More Uncertainty

More uncertainty and more volatility. The data released yesterday were below market expectations: the revised preliminary GDP data in the United States recorded a cut from +2.5% to +2.4% (accused public spending cuts because the so-called "tax kidnapping"), and on the other hand, initial jobless requests increased more than expected. Positive tone for a market that sees bad data as reduced odds of QE withdrawal. The session in the Asia-Pacific region has been marked by a wide battery of data in Japan, to include: maintaining the unemployment rate and the industrial production in a significant rise (actual 1.7%, previous +0 , 6%, expected +0.9%). The stock market closed with a mixed tone: the Japanese Nikkei added a +1.37% and the Chinese CSI 300 downwards by -1.06%. The session begins in the old continent with the release of industrial production data last month in Germany, which is growing up +1.8% this year, but recording a fall of 0.4% on last month. The european markets have opened with falls.

In Europe, remain vigilant to the publication of preliminary data for May CPI in the Eurozone, which is expected to rebound slightly to +1.4% from +1.2% the previous month. We will also know the Eurozone unemployment data, which are expected to be upward slightly from 12.1% to 12.2% (the market will be attentive to these data to determine today's movement). In the United States we will know this afternoon the purchasing managers index for Chicago, which can show the direction in which data will be moved in the United States next week. And also the consumer confidence data from the University of Michigan, a leading indicator of consumption (expected to remain unchanged). Tomorrow we will know the Chinese PMI data, which is expected to be upward from 50.6 to 50.1 (there are some rumors about the data to drop below 50).

For all this reasons, increase caution for positions at the end of week and month, as we have another surge in volatility on Monday with the release of PMI and ISM data.

30th, Daily Report

It seems clear that the fear persists. The stock markets (especially in Asia) show that the uncertainty of a reduction in aid from the Central Banks continues. The market crash is something that it seems clear that will occur in today's session, unless someone prevents it. This has slowed the upward trend and at least a part of the bubble has burst, but the support level of the NIKKEI, which coincides with the 38.2% Fibonacci, seems likely to slow this falling. The session can move from low to high according to U.S. macro data (PIB, weekly employment, housing presales, etc..) Although it is positive, it would continue with the fear of a possible termination of aid. Therefore, we will have to be careful.

In the U.S., the stock market continued the good news with doubts about a possible end of QE. So, yesterday the market contracted with a fall of its three major indices. DOW and SP fell 0.7% while the Nasdaq 0.6%. As a thing to note, the falling of Fannie Mae, which fell 28.9% with lots of volume.

Profit taking session in the European stock market with the perspectives presented by the OECD that brings back bad news for the Eurozone and in particular to the peripheral countries. Therefore, the declines were widespread. The worst performing was the ACC with a fall of 1.9%. At the other end of the scale, the IBEX, which fell by 0.8% although it carries a much greater fall in recent weeks, in fact, is the only major market in Europe leading a rise of less than 5% (only one 3.4%). The risk premium stood at 287 bp.

In Asia, the market moves with much more force. The crash yesterday was 5.15% in the NIKKEI and makes clear that the Asian market has many more doubts about the central bank, as it has suffered a drop of around 15% in recent sessions.

For today's session, I expect a behavior from low to high, but depending on the U.S. macro data that will be published. For the medium and long term, I continue expecting an improvement of the stock markets.



INDICES:


S&P 500

I seriously appreciate the ability to view back the index in weekly lows. With the U.S. data ahead, it's anticipated a fairly volatile day. With the average of 30 sessions already in a negative slope and the RSI showing laterality, we pay more attention to the lowest levels of the week, but we will be attentive to U.S. data before venturing to submit the new trend.

Dax 30


The index presents an interesting moment. After leaving the overbought levels, the corrections carried out in recent days have drawn a clear double top figure. This figure is only activated in case of drilling downwards the minimum between maximums, ie the 8267 points. Please note that in this case, it would be set a downside target in the area of 8000 points

Ibex 35

Bullish day for Ibex 35. The Spanish index opened today with a slightly upward gap, which was filled in after the opening minutes. The speed in closing the gap we usually give an upward bias to the value. With an average of 30 sessions in a clear positive slope, I see the Spanish stock market in this week's highs and lows of the past.

29th, Forex Analysis

The economic data released yesterday did not leave any doubt about the good pace of U.S. economic recovery.

The price housing index far exceeded the expectations reflected in market forecasts, and the consumer confidence soars to a figure not seen in over five years.

However, in the course of this morning I have seen very volatile movements and quite erratic in the opposite direction of that aim.

We must remember that we are at the end of the month and at this time there are usually flows from portfolio adjustments and some other major central banks also need to balance their reserve accounts.

In any case, these excessive movements, with the necessary precautions to be taken in these cases, give opportunities to be guided by the major trend.

It is for this reason that the EUR/USD 1.2950 area is still a good selling opportunity.

Wildly Out Of Control

The financial system of the third largest economy on the planet is starting to come apart at the seams, and the ripple effects are going to be felt all over the globe. Nobody knew exactly when the Japanese financial system was going to begin to implode, but pretty much everyone knew that a day of reckoning for Japan was coming eventually. After all, its economy has been in a slump for over a decade, as it has a debt to GDP ratio of well over 200 percent and they are spending about 50 percent of all tax revenue on debt service.

