Stock Markets And The Dollar

European Stocks Tumble

The last day of November morning, namely yesterday greeted us with increases mostly in Asian stock markets which on average were up by 1%.

So, let’s take a look at yesterday markets: the SSEC Shanghai Composite was at 2866.36 points, down by 5.34 points , or minus 0.19%; the HSI Hang Seng was traded yesterday at 23,166.22 points, higher by 288.97points or by 1.26%; the BSESN BSE 30 (19,405.10) added 268.49 points or 1.40%; the JKSE Jakarta Composite traded at 3630.64 points dropped 11.86 points or -0.33%; the KLSE Composite 1495.95 added 3.90 points, (an increase of 0.26%); the N225 Nikkei (22510,125.99) added 86.43 points or 0.86%; the NZ50 NYSE 3270.38 50 remained the same not adding nor decreasing in points, the STI Straits Times 3,158.21 added just 0.13 points, meaning 0.00%; the TWII Taiwan Weighted 8367.17 added 55.02 points or increased by 0.66%; and the KS11 Seoul Composite 1895.54 was down 6.26 points (-0.33%), which somehow predicts what lies ahead especially for the European stock market, meaning significant declines of over 1.5%, the maximum decreases being recorded by the Paris stock exchange index which dropped 2.46%.

The cause? Obviously the fears that besides Ireland and Portugal, Spain might also be forced to turn to the international institutions like the IMF and the EU for financial aid, namely the recue fund implemented by the EU. A clear signal for the European stocks is that the Euro currency yesterday fell to a level recorded two months ago, and investors have turned for some time to the safety of the dollar, which will most likely appreciate against other currencies as well. Certainly, the recent EU agreement to provide nearly 90 billion dollars in loans to rescue Ireland opens new ways to expand the list of countries in need of bailout, and yet analysts expect a month higher in U.S. sales compared to last year.

The U.S. indexes, on the other hand initially dropped yesterday, only to suddenly come back up. This week, U.S. investors will receive at least two very interesting reports, which will give us a closer picture of the economic reality, namely: the consumer confidence report for November and the unemployment situation in November. Taking a look at the estimated data; on the one hand we have the consumer sentiment which is expected to improve to the level of 52 from 50.2 in the previous month and on the other hand we have predictions about the unemployment status which is believed to get worse, meaning it is thought it will increase from 9.6% to 9.7% in the November report.

So we linger more on what happened on the American Stock Exchange yesterday as its evolution had something specific. Thus, we have the Dow Index which was traded at 11,052.49 points, dropping 39.51 points, meaning a decline of 0.36%; we have the Nasdaq which was traded at 2525.22 points, dropping 9.34 points, meaning a decline of 0.37%, we have the S & P 500 which was traded at 1187.76 points, dropping 1.64 points, meaning a decline of 0.14%; we have the 10 Yr. Bond (%) 2.8220%  with a decline of 0.0420; we have Oil traded at 85.75 +1.99 +2.38% and Gold which reached 1366.80 dollars an ounce +4.40 +0.32%.

For starters I will say that yesterday DJIA index dropped below 11,000 to 10,929 the minimum closing again above this psychologically important threshold TS. During this time 19 portfolio companies in the index had fallen off.

The largest was at Hewlett Packard Company by 1.39%. Opposite was increased by 2.51% at American Express Company. We note that if companies increase their variations had a larger area, which gives us to understand that you might see a return of these indexes in a short time. As we see on the chart yesterday ended for this index as a real bullish hammer, you will have to wait for 1 day for confirmation of a true rebound.

At the same time the DJIA index trend line pierced 50 days simple moving average (MA = 11 063) and closed below this threshold. It is possible that a continuation of this trend down, despite graphic candle formation of “hammer”, which means a possible return to trend UP. Based on these somewhat contradictory signals more so must one day have yet to confirm one of the two trends.

And yet we still have an increasingly important part, namely divergence MACD histogram, which attempts a shift in positive territory. In this situation we can better see what influence the news and press (on consumption and unemployment) may have on the stock market from this week.

Asian stock market back, this time in Tokyo, we found loss of 0.55% in Tuesday’s opening session. A few minutes after the resumption of trading, the Nikkei index fell by 55.68 points and reached a value of 10,070.3 points. This also means that Asian stock markets will be match the general trend of other scholarships and that fears of debt crisis in the euro area countries are quite present and most pronounced among investors in the world.

In this case we see how the dollar will appreciate further, possibly to see him close to Saxo Bank forecast to 1.3 against the dollar, in which case, if we take into account some already classical correlations, we find that U.S. stock-index will continue to fall.

Where?
If we refer again to the DJIA index, most likely below 11,000, which has already been tested and may be the next threshold after a longer period to an amount of solid support provided by line 200 day moving average 10,626 pt.

My opinion that the conditions do not yet exist, but only from the most pessimistic expectations for a more pronounced decline of the markets, but if these data confirm the negative (see the case of Portugal and Spain) and thus of the rescue plans that have overtaken experts’ expectations, the index can go down and solidly below the threshold 200 MA acting as support for the upward trend.

So the trend is down a little uncertain for the next 1-2 weeks. But as I said in the weekend the stocks will have a slight upward tendency this month. And I still think this estimate is based on the fact that the two countries will not ask for money from EU rescue plan. So we expect these events in Europe11