Since the geopolitical situations is quite confusing..let’s see what technical analysis says.
If you remember in June we correctly predicted that there could be a rally towards end of June – but it would be a fake and would post new lows in July.
The new lows of July dutifully came, but too early and too high (SPX 2044) from my expectation.
This could mean that there are still issues to be worked out and this rally could be quite temporary.
Also this means that unfortunately the basing process of this market will be longer – definitely it will take up August and could be well extended to October.
Now in this July rally we could even see a re-attack to 2,134. But the market weakness is still there with target 2,017 and 1,970
What could be the cause.
In order of probability
– The scary scenario on the Government Bond Scenario is still there and quite scary. A US Fed move in September could be there (a bit over the top to try to explain this in a blog). This could come along with an over strength in the USD.
– China. As predicted the one off measure do not work. My target lows are between 3,000 and under 3,400, before they go Quantitative Easing China
-Greece. With the bailout approved, all is finished? NO. Next week the negotiations on the details will start. Specially I wonder how they will agree on which assets put in the Euro 50 billion bailout fund – as already PM Papandreou tried and failed in 2011
So roller-coaster for a while
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Update. I checked a few numbers that confirm that this could be a false start.
In US the new lows (share that posts new lower lows) passed from 46 to 103 and the last three days to 131.
Why if the market is so good a lot of companies are trending lower.
US Transportation Index still did not overcome its weakness nor the NYSE (where most of the algorithmic trades are done).
So be careful for the next 2 weeks
investorpolitico 