Technical Weekly 15012007

Usually, I show you a chart of bond yields but this time I decide to show the monthly long term chart of the German government bond futures contract since the beginning of the nineties.
As you can see the price reaches a key chart point (circle) which is an uptrend line that has been in place for 13 years.
This should be a good place to buy bonds as the risk/reward looks attractive.
Howevere, If you look at momentum indicators you see another story.
Take the Macd for instance, this indicator is already negative on all time frames (daily, weekly and monthly) and if you consider that momentum leads price, a breakdown of this very important support line could occur soon.Strangely, the recent drop of commodities is not supporting for bonds.

Another important event last week was the fall of the Euro as M.Trichet higlighted risks to the outlook for growth.
Technically, the Euro-dollar is approaching support round 1.29.
This short-term pull-back is not enough for me to invalidate the recent breakout and renewed strenght may follow in the coming weeks.
On the other hand, a drop below 1.29 could invalidate this scenario.

Commodities started the year badly and most of them are technically very weak.
However, on a short-term basis they are now oversold.
As you can see on the chart, the Brent broken up the uptrend channel recently.
The next support is located around 47$, which correspond to the May 2005 low and to a 50% retracement of the 2001-2006 uptrend.

European equities continue to trade sideways, the chart of the DJ Euro Stoxx 50 shows that the long uptrend channel remains intact but I can not exclude a deeper correction towards the support zone (4080-4070).

Emerging markets are lagging and most of them are correcting since the beginning of the year.
U.S. stocks finished the week higher, as the Dow Jones Industrial Average closed at a record high.
The Nasdaq Composite added 17 points friday to hit a six-year high, and the S&P 500 Index tagged a five-year high.
All three of the US indices closed the week higher, with the Nasdaq leading the way with a gain of 2.8 percent.
The Nasdaq Composite broke the barrier of 2470, rallying all the way up to a close of 2502.82.
Chart 2 shows that the index is already into a bullish Macd crossover, that paired with the break of the past resistance is enough for me to make a bullish call here.
Investors may be waiting to see how the numbers stack up. If earnings remain strong, and the interest rate outlook doesn't get any worse, I think stocks may start to move back up.
I also observe wider swings and the volatility seems to be rising since we are now starting the earnings reporting season.