Technical weekly 18122007
Equities
Based on a favorable seasonality, short term oversold condition, extreme pessimism and a friendly Fed, I turned short-term bullish for a year end rally. However the recent downside acceleration deteriorates the short-term technical outlook.
So, I need a long term model to convince us that the long term outlook is still good.
A model’s greatest value is that it provides an objective assessment of the consensus of the indicators.
Forecasting procedures can be used to place current developments in the context of long term probabilities if they are used in conjunction with an objective model that enable you to maintain flexibility in responding to changing market conditions.
This model isn’t a market timing tool, but it will give you a clear perspective on risk and reward.
If it indicates that the market outlook is risky, you should respond by maintaining a defensive investment approach.
When the model starts to indicate that the skies have cleared and that there is little risk on the investment horizon, you can again be confident in taking an aggressive approach.
To determine the quality of the trend, I use a weighted combinaison of 3 waves of trend, based on different time frames.(monthly, weekly and daily)
The stronger weight is given to the long term trend.
I also used a risk return approach; this tool tries to define the potentiel of a trend.
The higher the score, the higher the probabilities of higher prices in the future. The stronger weight is also given to the long term trend.The combination between the trend and the risk return model is the matrix.
A model’s greatest value is that it provides an objective assessment of the consensus of the indicators.
Forecasting procedures can be used to place current developments in the context of long term probabilities if they are used in conjunction with an objective model that enable you to maintain flexibility in responding to changing market conditions.
This model isn’t a market timing tool, but it will give you a clear perspective on risk and reward.
If it indicates that the market outlook is risky, you should respond by maintaining a defensive investment approach.
When the model starts to indicate that the skies have cleared and that there is little risk on the investment horizon, you can again be confident in taking an aggressive approach.
To determine the quality of the trend, I use a weighted combinaison of 3 waves of trend, based on different time frames.(monthly, weekly and daily)
The stronger weight is given to the long term trend.
I also used a risk return approach; this tool tries to define the potentiel of a trend.
The higher the score, the higher the probabilities of higher prices in the future. The stronger weight is also given to the long term trend.The combination between the trend and the risk return model is the matrix.
As you can see, based on this technical model, the risk/return and the trend for the Stoxx 600 remain weak.
Bonds
Since May, the German 10 year bond yields are trading in a downside trading range. As the yields trades now close to resistance and are overbought, I foresaw lower yields for the coming days.
Since May, the German 10 year bond yields are trading in a downside trading range. As the yields trades now close to resistance and are overbought, I foresaw lower yields for the coming days.
Brent(Oil)
No change, the Brent is still challenging the ascending support trend-line.
No change, the Brent is still challenging the ascending support trend-line.
A break below this support could extend the correction towards 80 $ but the long term trend is still up.
Euro
Last week I said that a break below support would suggest a much larger correction.For the coming days/weeks a move towards the 1.422 level, which is upper part of the bullish long term channel, seems likely.
Last week I said that a break below support would suggest a much larger correction.For the coming days/weeks a move towards the 1.422 level, which is upper part of the bullish long term channel, seems likely.
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