Zak Mir on global markets, Janet ‘a’ Yellin, boxes and donkey’s tails!

4 mins. to read

To some observers, it would seem that as far as Spreadbet Magazine is concerned April 30, 2014 has similar potential connotations to other infamous dates in history such as the Mayan Prophecy’s Dec 21 2012 end of the world prediction!

As the guide at the foot of this piece relays, using a collection of research pieces, today indeed would be a good day to pin the tail stock market donkey for the end of the long bull market. Read it yourself and weigh up the evidence.

There are many factors at play at present which play to the bears hands such as the latest Ukraine a.k.a. Sudetenland style manoeuvres in Ukraine by Mother Russia. At the very least though, even if nothing too dramatic occurs over ensuing weeks, it does seem appropriate to a fresh look at key stock market indices.

It is not too difficult to believe that the Federal Reserve is now boxed into a corner regarding QE tapering and interest rates rises. If it acts to completely end the easy money punch bowl, it risks triggering a stock market crash and economic slowdown. If it dithers, and with Janet “Dove” Yellen at the helm it looks ever more likely, there is the risk of an inflationary bubble before, yes you have guessed it, a stock market crash and an economic slowdown. The Spreadbet Magazine comment to the U.S. central bank is, “Now get out of that!”

Let’s start by looking at the FTSE 100 and it seems to me that we have perhaps the most pedestrian of the three markets to be looked at today. This is said in the aftermath of support coming in towards 6,400 over the past year, and with a range between 6,500 to 6,850 in the recent past.  Indeed, it is difficult to see just where the fireworks may come from unless we are looking at an extended top under the all time record towards 7,000 achieved in 1999.

For the moment however, the pragmatic approach may be to assume that there is a little more upside and perhaps as high as February’s 6,850 resistance point. I say this if only on the basis that the key 200 day moving average at 6,620 is still rising, and while there is no end of day close back below it we are somewhat obliged as technical analysts to take the bull tack. The best case scenario on offer currently would be to suggest that at least while the 200 day line is held that this market could hit the top of a rising July price channel drawn on the daily chart from July, heading as high as 6,960 –  this being a one to two month target.

There is rather more to chew on from a technical perspective in terms of the DAX – a real traders market! It has been more volatile probably due to the proximity of the Ukraine debacle.  In fact, from a charting perspective, it can be said that we are looking at what could be described as a typical “wall of worry” ascent for the German index and, given the persistence of a rising trend channel from May last year based at 9,250, we are left with the idea that at least while there is no end of week close back below the near 1 year uptrend line that the trend is very much intact. Our friends in the Kremlin and indeed, the Federal Reserve notwithstanding! The implication as far as the upside scenario is concerned is that we are looking at a 2013 price channel top target in excess of 10,000 over the next 1-2 months, providing the big fundamental minefields can be negotiated successfully. The message from this chart is that the market expects this to be the case. We shall see…

Finally, it could be said that I have “saved the biggest & the best until last” in terms of the major world indices. As far as the S&P 500 is concerned, it is difficult to argue that this market has not been the driver for the likes of the FTSE 100 and the DAX – generally where the States goes so do the other major developed markets, at least in the short term.

The key technical information here to my mind is that with turn of the year record around 1,850, and despite the odd blip in 2014 to date, this former resistance has now in fact become new support. If you also throw into the mix the way that we have had support for this market coming in at or above its 200 day moving average – now at 1,774 since as long ago as November 2012, then it is evident that we are looking at phenomenal positive momentum here. Barring a weekly close back below 1,850 – well below the 50 day moving average now at 1,859 – the expected journey is now towards the August 2013 price channel top at 1,950 plus over the next 4-6 weeks. The buy trigger here could be as little as a break of the March RSI resistance line at 56 over the course of the rest of this week.

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