Lets take our monthly look at ten of the world equity markets
Greece
The Greek market traded in a rather narrow range across May, settling net higher by just 0.3% @ 825, the second consecutive net monthly gain. First resistance is the 10MA (895.. and falling).
The issue of Greece is a major concern to many, but then, it has been that way since spring 2010. A GREXIT looks increasingly probable, the can kicking is surely going to come to an abrupt halt at some point this summer.
The only issue is what exactly will the Greek leadership decide? A partial debt default of some degree seems likely, but the bigger issue is whether Greece would abandon the Euro and switch back to the Drachma. What should be clear to most, the 'smart money' has already exited the Greek banking system, whether to end up under the bed, to be spent in the economy, or wired into a foreign account.
As for how the Athex might react to any kind of GREXIT... some initial weakness would seem highly probable. However, a major devaluation would eventually result in attracting new foreign capital, and given a few years, would be a major positive for the Greek economy.
Brazil
The Brazilian market saw a rather severe net monthly decline of -6.2% @ 52760, although the Bovespa did manage a higher high... along with a higher low. There is clear resistance around 59K, with key support at the 50K threshold. Broadly, the market has been stuck for five years, having been held back as commodities have broadly cooled since spring 2011.
France
The French market saw the first net monthly decline of the year, but only lower by a moderate -0.8%. Despite the decline, it was still a monthly close in the 5000s. There is huge resistance in the 5200s, and the June 2007 high of 6168 looks out of range for some months. In terms of 'best case downside', there will be core support in the 4500/4250 zone into the early autumn.
Germany
The economic powerhouse of the EU - Germany, saw a minor decline of -0.3% @ 11413. First support is the giant psy' level of 10K. Even if most world markets are spooked later this summer/autumn, a monthly close <9K looks extremely unlikely.
UK
A minor net monthly gain of 0.3%, once again falling shy of a monthly close in the 7000s. First key support is around 6500. A monthly close <6K looks highly unlikely this year, with broader upside into the 8000s in 2016.
Spain
The ugliest and most problematic of the EU PIIGS (due to its size) - Spain, saw a net monthly decline of a somewhat significant -1.5% @ 11217. The 12K threshold remains stiff resistance, but looks set to be broken, regardless of any initial weakness this summer. A break above 12K will open the door to challenge the Nov' 2007 high of 16040. A hyper-bullish target for 2017 would be the psy' level of 20K.
USA - Dow
The mighty Dow gained 170pts (0.9%), having attained a new historic high of 18351. Upper monthly bollinger is offering renewed upside to around 18500 in June/July. In terms of downside, it will be very hard for the bears to break much below 16K. A year end close >20K remains very viable.
Japan
The BoJ fueled Nikkei climbed for the fifth consecutive month, with a net gain of 1043pts (5.3%) @ 20563. The Japanese market looks vulnerable to a brief washout down to the 17/16k zone at some point this summer/autumn. However, with continuing QE from the BoJ (and other central banks), the Nikkei looks set to climb broadly higher across the next few years.
Russia
Much like the Brazilian market, Russia saw a significant net monthly decline, -5.3% @ 976. Also similar to the Bovespa, despite the decline, there was a higher high... and a higher low. There are multiple aspects of resistance in the 1000/1200 zone. All indicators remain bearish, with viable downside to the 800/700s - if other world markets see a sig' correction at some point this year.
A monthly close in the 1200s would bode for much higher levels in 2016. First target would be the 1500/1600 zone... and then the big 2K level. Certainly, 2K looks well out of range this year, as energy prices look close to maxing out.
China
The China market remains in hyper-bullish mode, with a net monthly gain of 3.8% @ 4611, having hit 4986 just a few days previously. Volatility is starting to increase again, as the market is challenging the psy' level of 5K. If 5K is not broken above in June/July.. natural downside would be a retrace to the breakout zone in the 3400s.. which is a long way down. Broader hyper-upside to 8-10K looks viable within the next two years.
Summary
It was a bit of a mixed month for world equity markets. We're still seeing some powerful strength in Asia, but some of the EU markets are clearly getting stuck at resistance.
Most markets are long due a significant correction, and all have viable downside of 10% or so. Yet... the next wave lower will likely disappoint most equity bears.. and the declines will be swiftly reversed. Right now, even a correction on the scale of Oct'2014 (sp'500 -9.8%) looks a bold target.
In terms of the Dow, the following remains a primary scenario.
Dow, weekly'2, with fibs
Considering the ongoing QE from various central banks and low rates, equities remain the only viable place for most money to go. At best this summer, the Dow might fall to 16K.
I do not believe we'll see a grand multi-year top of this ramp from 2009 for another two years. That will likely apply to most world equity markets.. although not all.
The most bullish markets across the next two years: China, Germany, USA
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Looking ahead
A pretty busy week is ahead, not least with the monthly jobs data, and a key OPEC meeting.
M - Pers' income/outlays, PMI/ISM manu', construction spend'
T - Factory orders
W - ADP jobs, intl. trade, PMI/ISM service', Fed beige book,
T - weekly jobs, product/costs,
F - monthly jobs data, consumer credit, OPEC bi-annual meeting in Vienna
*there are a sprinkling of fed officials next week, with Bullard on Wed' and Dudley on Fri'
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Back at the Monday open :)