In a desperate attempt to revitalize the economy and reduce the debt burden, the Bank of Japan decided a few months ago to start pumping massive amounts of money into the economy. At first, it seemed to be working. Economic activity perked up and the stock market went on a tremendous run. Unfortunately, there is also a very significant downside to pumping your economy full of money. Investors start demanding higher returns on their money and interest rates go up. But the government cannot afford higher interest rates. Without super low interest rates, Japanese government finances would totally collapse. In addition, higher interest rates in the private sector would make it much more difficult for the economy to expand. In essence, pretty much the last thing that Japan needs right now is significantly higher interest rates, but that is exactly what the policies of the Bank of Japan are going to produce.

There is a lot of fear in Japan right now. On Thursday, the Nikkei plunged 7.3 percent. That was the largest single day decline in more than two years. Then on Monday the index fell by another 3.2 percent.

And things are not looking good for Tuesday at this point... The Nikkei has dropped by another couple hundred points, below the 14.000 level.

Is this the beginning of a colossal financial meltdown? The Bank of Japan is starting to lose control, and if it goes down hard the crisis could spread to Europe and North America very rapidly. The following is from a recent article:


"As Japan has indicated, when bonds start to plunge, it’s not good for stocks. Today the Japanese Bond market fell and the Nikkei plunged 7%. The entire market down 7%… despite the Bank of Japan funneling $19 billion into it to hold things together

This is what it looks like when a Central Bank begins to lose control. And what’s happening in Japan today will be coming to the US in the not so distant future.

If you think the Fed is not terrified of this, think again. The Fed has pumped over $1 trillion into foreign banks, hoping to stop the mess from getting to the US. As Japan is showing us, the Fed will fail.

Investors, take note… the financial system is sending us major warnings…

If you are not already preparing for a potential market collapse, now is the time to be doing so."


And all of this money printing is absolutely crushing the Japanese yen. Since the start of 2013, the yen has declined 16 percent against the U.S. dollar, even though the U.S. dollar is also being rapidly debased. Just check out this chart of the yen vs. the U.S. dollar. It is absolutely stunning...

The term "currency war" is something that you are going to hear a lot more over the next few years, and what you can see in the chart above is only the beginning.

What the Bank of Japan is doing right now is absolutely unprecedented. It has announced that it plans to inject the equivalent of approximately $1.4 trillion into the Japanese economy in less than two years. What they're doing represents 70% of what the Fed is doing here with an economy 1/3 the size of ours.

The big problem for Japan will come when government bond yields really start to rise. The yield on 10 year government bonds has been creeping up over the past few months, and if they hit the 1.0% mark that will set off some major red flags.

Because Japan has a debt to GDP ratio of more than 200 percent, the only way that it can avoid a total meltdown of government finances is to have super low interest rates.

It really is very simple. If interest rates rise substantially, Japan will be done.

"If rates go up, it's game over."

The financial problems in Cyprus and Greece are just tiny blips compared to what a major financial crisis in Japan would potentially be like. The Japanese economy is larger than the economies of Germany and Italy combined. If the house of cards in Japan comes tumbling down, trillions of dollars of investments all over the globe are going to be affected.

And what is happening right now in Japan should serve as a sober warning to the United States. Like Japan, the money printing that the Federal Reserve has been doing has caused economic activity to perk up a bit and it has sent the stock market on an unprecedented run.

Unfortunately, no bubble that the Federal Reserve has ever created has been able to last forever. At some point, we will pay a very great price for all of the debt that the U.S. government has been accumulating and all of the reckless money printing that the Fed has been engaged in.

So enjoy the calm before the storm while you still can.

It won't last for long.

27th, Daily Report

Week of corrections after the bad news about the Chinese PMI and the uncertainty caused by Bernanke's words. Expansionary policies will continue but not indefinitely and this has not pleased the market, which has lost some levels. Japan lost much strength, but since November it carries a 80% growth, so the profit taking was obvious. Now, we must analyze whether Kuroda generates enough confidence to reduce the volatility of the Nikkei. And in Europe, the measures taken on Monday on the deposit market where they secure all deposits under € 100.000 generate tranquility on investors. In addition, this report provides information on the reduction of losses of shareholders and subsequently bondholders. For the beginning of this week, I expect an upward movement of the stock exchange in the U.S. by closing far from the lows, but not in excess.

The U.S. market is closed today. Last week it ended in losses, but they were minimal, as the DOW fell only 0.3%. The SP and NASDAQ fell 1.1% and 1.3% respectively. The reasons were also the bad news in China, which generate some suspicion about the possible American exports. Beyond that, be analyzed as the week begins tomorrow to see if the market recovers, which is quite likely to happen.

Last week the European market, like the rest, was stained in red with quite strong losses. The worst were the MIB (-4%) and the IBEX (-3,7%). However, the worsening of the bonds is not that strong. For this next week, I expect a rebound, but depending on macro data and business results, which will definitely be determinant for the market.

