Zak Mir’s mid-week Global market technical overview – santa calls!

Some of you may have caught my now near legendary (!) interview with Dominic Picarda a few weeks ago (catch it here – http://link.brightcove.com/services/player/bcpid1270513410001?bckey=AQ~~,AAAACltoSNE~,uYWbCCt1nRW_BpfWa7XvK8rsHv6x05xQ&bctid=1968896924001), in which I ran through the outlook for the major markets. This was a somewhat brave (or foolish!) endeavour given the then acute concerns regarding the fiscal cliff and which could of course smash equity markets by 10% or more if things are not handled correctly. But now, three weeks later it seems appropriate to have a re-run of the outlook on the likes of the FTSE 100 and a couple of other key indices as we head for the homestretch of 2012.

For me, the governing event here in the FTSE 100 daily chart is the way that there was a November bear trap below the former September intraday low of 5634. This was quite a vicious move, and it is the insidious nature of the move that underlines the strength of the buy signal. The “cliff” notwithstanding, last month’s trap continues to the underpin the technical buy argument going into the New Year. As far as I’m concerned now, the critical level for the UK index is 5830 which was resistance on the way up during the late November recover. This is the level to be held.

What is also useful for the buy argument is the way that this recovery in the index back to the upside came through a still falling 200 day moving average-something which is only seen in the more bullish of situations. The upside initially is a nice round number which would be the top of the June rising trend channel and that comes in at 6000 – the target should be seen right at the end of December or beginning of January as the editor of this magazine believes too.

Last month also delivered a bear trap for the S&P 500 below the former August support and the main 200 day moving average at 1385. The rather simple message from this price action now would be that while the 200 day moving average line, which is still rising, continues to hold then we should see a retest of the 1470 level. However, fleshing out in a little bit more detail, and following this week’s narrow bear Bull trap through the 50 day moving average at 1421, I personally would wait for an end of day close back above this level before chasing the US stock index any higher.

It is now over 25 years since I had an argument with an Oxford Don during an interview for a graduate place regarding the Japanese economy and the Nikkei. This argument was enough to lose me the place at Oxford as well but in consolation my stance proved to be correct as to the influence or otherwise of the Japanese economy on the rest of the world. While bygones may be bygones, this event still makes me rather loathe to take a bullish view on the Nikkei, even though the current charting setup appears very strong and has been opined by the editor of this magazine with increasing vigour in recent weeks.

With a gap through the 200 day moving average now at 9091, as well as all the near-term moving averages being on the rise the Nikke picture is resolutely bullish. The view is that while the 10 day moving average at 9339 remains in place we should see a top of May rising trend channel target as high as 9700 over the next couple of weeks. Presumably this would be associated with the elections due to be held in Japan on December 16. To my mind though, only sustained price action above 9700 would suggest that we could retest the best levels of 2012 through 10,200 by the end of January.

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