Global Equity Monitor: Techno-Fundamental Research & Analysis

By Joel Kruger, Technical StrategistDavid Schutz,
  • US equities look to have found interim 2012 high; looking for reversal
  • UK equities rolling over after stalling by critical psychological barrier
  • German equities seen lower after stalling above 7,000
  • Japanese equities at risk for major corrective declines
  • Australian equities remain well offered on rallies

US30 (Dow)

Technical : We could finally be seeing the formation of some form of a top in 2012, with daily studies looking stretched and the market breaking lower on Tuesday to end a sequence of consecutive daily higher lows. Look for confirmation Wednesday on a break back below Tuesday’s lows. This could then open an accelerated decline back towards the 12,750 area at a minimum.

Fundamental: US equity futures were well bid today as market participants look for a hike in home sales data set for release today. The data’s market impact remains to be seen, but recent economic data out of the US housing market has shown improvement in the housing sector. Moreover, crude oil reserves data set for release today could take on added significance given recent tensions out of the Persian Gulf. Meanwhile, Goldman Sachs today advised in a report that stocks will likely experience a “steady upward trajectory” over the coming years because any declines in economic growth have already been factored into markets.

UK100 (FTSE)

Technical : Although the market has managed to mount an impressive rebound since breaking down from 2012 highs at 5,964, we see any additional rallies as limited, with the greater risk for the formation of an interim top around psychological barriers at 6,000. Look for the latest break back below 5,900 to help confirm outlook and accelerate towards 5,750 further down.

Fundamental: The Bank of England Minutes released today revealed that central bank members see the economy slowly turning around. The BOE unanimously favored its recent rate decision, while two members desired more easing. A majority of Bank of England board members saw “no reason” to change the central bank’s benchmark interest rate and current quantitative easing program. Meanwhile, Britain’s budget deficit almost doubled in February as taxes fell and spending surged.


Technical : While the market has managed to post a significant recovery rally and extend gains to fresh 2012 highs, we still see the prospects for recent rallies beyond 7,000 as limited with the greater risk for the formation of a medium-term top in favor of a deeper decline over the coming weeks. Look for a break back below 7,000 on Wednesday to confirm negative outlook and open an acceleration towards next key support in the 6,750 area.

Fundamental: European markets remained fairly unmoved today as the Greek parliament approved a 130 billion-euro ($173 billion) bailout. The bailout approval dampened demand for safe assets, and German government bunds fell as yields widened to a 3-month high.

JPN225 (Nikkei)

Technical : Daily studies are finally starting to correct from violently overbought levels and we would recommend that bulls proceed with caution over the coming days. From here, short-term risks are tilted to the downside so that technical studies can unwind from these overextended readings. Look for a pullback towards the 9,500 area before considering possibility of a bullish resumption.

Fundamental: Japanese markets declined today, sending the Nikkei into the red zone for the first time in six days. Concern s that China’s economy is slowing were thought to be turning traders off to risk, and signals that the stock market may have risen too far, too fast slowed down buying.

AUS 200 (ASX)

Technical : Rallies have been well capped by 4,300 and we look for the market to roll over yet again in favor of a bearish decline towards 4,100. A break below 4,100 will then accelerate setbacks and expose 4,000 further down. Ultimately, only a daily close back above 4,315 gives reason for pause.

Fundamental: The Australian dollar saw a brief rally overnight after the bureau of resources and energy said it sees higher energy earnings in the future. Gains were not seen in equity markets, though, Chinese concerns continued to throw a damper on trade. New Zealand’s FinMin said overnight that he expects his country’s deficit to increase, a development that did not help risk sentiment.

--- Written by Joel Kruger, Technical Currency Strategist

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