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. Don’t be fooled by the prevailing calm.
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: Bullish for global stocks and other risk assets as upward momentum improves and psychologically important overhead resistance beckons for a test higher.
–FUNDAMENTAL OUTLOOK: The key supports of the multi-year rally remain in place, now augmented by new ECB stimulus and the promise of more coming.
–CONCLUSIONS: A quiet economic calendar but many important lessons and potential market movers worth watching.
– BIGGEST LESSONS: An EU version of QE, QEU, is coming. Many ramifications for all investors. Here’s your chance for fame-name that EU QE. See below for details, prizes.
Technical Outlook
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
Must-Know Market Movers To Watch And Lessons For Week Of June 9 2014
Weekly Charts Of Large Cap Global Indexes Week of February 2013 To Week of June 2 2014:Â 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. 08 19.20 / 05 Jun 8
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.
Daily Charts / Short Term Coming Weeks
There’s only one important point from the daily charts that doesn’t show up on the weeklies. US and European indexes made all of their gains on Thursday and Friday following the ECB announcement. Without that the week would have been flat.
The ECB saved the week and kept momentum on the daily charts firmly positive, with the indexes bouncing off the bottom of their double Bollinger® band buy zones, and ending the week at the upper edge of these zones.
This matters because the coming week’s calendar is relatively light, and unlikely to provide any departures from the current themes.
Likely Market Direction: Â Technical, Fundamental Outlook Suggest Test Higher
The combination of technical and fundamental evidence suggests that stock indexes and most other risk assets continue drifting higher. Here’s why.
Fundamentals Remain Bullish
The same conditions that have sustained the risk asset rally for risk currencies, stocks and other risk assets (excluding certain China related risk assets) since mid-2012 remain in place. These are:
- All major central banks remain in de-facto easing mode, even if some claim they’re finished and even moving to tighten, no one is planning to materially tighten for about a year at least.
- No big scary contagion threats. Indeed this latest leg up that began in mid-2012 started with ECB President Draghi’s promise to do “whatever it took†to keep the EU’s sovereigns and banking systems solvent. (Side note: Germany and other core funding nations were hardly guaranteed to fund unlimited lending or back unlimited money printing. Moreover, his bold OMT program to aid Spain’s teetering banking system was never tried because Spain was too repelled by its various conditions to insure accountability for the funds. Yet, markets never tested Draghi’s bravado, and his quelling of EU crisis fears remains one of the greatest acts of sheer bullsh…er, spin control, in the history of modern global finance. Any similarity between that any last week’s promise to do more until it’s enough is of course purely coincidental.)
