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The following is a mid week update for SharesBulletin clients – that could be of wider interest:
I thought I would remit a mid week update given the mini melt down we are seeing in global markets.
There is not a lot really that has changed since my review in this Monday’s SB.
I spoke in TTN a week or so ago about the ‘X’ factor and unfortunately it came in the form of a very tragic Japanese tsunami that followed the earthquake there. The full impact of the tsunami is far from clear. Apart from the fact the Japanese are not traditionally straight in telling it as it is - they also just don’t know what fallout might lie ahead. Not just from the nuclear power plants but just from the general unknowns. And there is little point in speculating what they might be.
Technically my rationale is that markets are correcting as the markets have run too hard.
As suggested in this week’s SB markets and for the last several weeks – the markets have just run too hard. The queues to the exits are swamped with sellers and now there is an element of fear in selling.
Judging from many analysts/commentators views that the rally can resume – I would suggest that there are many long when they wish they were just sitting on the sidelines.
So how might all this unfold as far as our technical charts are concerned?
Markets are rally in one big range trade:
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My long held view that this has never been a trend – just a big trading range – I guess is now easy to see in hindsight. This range trading could continue for years. We have no basis for saying otherwise.
Where might markets settle? We can only postulate. Here are some views but we cannot be categorical.
I expect the DOW to head towards 11000 – maybe 11200 – we can relook at this in a few days time.
The XAO is likely to head to as low as 4000 but in the short term to 4400:
click to enlarge
We can only review as the panic unfolds further. We are likely to see some form of relief rally as we are now seeing some overselling:
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Even the weekly Bollinger is showing some degree of overreaction – but we know markets can continue to be further oversold for time yet.
In summary we are seeing some elements of irrationality in markets but in time some sense will prevail – but maybe not before more panic.’
So bargain hunters could make good money short term money – but beware falls may not be over yet.
Enjoy the ride
Tom Scollon
Chief Analyst |