GLobal Markets and Dow Jones have peaked short term last Nov 1st-15th at around 12284.
The usual Bear Market rallies ranges from 1-3 months, with an average of 2 months rally. The 20% rally for almost 1 month was a possible Bear Market rally technically speaking. The very very very big question that comes to my mind and everyone's mind, is this a bull trap? Or we are already bullish in the market.
The unexpected drop of U.S. unemployement rate to 8.6% was intriguing. Did the drop really confirmed that Economy was gaining momentum,or was it just people are not claiming unemployment benefits anymore?
Next week is a whole lot of meetings, news , CPI numbers all over the globe. EU Meetings will be at the most critical stage and China will show up its CPI numbers. Expect the unexpected!
1. Bullish scenario - I am unfavor of this, but will share my insights in the case that this would be the result next week. DOW Jones may be medium/long term downtrend, but the short term rally concludes that the rally may not be over yet. the 20% rally looks very impressive, like a bull market behavior, and a good 8% pullback correction did happen. A bullish behavior still. Resistance is at 12000-12284. A breakout of that will temporary lead to 12450 resistance, and a confirmed breakout of 12450 resistance means, we are still in a bullish state. Lots of news could trigger this. Good China CPI, managable EU meetings, a 25bps or 50bps cut of rate in Europe, and a lot more.
2. Bearish scenario - 100% biased to happen. We don't know the results until next week's reports show off. the Bearish news that will make this downtrend continue are ECB disagreements, China bad CPI numbers, unresolvable dues of European Debts, Sending Greece out of European Nation and other probable worst case scenarios. Bearish count can be confirmed once it goes below the higher high, which is at 11200. A break below that could resume this downtrend. :) Watch out also for the first support around 11450, which is the RED short term uptrend line.
My reasons why I am still bearish despite optimistic about resuming to bullish state
- there is still no timetable, and targets for EU resolution
- China GDP is slowly going down, including production and exports imports.
- EUR/USD is attempting to break down the 1.32 mark.
- Greece bonds is running out of time, and the nth bailout wouldnt end this crisis.
- Portugal,Greece, HUngary bonds set to junk, possible next sets of downgrades could happen.
- a ticking timebomb/default could trigger a domino effect selloffs.
- we may breakout of the range, BUT the risks involved in EU will never fade in YEARS time.
My reasons to be bullish
- Improved unemployment rate
- EU willing to cut rates
With the risks involved, please respect my own decision where I stand upon right now...
Talking about the 2nd largest economy in the world. GDP is slowly going down, and may go down further.
SSEC is now at 12.36x PE Ratio, a good one, is also part of the crowd and decision making where will GLobal Markets go. Remember China lending and buying a lot of European bonds,China is one of the large dominos ready to be brought down by Europe if ever worst things happen.
Speaking about the technicals, it is now nearing the 2yr lows at 2300, and has no clear indication of getting a rally. Risk as of now is the breakdown below 2300 level, which could lead to China Bear market and lead it back to 1500 - 2000 levels.
