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Global Equity Monitor: Techno-Fundamental Research & Analysis

By Joel Kruger, Technical Strategist
22 February 2012 12:22 GMT

  • US equities showing signs of reversal
  • UK equities unable to extend gains further
  • German equities stall ahead of key resistance; deeper setbacks ahead
  • Japanese equities remain well bid for now but daily RSI through roof
  • Australian equities rally but moves well capped as expected

US30 (Dow)

Global_Equity_Monitor_Techno-Fundamental_Research_body_us30.png, Global Equity Monitor: Techno-Fundamental Research & Analysis

Technical: Remains very well supported on any form of a dip with the 20-Day SMA continuing to prop. However, the market is trading by multi-week highs and daily studies are starting to track in overbought territory to warn of short-term structural shift. But, a close back below the 20-Day SMA will be required to trigger bearish price action and open deeper setbacks. Initially, look for a break below Tuesday’s low to get reversal prospects going.

Fundamental:.US equity futures declined on weaker than expected Euro-area manufacturing and services data today. Weakening Chinese factory output reported overnight was also seen weighing on market sentiment. Meanwhile, the White House is expected today to propose reducing the corporate tax rate from 35 percent to 28 percent in a bid to encourage business production and increase international competitiveness.

UK100 (FTSE)

Global_Equity_Monitor_Techno-Fundamental_Research_body_uk1000.png, Global Equity Monitor: Techno-Fundamental Research & Analysis

Technical: While the trend in this market remains bullish for the time being, we are starting to see signs of a potential bearish reversal with daily studies looking stretched. A close back below the 20-Day SMA will be required to accelerate further and expose more significant support by the January 30 previous higher low at 5,649. A daily close back above 6,000 negates and gives reason for pause.

Fundamental: Bank of England policymakers Posen and Miles pushed for larger quantitative easing steps at the last BoE meeting, BoE minutes revealed today. Other members voiced concerns that larger stimulus could send a message that the economy is worse than it actually is. The BoE voted 7-2 to increase easing by 50 billion pounds; the two dissenters were Posen and Miles who wanted a larger increase of 75 billion pounds. Elsewhere, the Confederation of British Industry has urged Chancellor of the Exchequer Osborne to provide tax breaks and easier credit in next month’s budget.

GER30 (DAX)

Global_Equity_Monitor_Techno-Fundamental_Research_body_ger30.png, Global Equity Monitor: Techno-Fundamental Research & Analysis

Technical: No major signs of reversal just yet despite daily studies tracking into overbought territory on the daily chart. Still, while the up-trend remains intact, there are risks for a significant short-term pullback ahead. Look for a break below the 20-day SMA to confirm short-term shift and open the door for an acceleration of declines. Above 7,000 delays bearish outlook and gives reason for pause.

Fundamental:German PMIs released today for the manufacturing and services sectors were weaker than expected, fueling market hesitancy as the German economy attempts to rebound from weak growth in Q4 2011. Meanwhile, all eyes remain on Greece as European leaders have given the beleaguered nation nine days to approve further austerity measures. The Troika is demanding further reforms in the context of the latest Greek bailout agreed upon two days ago.

JPN225 (Nikkei)

Global_Equity_Monitor_Techno-Fundamental_Research_body_jpn225.png, Global Equity Monitor: Techno-Fundamental Research & Analysis

Technical: Daily studies are highly overbought at current levels and we would recommend that bulls proceed with caution over the coming days. From here, short-term risks are tilted to the downside so that technical studies can unwind from overbought readings. Look for a pullback towards the previous resistance now turned support by the 200-Day SMA in the 9,000 area before considering possibility of a bullish resumption.

Fundamental: A free-falling Yen has boosted Japanese exporters’ outlooks as carmakers put in large gains, led by Toyota. The Yen has fallen to a 7-month low on the back of easing measures from the Japanese Finance Ministry. Meanwhile, former BoJ Deputy Governor Muto warned today of pushing “unsustainable” debt to a point where capital inflows reverse and bond yields rise.

AUS200 (ASX)

Global_Equity_Monitor_Techno-Fundamental_Research_body_aus200.png, Global Equity Monitor: Techno-Fundamental Research & Analysis

Technical: Setbacks have been well supported for now by 4,164 and the market has once again found renewed bids to attempt a retest of the recent multi-session highs by 4,315 further up. Still, we see risks for more consolidation rather than any meaningful upside break beyond 4,315 and would recommend selling rallies towards the latter in favor of a range trade.

Fundamental:Weak Chinese manufacturing data released overnight has not yet translated to diminished risk appetite here. Recent positive US job data is also thought to have bolstered market sentiment. Additionally, markets are up on optimism caused by a record harvesting season this year; however, Russia threatens to put on a damper on spirits with a Russian economic minister today stating Moscow’s intent to become a major player in Asian grain markets.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

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22 February 2012 12:22 GMT