Equities appear to have stabilized today with European indices moderately higher and North American indices moderately lower. This suggests that market participants may be backing off and surveying the situation in the wake of Wednesday’s big rally and yesterday’s big pullback. It is also possible that with bankruptcy rumours continuing to swirl around, particularly related to General Motors (NYSE: GM, Stock Forum) and other uncertainties, investors may be unwilling at this point to take on new positions ahead of the weekend.
The swings of the last two days also suggest that bulls and bears may be moving back into balance and that a battle for control of the market may be underway. Since mid-January, bears have generally had the upper hand. This week, new lows in indices have not been confirmed on hourly charts by the MACD indicator. These positive MACD divergences suggest that downward momentum may be easing. That being said, unless indices can get back above recent support levels that were broken, current downtrends remain intact. Key resistance levels currently appear near 7,000 for the Dow Industrials (US30 CFD), 700 for the S&P 500 (SPX500 CFD), 1,150 for the NASDAQ 100 (NDAQ100 CFD), 3,600 for the FTSE 100 (UK100 CFD) and 4,000 for the DAX (German30 CFD).
Over the course of this week, there were a number of developments that suggested that economic conditions may not be as bad as had been feared. For example, North American purchasing managers’ surveys came in better than expected, the government of China indicated it doesn’t need additional stimulus to hit its 2009 GDP growth targets and some U.S. retailers such as Wal-Mart (NYSE: WMT, Stock Forum) posted significantly better than expected same store sales results. Recognition that the global economy may be starting to stabilize does not to have appeared in equity markets, but it does appear to be improving sentiment toward commodities.
Copper, widely considered to be the commodity most sensitive to global supply/demand conditions has resumed its advance following a minor pause yesterday. Current resistance appears near $1.70/lb, with the potential to trend toward $1.80 or $2.00/lb over time. Similarly, U.S. crude oil continues to trend toward a retest of resistance at the $45.00/bbl level. Grains also appear to have attracted increased interest with corn moving back above the $3.50.bushel level and wheat holding above $5.50/bushel. Precious metals also appear to have resumed their primary uptrends. With recent corrections holding above $900/oz support for gold and $12.50/oz support for silver, both former resistance levels, these metals appear to be trending back up toward retests of resistance zones between $1,000-$1,030/oz for gold and $14.00-$14.50/z for silver.
This renewed interest in resources also appears to have provided support for Canadian equities. Unlike many of its counterparts, the S&P/TSX 60 has been holding above the key 450 level, which may be due to its higher weighting in commodity related sectors.
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This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.
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