Part 1: Prior Week Market Movers & Their Lessons For the Coming Week
The following is a weekly strategy guide for traders and investors, covering prior week’s market movers and their lessons for the coming week for traders of all major asset classes via both traditional instruments and binary options. Perfect for those seeking a summary of prior week market movers & their lessons for the coming week and beyond, & a look at likely coming week market movers.
PRIOR WEEK MMS
As we noted last week in our article, PRIOR WEEK MARKET MOVERS: JACKSON HOLE DISTRACTS WHILE EU COLLAPSING, markets somehow were managing to ignore the deterioration in the EU, and we doubted that could last. It didn’t. Before reviewing the prime fundamental market drive last week, let’s first look at what actually happened on the charts.Technical Picture
The weekly chart of the S&P 500, our preferred barometer for risk assets, continues the ongoing bearish theme for risk assets in general.
S&P 500 WEEKLY CHART COURTESY ANYOPTION.COM WEEK OF APRIL 24 – AUGUST 28 2011
Key takeaway points:
- Last week’s test of strong resistance (now a month old) of the 200 week EMA failed, with this week not only closing lower but forming a tentative bearish “shooting star” Japanese candle formation that will be confirmed if we get a lower close this week.
- The index completes its 5th week in the Double Bollinger Band Sell Zone bounded by the lower 1 (green) and 2 (orange) standard deviation Bollinger bands, indicating that the long term downward momentum on the weekly chart remains strong until proven otherwise. See 4 RULES FOR USING THE MOST USEFUL TECHNICAL INDICATOR, DOUBLE BOLLINGER BANDS for details on using and interpreting Double Bollinger bands.
- The weekly EMAs continue to form increasingly bearish layers, with the shortest term 10 week EMA (blue) already having crossed below the 20 week EMA (yellow) and both threatening to cross beneath the 50 week EMA (red) within the next 2 weeks. All three have now turned lower.
- The next leg of the down trend is now half formed, with the past week forming a new lower higher, Now we await a new lower low on a weekly close below ~ 1110
- If we look at the daily chart of the index for daily resolution, the picture isn’t any better.
S&P 500 DAILY CHART 25 JULY – 2 SEPTEMBER 2011 COURTESY ANYOPTION.COM 09sept 04 0148
Key take-away points:
- The uptrend (red) line from August 23rd decisively broken with 2 consecutive lower closings each of ~1% or more
- The death cross (50 day EMA in red crossing under the 200 day EMA in violet continues to deepen
- Resistance at 1220 from the 50 day EMA and recent uptrend line (red) held firm
While stocks and other risk assets moved higher Monday – Wednesday, there were some notable divergences from other markets that contradicted the rally and ultimately proved correct.
- Except for Monday, the EUR moved steadily lower vs. the safer-haven USD all week.
S&P 500(red & green candles) VS EUR AS PER The FXE (red line) AUGUST 29 – SEPT 2 2011
NOTE HOW THIS EUR ETF WAS FALLING STEADILY ALL WEEK WHILE THE S&P 500 AND OTHER RISK ASSETS ROSE MONDAY – WEDNESDAY
The same holds true for the primary Hedges of against EUR and USD, gold and silver. Note the daily charts for these for the past week.
GOLD AND SILVER DAILY CHARTS 29 AUGUST – SEPT 2 2011 11sept04 0213
- This move up in precious metals was mostly a reflection of nervousness over the EU crisis on bad news from Greece, Italy and Spain (see below) as shown by:
- CDS spreads for Greek, Italian, and Spanish bonds moved higher this week as the ECB reduced its support for these bonds this week (perhaps to send a message to Italy and Spain to stick to austerity plans after Italy backed off from any serious plans to reduce its deficit like increasing taxes on the wealthy).
- US 10 year bond prices moved higher, showing that markets were not averse to holding US dollars, a typical reaction in times of great anxiety over the EU or non-US related issues
So that’s the actual price action. Now let’s look at what was behind it all, and what that tells us about next week.Fundamental Drivers
What were the fundamental drivers behind these moves on the charts?MONDAY – WEDNESDAY
A continuing technical bounce off near term support (1200 area for the S&P, 9000 for the Nikkei, etc) was fueled by:...
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DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN’T BE TELLING YOU FOR FREE, NOW WOULD WE?