Technical Weekly 29122006

I wish you all a healthy and successful 2007!

The table below is a technical ranking based on 3 different rates of change (1,3 and 6 months).
Momentum leads price, the challenge is to identify emerging strength and weakness with accuracy and consistency.
While major markets moves tend to be global in scope, some markets (sectors) are stronger than other, enabling investors to maximize bull markets profits by identifying the leaders and avoiding the laggards.
That’s why the current ranking position is compare to the position n days ago (normally 1 week ago.)
As you can see, the recent performance of world stock markets sends a very clear message. The top quintile contains China, India and Russia, while the bottom quintile contains the largest most mature markets.

More generaly, the market is in a positive uptrend with breadth and volume confirmation. However, the combination of overbought price momentum and overly optimistic investor sentiment suggests that near-term caution is warranted.
For instance, on the Stoxx 600, 87% of the stocks are trading above the 200 day moving averages and the montly (long term) RSI is now oberbought.(see chart)
Two important sentiment surveys, the Sentix in Europe and Investors Intelligence in the USA highlight a significant rise in bullish sentiment towards equities in the last few weeks.
So technically speaking, there is a good chance of a pull-back in early 2007, before a resumption of the bull market.

The second message is that during the last months, equity and bond markets seem to be telling different stories, and they cannot both be right. Equities seem to see a high growth world with low inflation, whilst bonds predict a coming recession.
So it will be very interesting to see if the bund (in yield) is able to break above resistance (and the psychological level of 4%) in the coming days/weeks.

And finaly some stocks with good and bad momentums.(daily basis)

Sentix

Normalement le mois de janvier est historiquement bon pour le marché des actions.

Mais il me semble que cette fois-ci le concensus est largement anticipé par les investisseurs.

Les indicateurs de sentiment d'Investor Intelligence aux USA et le Sentix qui sont deux sondages connus dévoilent un excès d'optimisme à court terme.

Le graphique ci-joint nous montre une lecture extrème (la plus haute depuis le lancement du sondage)sur les prévisions pour le le DJ Euro Stoxx 50 au cours du prochain mois.

Il est à noter qu'un niveau extrème de surachat(= trop d'optimisme) est également constaté sur le site sentimentrader (http://www.sentimentrader.com)

Technical Weekly 18122006

Equities
While there have been some indications that this bull run is "tired," there are few if any technical sell signals to indicate that a change of direction might take place.
The only concerns we have is the persistency of bearish divergences on daily technical oscillators and a high bullish sentiment amongst US financial advisors according to Investors Intelligence.
But for now, the primary uptrend, which started in March 2003, is intact.
According to Elliott Wave theory, European stocks are poised to resolve a five-leg move that may put the Dow Jones Stoxx 600 index on track for further gains.
The chart below shows why June 2007 could be a key turning point for European stocks.
The numbers in black identify each leg of the movement.The green vertical lines apply the ratios in the Fibonacci sequence to dates, rather than price levels. Measuring the time scale of the first wave and applying that same period from the end of the fourth wave suggests the fifth and final wave will resolve in June.

Commodities
Brent
No change, short term bullish, but the Brent must not fall below short-term support (red line), otherwise renew weakness may follow towards the lows.

Gold

Neutral, strong support exists around 615$, which is the confluence of the 200 (in yellow) and 50 day moving average.(in green)

German 10 Year Yield
Yields broke through resistance above 3.78% but are now facing another one around 3.85%. (Blue line)
The daily stochastic indicator in the lower panel is now above 90, which indicates an overbought status. In the coming days/weeks a trading range between 3.85% and 3.65% seems likely.

Euro-dollar
Last week I said that the Euro-dollar was correcting towards the 1.30.I'm monitoring closely the ascending trendline (in red) because the rate should remain above support in order to avoid a retest of the 1.29. (Black line)

DJ Euro Stoxx 50

L'indice européen attaque ses plus hauts précédents.

La tendance reste haussière à moyen terme et neutre à court terme en attendant le dépassement des nouveaux plus hauts.

A plus long terme sur le graphique hebdomadaire on peut clairement observer la cinquième vague d'Eliott.

L'objectif de cette dernière vague de hausse en ajoutant une droite de régression comprenant 2 deviations standards et en partant du principe que l'amplitude de la vague 5 est égale à celle de la vague 1 est de 4650 en prix et de fin mai 2007 comme objectif en temps.

Technical Weekly 12122006

Equities
The DJ Euro Stoxx 50 rebounds last week and could soon challenge resistance around 4100.
I would prefer a deeper pullback around the 3880- 3900 levels to add some long positions.
I believe that the index could trade between these levels (3900-4100) in the short term.
Unlike European indices, the trend of the SP 500 remains very strong.
However, US indices are now overbought and that is why technically, I prefer to invest in emerging markets.
The chart below shows the MSCI emerging market in red and a ratio comparing this index with the Stoxx 600 in black.
We can clearly see on the relative chart that after an under-performance between May and June, investors are now boosting their exposure to emerging market equities since mid-November.

Commodities
Brent

Still short term bullish but the brent must not fall below short term support (red line), otherwise renew weakness may follow towards the lows.

Gold
Was not able to break above 650.This is rather a neutral chart and not(yet) the start of a major advance I had forecast a few weeks ago.

German 10 Year Yield
No change, yields seem to stabilize around the 3.7% level.On a long term basis the overall trend remains negative on bond yields but in the short- term bond yields have been quite stable.

Euro-dollar
After a strong rise, the Euro-dollar is correcting and the daily Macd indicator is now close to give a sell signal.
I think that this consolidation is just a minor pullback and that the downside potential is limited.Watch the ascending trendline (in red) as potential support in the coming days.