In Asia, corrections continue, caused in part by the Chinese PMI but in turn by rising since November last year. Technical corrections may be considered after excessively strong rises. We will have to see when it ends. In turn, Kuroda should reassure the market to reduce the volatility of the NIKKEI because it generates some distrust. This morning it has fallen back by 3.2% (-9% in the last 3 sessions) and it is now at 14.000, turning on the key support.

For today's session, I expect an upward trend after the positive closing in the U.S. market (far from the lows) and having lived strong falls last week. For the medium and long term I continue expecting a bull market.



INDICES:


S&P 500

Closed today.


Dax 30

Bullish behaviour in the opening today. We continue to monitor levels of 38.2 Fibonacci correction. Despite recent declines, while these levels are not missed, I continue to see an upward trend for the index. Technical indicators and the average of 30 sessions also present a bull market.

Ibex 35

Slightly bullish opening in Spain, after a strong correction last Friday. High levels of volatility in the Spanish index, and the technical analysis indicates bullish signs of exhaustion. Average of 30 sessions in a clearly negative trend in the 4 hour chart. We monitor the key support in Friday's lows, located in the 8196 points.

26 May - 1 June, Weekly Calendar

24th, Daily Report

Weekly closing session that is expected to have a rebound in the stock market after a very complicated and volatile week due to the reading of the Fed's act and the worsening of the Chinese PMI. New macroeconomic data, which are being published today, will mark the end of the week. The most important are the German IFO (better than expected) and the durable goods orders in the U.S.

The American stock exchange suffered the negative behaviour of Asian indices and the uncertainty effect of QE, as it fell at the opening but finished strong, far from the lows, so it could bounce off in today's session, but we will have to keep an eye on the durable goods data. The fallings were considered minor, and the worst indices were the SP and NASDAQ, which fell 0.3%, while the DOW lost only 0.1%.

The European market in yesterday's session fell sharply driven by Asia and the uncertainty in the U.S.. Therefore, the closure of the stock market was widespread of unrestrained falls. The worst was the MIB with a fall of 3.1% while the best was the IBEX with a fall of 1.4%. For this final day of the week, there could be a slight European rebound.


In Asia we have returned to have a highly volatile session, which ended with the Nikkei climbs 0.9%. Kuroda said that his role is not to take care of the markets, so it fell by -3% when it was previously rising 3%, so volatility has settled into the Japanese market. This subsequent rise can encourage European and American markets.

For today's session, I remain confident of recovering the upward trend, but depending on the macroeconomic data that will be published. For the medium and long term I continue expecting a bullish behaviour.



INDICES:


S&P 500


Wall Street faces another day of possible corrections to its vertical climbing, as volatility continues to rise after touching highs during Bernanke's appearance. Despite seeing an upward trend, we should be careful it does not lose the support in 1628 points, which is the key level of Fibonacci correction.

Dax 30


As has happened in the markets around the world, the German index yesterday suffered a major correction to its ascension. Note that the minimum of this correction was stopped just in the 23.6 Fibonacci level. Pay attention to this key level, because its losing could send us to the price correction of 38, 2, located at the level of 8125 points. If the price keeps above the average of 50 sessions, the upward trend will continue and the 8548 points could be a possible new maximum.

Ibex 35


Aperture moderately bullish today. After the troubles yesterday, which caused most of the world trading floors closed with losses, the Spanish index faces a day that can bring upward corrections. From the technical point of view, we see how the Spanish index is framed in that indecision that leads from earlier this year. With the average of 50 sessions starting to take a negative slope, I think that the key level is on yesterday's lows in 8227 points.

High Volatility

After the sharp drops recorded at the beginning of the session by the U.S. indices, the macroeconomic data, which were better than expected (weekly jobless claims fell further than expected and new home sales rose above expectations ), were interpreted as positive for yesterday market. The major indexes ended the session with moderate cuts. The statements yesterday by ECB President, Mario Draghi, told us that the risk of rupture of the Euro has dissipated, but that the ECB can not solve the crisis alone.

The session in the Asia-Pacific region has been marked by the statements of the president of the Bank of Japan, Kuroda, who stated that sufficient incentives are scheduled (some kind of extension or extraordinary measures are expected). In this context, the Japanese Nikkei, having left during the session up to -3%, closed with a rise of 0.89%. For its part, the Chinese index CSI 300 added a 0.56%.

The session begins on Europe without much change. This morning some data has been released in Germany: the GFK consumer climate, which is above than expected at 6.5, the revised German GDP data for the first quarter of the year remains unchanged, and the rate of business climate, the German IFO, which is above that expected by the market consensus and moves from 104.4 the previous month to 105.7.

We will not know further relevant data in this side of the Atlantic during today's session. In the United States, remain vigilant to the publication of calls for durable goods, after the downward revision of previous data, which is expected to be placed in 1.5%. This is a very interesting indicator of business confidence, which perform more machinery orders when discounting an increase in sales (and thus in consumption) in a medium-term future. There could be changes in the market during the first half of the session, as we are in a fairly high level in most of the indices and there is an increased volatility, so they could be entering a correction, or just making a break in the path.

