How we close the week will be important, not least for those watching the primary up trend on the weekly index cycles. Equity bulls should be desperate for a weekly close >sp'1863, but that now looks somewhat difficult, as the market remains concerned about some key geo-political issues.
sp'weekly8
sp'weekly9 - the next fib retrace
Summary
The threshold for another green candle on the weekly 'rainbow' chart is sp'1863. If we do close the week with a blue candle it will be the first initial warning of trouble.
That sure doesn't mean we can't rally back to the 1860/70s early next week, but it does bode badly for those bulls seeking the 1900s, a level that now looks increasingly difficult.
re: chart weekly'9. I hold to the original outlook of a multi-month decline, and the 1625/1575 zone remains a very natural target for this spring/summer.
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The EU powerhouse is rolling over
The German DAX is lower by almost 7% this month, and if an intermediate top is now in...the equity bears should set their targets a fair ways lower...
Germany, monthly
First target should be the 8000 level, however, 7500/7250 looks viable by early summer. The latter zone would be around 20% lower. From there, I'd be seeking a hit of at least 10k in 2015, but as ever..first things first..lets see if we get a multi-month drop across the next 3-6 months.
Looking ahead
We have PPI and consumer sentiment. Perhaps the market though will pay more attention to what Fed official Fisher has to say?
*next sig' QE-pomo is not until next Monday.
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Looking forward to next week
I want to end the day with just a few thoughts on next week. First, next week will be largely about the FOMC. Now, we know the decision will very likely be 'QE taper'3', with monthly QE reduced by a further $10bn a month to 'only' $55bn, beginning in April. However, we know this market will increasingly weaken as the QE fuel is reduced.
Of course, there is also the Ukrainian/Russia situation, and any 'drama' there would really send the world markets into a spiral. As it is, I don't expect any developments there for at least another week or two...until after the FOMC.
As for what I'm doing, I remain patiently awaiting the FOMC. If the price action looks toppy next Wednesday afternoon, I will probably launch the first index shorts since last summer. It has been a long time to wait, but perhaps...it will be worth it. If anything, re-shorting the market in the sp'1800s is a hell of a better short-entry than the 1500s.
Goodnight from London
