Momentum indicators put the odds in favor of further upside
  • Indexes continue to close in their double Bollinger® band buy zone
• Moving averages from 10-200 weeks continue trending higher.
• Asian index trends continue to be too diverse for easy generalizations.
•  

Fundamental Picture

Lessons For The Coming Week

Low Yields, Market Calm, Momentum Explain Current Rally, Not Data

Economic data remains mixed, but apparently good enough to keep markets trending higher. US durable goods and weekly new jobless claims beat expectations.

 

Source: St. Louis Federal Reserve

02 Jun. 01 11.49

On the other hand, preliminary GDP and pending home sales missed.

The poor GDP figure was widely dismissed as the result of temporary factors like weather and unsustainably low inventories, both of which suggest a coming rebound in these that will boost Q2 GDP and put the US back into positive territory for 2014. They also noted that consumer spending had held up well despite the bad weather.