23th, Daily Report

Today's session is expected sharply bearish for several reasons. The bad Chinese PMI data has caused the Japanese market panic (-7,3%), and it has joined the emerged doubts after reading the Fed's act. The fact that so many discrepancies appeared among its members generated rumors about the continuation of QE. It will be a bearish session, but it is not intended to be a long-term trend.

The U.S. market had a big move either up and downwards yesterday, greatly influenced by the appearance of Bernanke, which gave confidence, but then the reading of the act made it return to the mistrust that caused the final fall. The fact is clear, the markets know but do not want to end up aid. The QE are essential today for increases in the equities. This caused declines in the three major markets. The best was the Dow, which fell 0.52%. The SP lost 0.83% and the Nasdaq 1.11%.

Yesterday's session in Europe was marked by the appearance of Bernanke, whose message encouraged the stock market, but then it corrected and ended with a mixed close. The best was the DAX with a rise of 0.69% while the IBEX, as has happened in the last sessions, was the worst and closed in red, with a loss of 0.02%. In addition, there was a rise in the risk premium above 280 points, which clearly shows that doubts about Spain continue.

In Asia, the market has finally burst. Negative Chinese PMI data (private data, so it is not manipulated), which has caused a drop of 7.3% in the NIKKEI. The Japanese market has such a level of nervousness that the BOJ has had to inject liquidity to not run out of money in the short term. Even so, the Japanese bubble burst does not seem to follow a trend, so it can be a momentary thing.

For today's session I expect a sharp correction of the market, but depending on macro data, especially in the U.S., which might change the trend in the short term or at least reduce the expected fall in the opening. For the medium and long term I continue to expect a bullish continuation. As I have discussed in various reports, the falls are always stronger than the rises.



INDICES:


S&P 500

After the troubles yesterday, which has led the American index to suffer setbacks, it presents a very interesting technical aspect. We see the price, after maximums yesterday, has dropped sharply to slow in the average of 14 sessions. Despite these setbacks, quite common in the SP500, I strongly believe that we must evaluate this as a short-term correction, and the index may attack new highs in coming days.

Dax 30

Like the other European markets, the German index opened downwards with a gap of nearly 70 points. As I said yesterday, the DAX had some bearish divergences that could make a correction. Despite these factors, and although the index has gone down the average of 50 sessions, I do not believe it is appropriate to say the index has a long term bearish trend. However, pay attention to the support of 8141,6 points given by the Fibonacci.

Ibex 35

As for the technical aspect of the Ibex, I warned about a key support in 8377 points, which was drilled yesterday and largely confirmed by the opening this morning. We must be careful, therefore, to fluctuations in the coming days because we have an active downside target of 8,130 points, with all the indicators pointing downward, which can make us confirm the bearish scenario in the short term.

Better Prospects for the Euro

As expected last week, the dollar has been losing ground in view of the statements of Fed members, who are mostly more favorable to maintain QE policies as long as needed.

And the final confirmation has come this afternoon in Bernanke's appearance:

“A premature tightening of monetary policy could lead interest rates to rise temporarily, but also would carry a substantial risk of slowing or ending the economic recovery.”

I think that the dollar should further correct and the EUR/USD may again exceed the critical level of 1,30. We will see a technique confirmation if the dollar index closes below 83,40.

In addition, in Europe the peripheral risk premiums remain fairly stable, and they are likely to improve, especially after the publication of new data about the current account deficit of the eurozone in March, which has improved substantially over the previous month's figure. A sustained surplus will undoubtedly enhance the credibility of public finances and also for the bonds of the countries concerned. On the negative side, I see that these improvements are based largely on the decline in imports, but the ultimate effect, referring to foreign debt, remains favorable.

For this reason, the EUR/USD is likely to resist its downtrend rally and it can be kept above the level of 1,30. The USD/JPY could also correct its price, so we must be careful with the 102,00 and 101,80 levels, whose break would open new extensions to downward trend.

22th, Daily Report

Today's session depends on the outcome of the meeting of the Fed. As we already know, when the market doesn't like the news, it enters in a strong depression. But for today, it's unlikely to happen. After the words of different Fed chairmen of some important states, it is clear that this policy will continue to search for economic recovery. In fact, Bullard (president of the Chicago Fed) has recovered the EMU economic policy in addition to other presidents, who said they know that it is not currently feasible to change the monetary policy. A couple of positive notes, is that Linkanen (ECB) recommended the purchase of ABS as a way to promote lending to SMEs, as well as the confirmed approval of a shield to 100,000 € in deposits. All these measures should encourage equities, so I expect a higher open, but as always, rumors and words from Bernanke will be conditioning the session.

The U.S. market had a downward trend in the beginning of the session, after words of different authorities, but it changed its sign compensating losses in the European market. The increases were very limited because markets are still with doubts about Bernanke's words. The better was the DOW with a rise of 0.3% followed by SP and NASDAQ, which rebounded 0.2%. Dudley (San Francisco Fed) and Bullard (Chicago Fed) encouraged the market making it clear that they are strongly opposed to the completion of the QE.

The European session ended mixed yesterday. Profit taking, as I had already said, is always given in the markets that generate more doubts, such as the Spanish and the Italian (fell -0.6% and -0.5%). The best performing was the FTSE100, which was encouraged with its retail sales.

