Technical Setups

Technical Setups














Sunday, January 04, 2009


By Adam Perl /  Editor of dodjit.com







On a weekly basis Dodjit’s site provides its readers with a fundamental and technical outlook of the global markets, focusing on the U.S stocks and Forex. Even though we have now entered a new calendar year, economic data remains unchanged, forcing officials from around the world continue to battle deteriorating economies, while market participants search for opportunities among chaotic securities. Due to the holiday season, investors experienced last week numerous session characterized by low volatility, as trading volume across the board decreased. Major movement appeared on Friday as a series of events sparked interest among investors, encouraging them to buy up stocks, while sending the indices to close higher by over 3%. Even though global economic data continued to show a dire situation, for example; England reported that their house prices fell at their fastest rate during 2008 for at least 25 years, while manufacturing activity contracted for the seventh month in European countries, merging activity in the U.S between large banks and a $4 billion bailout from the U.S government to rescue General Motors, sparked major buying. Bank of America completed its $19.4 billion stock purchase of Merrill Lynch, while Wells Fargo & Co purchased Wachovia Corp.

Since the middle of November articles published on Dodjit’s website have been stating that price action is showing a turn in sentiment. Even though the financial markets are still dealing with ongoing problems, recent price action now seems to be strengthening previously published reports. Throughout 2008 central banks have been confronting the problems in the financial markets using various tools including; massive interest rate cuts, tax cuts and other fiscal stimulus methods. To date, most analysts believe that due to the extensive efforts of officials, the second half of 2009 could be a positive one. One has to remember that unlike Main Street, which is driven by negative economic data published on a day to day basis, Wall Street and other financial markets seem to be already pricing it in. Interest rates in the U.S have dropped to a 0-0.25% range and other economies intend to follow their path.


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The BOE (Bank of England) have stated that further interest rate cuts will be needed and that their central rate could fall to below 2%. Despite all of the points stated above risk appetite now seems to be heading back into the markets as veterans know that pessimistic situations can often provide risk takers with phenomenal returns. When analyzing the situation more thoroughly one can see on the charts below that over the last couple of weeks High Yielding bonds have made an enormous come back, as huge volume has returned those riskier assets. The increase in volume provides a consensus of opinion that defaults upon those riskier companies are now decreasing, due to the overall actions taken within the U.S economy. In addition, on the currency market certain carry trade pairs have received a boost, as participants are now expecting that those same economies intend to hold with their current rate status.
Trading volume should return to a normal state this week and price action will determine the overall outlook of the upcoming weeks. While charts are currently providing technical setups, one must remember that further surprises from defaulting companies or Middle East problems could dampen the current mood, forcing prices lower. With investors rolling back into the markets this week and a wave of economic data coming out, including a major market mover – U.S Unemployment, participants should watch out for major moves, especially as prices are currently trading at critical levels.

Charts
SPX- Daily Chart

*Courtesy of stockcharts.com

High Yield Bonds- Daily Chart

*Courtesy of stockcharts.com
TLT- Daily Chart

*Courtesy of stockcharts.com
XLF – financial sector daily chart

*Courtesy of stockcharts.com
EUR/USD – Daily Chart


*Courtesy of netdania.com
USD/JPY- Daily Chart

*Courtesy of netdania.com
AUD/USD- Daily Chart

*Courtesy of netdania.com
GBP/JPY- Daily Chart

*Courtesy of netdania.com
For further articles please visit www.dodjit.com

Information reliability and liability: The contents are solely aimed for the use of "Experienced" investors in the financial markets who are fully aware of the inherent risk of trading. I, “Adam Perl”, do not accept any liability for any loss or damage whatsoever that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in our trading recommendations. I make no warranties or representations in relation to the Information (including, without limitation, in relation to its accuracy or otherwise) and do not warrant or represent that the services will be error free or uninterrupted. Copyright: This article is subject to and protected by the international copyright laws. Use of the information brought in this article is subject to making fair use only in accordance with these laws. It is not permitted to copy, change, distribute, or make commercial use of the information except with permission of the holders of the copyright. Risk Disclosure: The risk of losses involved in the transaction or speculations in the financial markets can be considerable. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. Speculate only with funds that you can afford to lose.