Technical Weekly 25012008

Equities
Most short term indicators are now at oversold levels and most intermediate term indicators we looked are also at oversold readings.
Market internals remain oversold but are improving.
So that the market is oversold enough to rally but for now there is no pattern suggesting a sustained rally.
Taking risks have few chances to be rewarded as long as a valid signal did not appear.A wait and see market is the norm after a very strong decline but, as long as the process of reflection did not come to a end (base forming or distribution pattern?), it is highly preferable to stay on the sidelines.
This week we take a look at emerging markets, the MSCI EM Latin America made a new high (for 2008) last week and is strongly outperforming the Stoxx 600 (black line)















The MSCI EM Asia remains weak and volatile and the MSCI EM Eastern Europe technically ranges between the two others and is outerperforming European stocks.

Bonds

On the short term, positive action is expected (higher yields) towards the upper end of the descending channel (around 4.1%) but as you see the mid-term trend is still down.

Commodities

Most commodities are showing parabolic upside accelerations.

Their momentum is incredibly strong and most of them have made significant technical bounces since last month but are trading now close to resistance zone.

Aluminium, copper, oil and agriculture are just reaching long term key resistances.

The chart below shows the DJ-AIG Agriculture total return index; any break through these areas would suggest that the advance may extend a lot further.

Euro

The exchange rate is still trying to break above the 1.5 resistance level.

A break above this level could open the door to the 1.55-1.56.