In Asia, the behavior of the stock exchange remains bullish due to the expansionary measures of the BOJ. This morning, they have spoken again about the continuation of these same monetary policy, which caused a large rise in the Nikkei that finished with a rebound of 1.6%.

For today's session I expect an upward trend, but depending on Bernanke's words. About that time, the volatility will rise and depending on the way of putting it, the market will take it in one way or another, although it seems clear that they will continue with the same policy. For the medium and long term I continue expecting a bull market.



INDICES:


S&P 500

The world looks today to Wall Street. On the day before the hearing of Bernanke, the maximum was beaten again, reaching up to 1672 points. After the brief correction of the last hours and the new minimum volatility, I continue to see the index rising across all maturities. However, we should be aware of a possible rupture of support that could give us trend exhaustion symptoms.

Dax 30

The German index leaves an interesting perspective on the hourly chart. I expect an upward trend as long as it trades above the 50-day average. However this is a value to be careful because, despite the strength of the trend, the maximums are decreasing, what makes me think that a possible correction in medium term do not may be too far away.

Ibex 35

With markets awaiting Bernanke, the Spanish index faces a day in which it will look askance at what happens on the other side of the Atlantic. Despite the higher open today, what really made ​​the gap was the rising above of the average of 14 sessions, and the IBEX remains in a channel between 8377 and 8598 values​​. We must be very attentive especially to the supports because if they get lost, it will mark a target of 8130. However, with controlled volatility and a higher open, today it's unlikely to reach those levels.

Nervousness

It was what we saw yesterday in the equity markets in the United States. The major indices, after moving with a positive tone during the session, closed almost unchanged. The statements of the members of the FOMC in recent days have attracted much attention to the publication, tomorrow afternoon, the act of the last meeting and the appearance of the Fed's chairman, Ben Bernanke.

The session took place in the Asia-Pacific region with a very similar behaviour to what we saw yesterday in the United States. The market, in high overbought, started a bit scared by some negative rumors about the quantitative expansion of the Central Banks. In Japan last night we knew the industrial activity data of the last month, which was in line with expectations at -0.3%. The Nikkei ended the session with a timid advance of +0.13%. Today's session begins in the old continent with slight cuts in equity indices.

For today, it's important to remain vigilant to the publication of the CPI data from the past month in the UK (and inter-month rates), that are expected to remain almost unchanged with a tendency to decrease (this data Battery may bring volatility to the pound against other pairs). In the United States, today there will not be any published data of particular relevance to the markets.

It seems that, in a strongly bullish scenario, we could see slight corrections in the stock markets, in anticipation to Bernanke's statements tomorrow, which could stop the upward trend.

20th, Forex Analysis

Equal in the graph of USD/CHF with bearish implications. In these circumstances, and while crossing quoted below the resistance of 0.98 francs per dollar, there should be a franc appreciation for the short term.

All with the permission of the SNB president's appearance, Thomas Jordan, which will take place tomorrow at 18:30 Spanish time. And of course, it must be considered that the view of the dollar for long-term is appreciation, so that, despite talk of daily charts, short entry proposal makes more sense in the short term.

20th, Daily Report

The beginning of a new week, in which the market expects news about the FED and the BOJ. If they talk about inflation, it would be very positive because it would be clear that them could continue the policies of monetary expansion. The scraps are holding the market today: the flow of funds from the BOJ, the central bank support and business figures of the first quarter to give confidence to the market (more in the U.S. than in the EU).

In the U.S. stock exchange, the situation continues with maximums. It seems that the business news and the consumer confidence data are better, with also a low inflation and a clear improvement in the labor and housing markets are showing that the U.S. economy is recovering. These are very positive macro factors and give a lot of confidence, not only to the U.S. market itself but also to Europe. The best performing market was the SP with a rise of 2.1% followed by the NASDAQ and the DOW, which rebounded 1.6% in the last week. So far this year, the U.S. stock market has risen more than 15% in all places. It seems it can have a stop for profit taking, but seeing the current macro data, it does not seem too important.

The sessions in Europe last week had a close in green. Emphasize the behavior of the MIB with a rise of 1.9% thanks mainly to good auctions. The worst of this past week has been the IBEX rise only 0.4% putting us on a rebound of 5.1% per annum (well below the European average). This movement seems to be able to continue if in addition to the expansionary policies of the spoken, there are improvements in debt as we have experienced in recent sessions (10Y bond yield is now below 4.3% which improves clearly the premium risk).

In Asia, the behavior of the BOJ, and macro data increasingly positive, the NIKKEI does not have any restraint and is now at a rise so far this year of 45.6%. The government also reported that it is satisfied with the current growth of its economy.

For today's session, I expect a slightly bullish market after the positive Asian news, with significant increases of the major stock exchanges. For the medium and long term, I continue expecting an upward trend.

INDICES:

S&P 500

Reached the target of 1663, I don't see ceiling for the index of Wall Street. After big gains on Friday, which makes it further away from the average of 14 sessions. Moreover, although I see clearly the upward trend, an overbought level must be considered, which the RSI is giving us since several days.

