A Bounce Or The Next Rally?

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By Rudi Filapek-Vandyck

Five weeks of downtrending has caused quite some damage to the technical picture for global equities, report technical market analysts at Barclays Capital and elsewhere. One of the observations made is that some equity markets are now trading below the Ichimoku Cloud, suggesting there's room for a bounce in the short term, but within limits. For more on the Ichimoku Cloud, see: http://www.investopedia.com/terms/i/ichimoku-cloud.asp

The TechWizard offered his view last night that recent market action had likely paved the way to a tradeable bounce in the short term. The Wizard's view is based upon two observations: one the VIX index in the US seems to indicate there's no trace of real panic, so everyone is still keeping a cool face when put under pressure. Secondly, leading blue chip stocks in Australia, BHP Billiton ((BHP)) and CommBank ((CBA)), have held key support levels. This, reports the Wizard, suggests a bounce is not only likely, but very probable.

And see… today share prices are showing "green on screen".

This has already triggered at least one prediction that US equities have commenced the next big rally.

It's not difficult to see where the next potential problems might come from. Crude oil prices are again approaching levels prior to the recent sell-off and there's a growing army of chartists and experts predicting the US dollar has potentially bottomed. At least for Australian equities relief has arrived in the form of the bond market pricing out any prospects for an RBA hike in the medium term and an Aussie dollar that is looking weaker by the day.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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