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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Week Ahead in the Financial Markets

Stock-Markets / Financial Markets Nov 12, 2007 - 02:06 AM GMT

By: David_Urban

Stock-Markets This week will be interesting to say the least. The large drops were very worrisome but expected in some ways. Internal indicators have been weak in this rally which led me to believe that we would get some sort of a selloff before the year end rally. But timing these selloffs is very tricky.


The DJIA is at a key support point on the point & figure chart. A break below 13,000 means that support is broken and prices can quickly fall to 12,550. The trend is now down until the resistance line is broken but this may be the beginning of a long-term top in the Dow.

If the Industrials continue lower along with the Transports we may end up triggering a Dow Theory sell signal which would be a very bad sign for the overall market.

The S&P500 is at crucial support. It needs to hold here in order to maintain a long-term support line. Breaking below that is a bearish signal.

What might make the market rally this week? A drop in oil prices combined with a drop in gold prices. If there was a day for the sellers to get a hold of gold Monday is the day. US fund managers will be off on Monday celebrating Veterans Day while the rest of the world remains open. Selling on the open in Asia and carrying it through Europe and the next day would be bullish for the markets next week. For those who may be doubtful, check the YTD gains in oil and gold. No doubt fund managers who have done well this year will be looking to protect their gains and performance fees going into year end. We do not need a big selloff, just a couple of percentage points.

The need to protect gains going into year-end may cause some selling in Asia as well.

The Nikkei's chart looks ugly to say the least. A small head and shoulders pattern was broken to the downside. The end of the week here will be more important than Monday.

I expect Asian markets to be weak on Monday and how far they fall will give me a vital clue as to how the final 7 will go.

6,200 is long-term support for the FTSE. The chart appears to be in a topping pattern as well. Like the Nikkei, the end of the week will be more important than the beginning.

In France , the CAC40 finds crucial support at 5,400 and 5,200. A break below 5,200 would be a break in the head and shoulders pattern and the signal of further declines ahead.

The DAX Index in Germany is confusing to say the least. The daily chart is a mess while the weekly chart appears to show either a top or pause that refreshes. Either way, this market will take longer to resolve itself than the others.

By David Urban

http://blog.myspace.com/global112

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