Dax 30

The German index continues its upward climb. Although the slightly bearish opening today, I think that the index is unstoppable until the Fibonacci target in 8543. The price is also quite far from the average of 14 sessions. This requires us to be attentive to the index, as both factors face the technical impossibility of the DAX to continue this trend for many more sessions.

Ibex 35

The Spanish index remains stuck in its medium term channel launched in late summer. With a flat average of 50 sessions, and volatility clearly in a minimum value, a small upward trend is expected in the IBEX, unless it loses its support, located in 8370.

Waiting for the FED

Last week ended with strong gains in U.S. equities. The steady drip of statements by members of FOMC (Fed's decision-making body) about a premature withdrawal of QE3 seems not to have had effect in the markets, which have been marked by a strong upward pressure. On Friday, the U.S. indices continued in its highest levels, and the consumer sentiment data supported this idea. The euphoria this morning moved to equities in Asia-Pacific, which ended the session with widespread increases. The Japanese Nikkei raised a +1.47% and the Chinese CSI 300 added a +0.68%. The session begins in the old continent with green numbers on most indices, in which seem not to have had much effect the statements of a member of the Bundesbank, showing their displeasure with the intentions of the ECB to carry out a more expansionary monetary policy.

Day without macro references in Europe.Debt auction in France, in which we could see how it highlights the worsening of the French economy. In the United States the main reference will be posting activity index of the Chicago Fed (not a fact too relevant to the market). This afternoon we have statements by the president of the Chicago Fed, who, as a voting member on the FOMC, might give some clue as to where Ben Bernanke's statements could go on Wednesday. The trend remains strongly bullish for U.S. equities and, by contagion, to the European.

19 - 25 May, Weekly Calendar

17th, Forex Analysis

Currencies linked to commodities have suffered intense selling pressure, largely motivated by the general fall of raw materials.

It was the case of the Australian dollar, which has broken down very important support levels. In this case it is the weakness of the yen that has also affected him as Japan is one of its principal customers and the fall in the exchange rate of its currency purchasing power has decreased.

We are seeing in other currencies as the Chilean peso, which after news that the central bank left its rates unchanged has reached new lows in the 480 against the dollar.

The Canadian dollar is one of these coins but in this case the above is added in June flows that tend to increase sales of the Canadian currency, as they are concentrated in this period and the payment bond maturities of coupons, which are largely repatriated to the countries of origin of the holders of these bonds.

For this reason and given the loonie graph, I can see that a close above current levels just 1.0250 projections could have at least one figure upward.

Market Overreaction

The market has turned its sight to the members of the Fed after the latest employment numbers. A majority anticipates an early withdrawal of monetary stimulus and for that reason the dollar has strengthened against almost all of its peers.

Certainly employment data were better than expected, but still far away from employment levels that the Fed had set to slow down bond buying in the secondary market. Neither inflation is reason enough to think of this measure. On the other hand, other data related to growth still fail to take off convincingly. Specifically yesterday, the industrial production disappointed with a weak figure.

I will be watching what Fed members say, but I fear that, as on many other occasions, the market is anticipating too much. So the dollar index should correct the upward movement, and the EURUSD, if only for the moment, stop its losses.

Bearish Reversal - Ibex 35

The current overbought levels that present practically all equity indices are not going unnoticed, and many investors are waiting for the opportunity to enter the market in "sold" positions.

That said, one of the major indices, in this case with the most downtrend technique is the IBEX 35. So let's raise, based on the weak employment data shown today in America, a bearish short-term strategy in the IBEX 35.

16th, Forex Analysis

Today is going to be a volatile day for the dollar. Attention to the statements of Federal Open Market Committee, because their purpose is to implement appropriate monetary policy and if any interpretation left the door open to a cut in QE, it will cause an upside in the USD. Unemployment claims are also in the crosshairs of investors as a decline would support further cut in its expansionary policy.

As for the CPI in the euro zone, provided that the data is below 2%, it is understood that gives scope for expansionary policies implemented by the ECB, turning the current scenario where the dollar would be a stronger currency.



TECHNICAL ANALYSIS:


EUR/USD

Downtrend in the pair, there is an important support in $ 1.2848. Mindful of macro data today. For technical fibonacci fulfilled the first activates the second pulse with drop target $ 1.2784. The average of 50 sessions, with a negative slope and below the 200 day moving average, confirms the bearish scenario.

USD/JPY

Upside potential if macro news are positive. Average of 50 sessions with a positive slope above average of 200, hard break up the first fibonacci, with the idea of meeting its second activation levels in 104.24 yen per dollar. Accompanying strongly bullish indicators.

16th, Daily Report

The session is expected to be slightly bearish due to a misbehavior of the financial system in addition to the Eurostoxx options expiration tomorrow. The Japanese data could positively influence the market but it seems that it's going backwards, although good data could also raise the doubts about the continuation of expansionary monetary policy behavior and encourage the exchanges because it means that governments will continue injecting liquidity. Yesterday, the improve of funding levels encouraged the shares but today it seems that it could correct along this morning even if there are no bad news, and if the U.S. housing market has good data it could improve throughout the rest of the session.

