Technical weekly 28/11/2006

EQUITIES

In the US, the Nasdaq is through the recent highs making it a four year high and the Dow Jones is finally closing above the top of the recent trading range.(6 months high)

Emerging Markets make new price highs.

In Europe, the Euro Stoxx 50 remains very strong (graph1)and the Stoxx 600 index reaches a four- year high.

The only concerns is that the short term overbought conditions that could lead to some consolidation.


The conclusion is that I expect the positive trend to continue.






COMMODITIES

Gold (graph 2) is breaking to new highs and is close to reached the psychological level of 500$.

Energy remains under pressure but oversold.
Even if the correction extends to 40$, the long-term picture remains bullish.




GERMAN 10 YEAR YIELDS

The sell signal (buy on bonds) that was expected two weeks ago has happen.

However, I suspect that this is just a minor pullback in yields (technical bounce) and that the uptrend may soon resume to the 3.7-3.8 zone.





EURO-DOLLAR

After a rebound last week, (Euro-dollar was extremely oversold and the consensus was very bullish for the $) the rate seems to stabilize around the 1.17 zone.

Over the last year, the Fed has been raising short-term rates while the ECB hasn't.

That has boosted the dollar relative to the Euro .

ECB President Jean-Claude Trichet said on November 18 that the bank is ready to raise rates for the first time in five years.

That hike in European rates is expected during December.

The recent release of the Fed's November meeting hinted at a possible end to U.S. rate hikes.

If that is the case, 2006 could see U.S. short-term rates declining while European rates could rise and this could be negative for the dollar.

But for now the downtrend still prevails.