Technicals | Jul 05 2010
By Rudi Filapek-Vandyck
Continued weakness into the closing days of June and the beginnings of the third quarter of calendar 2010 has generated negative signals for many financial assets on price charts, report technical market analysts at Barclays Capital.
The analysts suggest it is probably best to remain cautious and to expect risk appetite not to return before the final quarter of the year, at the earliest.
The TechWizard couldn't agree more. His prediction the coming weeks will be key to determine the medium to longer term outlook for equity markets remains intact, the Wizard reports on Monday morning, but there might be a twist to the story, he adds.
It is the Wizard's observation that after a horrid nine weeks, markets have become “tired of selling”. On Friday, for example, US equities managed to rally back to square until the last few minutes of the session – all this despite another disappointing non-farm payrolls release.
In addition, the Wizard notes EUR/USD and GBP/USD have not crashed to new lows but both crosses are rallying, especially GBP/USD.
The Wizard suspects that less selling pressure might give the buyers a chance to start buying on valuation support and this might just temporarily tip the scales back in favour of rising asset prices. Given the strong bearish bias among short term investors in the market at present, it wouldn't take much to start a short-covering rally, he says.
If the Wizard's prediction proves correct, this would very much please chartist Daniel Goulding. Goulding has been negative on equities ever since the rally took off in March 2009. More recently, Goulding published a likely scenario for Australian equities ahead and until last week the ASX200 seems to have followed the predicted pattern.
Assuming Goulding's predictive powers remain intact, his chart suggests the share market is due for a correction upwards.
Technical market analysts at Barclays stick with a negative view for all risk assets. They believe investors should pay attention to the many bearish signals financial assets have posted on price charts leading into the third quarter.