The U.S. market ended upwards in all its main markets dragged by poor confidence data generated by the continuation of the Fed's expansionary policies. In the NASDAQ gains were limited by Apple drop the worst being selective with a rise of 0.2% only. The better the SP rising 0.5% and Dow with a rebound of 0.4%. These behaviors make it clear that the market still needs the FED inject liquidity and worries more about this than a simple macro market data.

The European session yesterday had a great performance, particularly encouraged by the financial markets and also by poor economic data in the eurozone involving a continuation of expansionary monetary policies. The best index was the IBEX with a rise of 1.3%, followed by the MIB with 1%. The worst was the FTSE 100 with a rise of 0.1% only. This aspect is mainly due to the drag of poor central European economic data. Even so, rose. For the opening session today it could hold a slight decline and then bounce.

In Asia, the Japanese GDP data has been very positive but outweighed by the fear of financial stagnation and the NIKKEI receded 1.3%. Even so, good GDP data makes it clear that Abe Japanese policies are stimulating the economy and getting their goal.

For today's session I expect a slightly bearish opening, which could bounce back after U.S. housing data. For the medium and long term I continue with a view of an upward trend.

INDICES:

S&P 500

The U.S. index is still in its highs and in free rise. Yesterday it reached the target channel that I had previously submitted. However, the MACD showing the strength of the market, and the price well above the average of 14 sessions aggressive, I can say without hesitation that the index remains bullish.

Dax 30

After the publication of data growth, the index continues its upward climb. With an average of 50 sessions in positive slope, giving significant levels MACD bullish market strength and volatility of close quite low, we still see the DAX to not break long while 38.2% of the current uptrend.

Ibex 35

Lateral movement in the IBEX, waiting for important news and macro data. The Spanish index is in clear resistance levels. Price beating up the average of 14 sessions, with the average of 50 positive trend with minimal volatility, which tells us that there may be strong in the short term movements. We monitor plus key 8332 level.

Be Careful with Bernanke

Last weekend I wrote that a new sentence in the statement of the Federal Open Market Committee could announce changes. With Bernanke's observations, such changes may be on the way. Moreover, the ECB may be moving too - just in the opposite direction.

I will not call Bernanke a "hawk". But it is already said. (A "hawk" is someone who tightens rates to beat inflation and doesn't care about unemployment).

In view of the low rate of current interest, I am paying particular attention to examples of "extend the scope" and other forms of excessive risk that could affect the price of assets and their relationships with the fundamentals.

You can not ignore nit. I don't believe that Bernanke's views changed from the overnight, but a mere mention of the disadvantages of this policy could be seen as an early sign of reversal. While the FED may not be in a hurry to openly comment the future of QE, for investors operating EUR/USD both sides of the equation are equally important, especially since Draghi opened the door to the discount rate during the last conference.

The short-term trajectory of the U.S. dollar is up and the Euro down. Both trends are based on macroeconomic data, and some changes in nominal fields will not be important. However, since monetary policy is the key to the exchange rates, the direction for the most important exchange in the world seems to be clear.

14th, Daily Report

Excessive movements are not expected in today's session. It is true that the German ZEW data may have caused volatility, but it has not been very positive so a return to the upward trend is unlikely. Moreover, today's ECOFIN meeting will determine something that is partially known: deposits above € 100K may suffer taxes.

The U.S. market ended mixed, thanks in part to the strong performance of the health sector, which has improved the status of a session that opened downwards. Markets are influenced by analysts, as many of them support further gains while others are more skeptical. The best was the NASDAQ with a rise of 0.06%, followed by the SP that was flat. In contrast the DOW ended with a decline of 0.18%. This behavior, with good data as the yesterday's retail sales, may indicate that we are in a moment of bullish exhaustion.

In Europe, most indices fell yesterday, except the FTSE that ended with a rebound of 0.1% and the DAX, which was flat. The worst was the IBEX, which lost 1%. This is mainly due to the worsening of the debt, which has already lowered bond yields in the region of 4.3%. For this session, a good performance of the stocks are not expected due to the German ZEW data, which has not been positive.

In Asia, the Japanese bond yield continues falling due to the depreciation of the yen, and that looks set to continue with this behavior, which causes money go to other markets (albeit at the periphery of Europe does not get much). The Nikkei ended with a decline of 0.1% after several sessions of gains, and it's in the area of 42.1% annual return with no reason to distrust since the BOJ continues to inject money.

For today's session I expect a slightly bullish behaviour due to the macro data that is coming out throughout the day, although it has not been very positive. For the medium and long term I continue expecting a bull market.



INDICES:


S&P 500

Lateral movement between the resistance in 1630 and the support in 1620. Possibilities for intraday trading in this range, being always very cautious with the stop loss. Approaching the average support of 50 sessions, which may be used as support. Oscillators without showing divergences.




Dax 30

The highs last week seem to have already found its limit. Macro data has not been very positive so today it could close with the same scenario. However, the strength through the upward trend may mean no more than a mere collection of benefits. At the bottom, monitor the 8165 as a support for the short term. The oscillators do not differ with regard to the long term.




Ibex 35

The return to the average of 50 sessions finally came in H4 making it more convenient to watch for the short term if it occurs in the same way on the daily chart, in the vicinity of 8250. On the upside, the objective of the 8670 resistance. RSI and Stochastic in neutral territory.

13th, Daily Report

The session today is expected to be slightly downwards due to some rumors about the possible departure of QE in the U.S. that generate doubts in the market. On the one hand, the good behavior of the stocks after the Japanese, American and European monetary policies but, on the other side of the ledger, the doubts about the continuation of QE could affect the behavior of the market for today's session. Beyond that, the Japanese market shows that while these monetary policies are active, the behavior of its index will continue with great upside. Another plus is that in the G7's meeting this weekend there haven't been news against expansionary policies of central banks.

In the U.S. market, the good data are always accompanied by some rumors about the termination of QE, partially slowing down. For this week we should expect an improvement in macro data, but this aspect may be accompanied by doubts about the continuation of QE. The presentation of business results also concludes for the 1st quarter and it seems that half of them have been pretty good. The best of last week were the SP and NASDAQ , which rebounded 1.2% while the Dow rose just 1%. Yet so far, this year the three indices are above the 13% annual return.

Last week in Europe, the shares ended upward proving that the new European monetary policy will continue to encourage buyers. We also have to join the good German macro data and the great improvement of confidence about the peripheral debt. All these are factors that influence the market to be more buyers than sellers and it looks like that it will not change as long as the monetary policy continue. The best index was the MIB with a rebound of 2.1% (6.2% annually) and the worst was the IBEX, which ended up driven by business results.

In Asia, both monetary policies and macro data generate confidence, and its level has continued to rise this morning in the NIKKEI (1.2%) with above 41% of annual return. This behavior is linked to good news in China despite that the industrial production was a little lower than expected. These issues continue to generate confidence in Europe, as well as the low bond yields of Japan, which make capital flows arrive to Europe to continue to fall the risk premium of the peripherals countries.

For this week I expect a bull market, but with some doubts about the rumors of a termination of the QE, which could completely halt these increases. For the medium and long term, I remain confident in a good upward trend of the markets.



INDICES:


S&P 500

Interesting the triangle that is developing in the H4 support area in 1619. Attention must be paid to the fact that it is located in an area of ​​uncertainty because both the down trend or the bullish continuation (in the vicinity of 1628), have the same odds.

Dax 30

The maximums of last week seem to be changing this Monday morning but, however, this may be no more than a mere collection of benefits. At the bottom, monitor the 8165 for the short term. The oscillators do not differ with regard to the long term.

Ibex 35

Return to the average of 50 sessions? It seems that the index is losing strenght after last week's rally and the correction experienced last Friday. We must be very careful when taking positions, since in the short term I see it in 8300, but I insist about remaining bullish for the medium term. RSI and stochastic in neutral territory.

12 - 18 May, Weekly Calendar

Is this Rally for Real?

Not much action following the new Dow high. Not much follow-through. But not a big breakdown either. As near as I can tell, stocks have been driven up by the Fed’s easy money. Investors expect more easy money, so they think stocks will go up more.

What surprises me more is how optimistic the young investors are. They think stocks always go up:

"I'm 36 years old," one explained. "That means I was too young to get in on the boom of '82-'00. All I’ve seen are stocks going up and down. They’re just a little bit higher today than they were in 2000."

"But when I look back on the history of the stock market, what I see is a market that takes big leaps forward… Then we get a period in which prices don’t go anywhere… And then we get another big leap ahead. I want to be sure I don’t miss that next big move to the upside."

His reading of stock market history is much different from mine. What I see is a market that, in inflation-adjusted terms, goes up, and then goes down. It can go up for decades and down for decades. The next big move to the upside might not begin for another five to ten years. In the meantime, investors could lose half or two-thirds of their money.

Then again, there may never be another major bull market cycle for all we know. The bull market of the '50s and '60s was based on growth and output expansion, and in the '80s and '90s it was based on credit expansion.

What will drive the next bull market? Growth has slowed to a crawl. Credit cannot expand forever. Are the big bull markets over? I don’t know. But I wouldn’t stake my financial futures on catching the next one anytime soon.

“But stocks have been going up since 2009,” replied the young man. “Companies have record profits. There are lots of new technologies and innovations coming online. I don’t see any reason for this bull market to end. It could go on for many years.”

Yes, it could. But this is a market driven by an illusion created by phoney money.

“Aw, c’mon… the Fed’s new money is just the same as the old money.”

Well, yes... and no. Each of the old dollars represented a certain amount of goods and/or services. That amount was measured by the 'price' of things. Now, the Fed is adding more dollars – at a rate of $85bn per month. Other central banks are doing the same with the Bank of Japan (BoJ) leading the way. The BoJ is adding, proportionately, much more money that the Fed.

At the same time, the economy is not adding anywhere near as much in terms of goods and services. Real private-sector output is about the same today as it was ten years ago.

This is what makes this new money much different from the old money. It comes with no new output behind it. So it will inevitably and eventually have to come to bear on existing output, not new output. The only result can be higher prices. How much higher? No one knows. It depends on the velocity of money, which depends on how the economy is doing and how eager people are to get rid of their dollars.

One way or another, the dollar will be worth less than it is today. How much less? Only time will tell.