Thursday April 10, 2008 - 06:52:59 GMT
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Signs for a respite of the markets turmoil
The general feeling of all the participants in the financial markets game is of dismay and despair. From a "small" problem in the US housing market (Sub-Prime), we have arrived to a possible meltdown of the global financial markets (Bear Stearns Bailout).
In the middle we had a "credit crunch" and liquidity problems in asset backed papers and a collapse in real-estate prices with a rising inflation problem in food and energy.
It would be nice if we could see a hope somewhere and maybe the light of the tunnel's end. We have compiled the charts that can give a minimum kit for someone who would like to see the signs of the respite for this crisis:
1. (Upper left corner): From October last year, the DJIA (Dow Jones Industrial Average) was in a down trend. But the most important point is that the DJIA/Gold ratio that calculates the "real" value of the index has been in free fall. Look how it reversed from mid-March. This is a first good sign for the Bulls.
2. (Upper right corner): From 2006 the new highs in the NYSE are going down (Blue trend line 1), and since the starting point of the crisis in august 2007, the new lows are going down (Blue trend line 2). The Bulls need to see a rising new trend line of the new highs again.
3. (Lower left corner): The most used Carry-trade pair is the USDJPY, and we can see that it did fall with the development of the crisis because of the deleveraging process that took place. Lately, it tries to recover and test the 10 WMA while its RSI is trying to break up its descending trend line. The Bulls need both events to succeed.
4. (Middle lower): The NYSE composite index has succeeded to move over its 10 WMA (medium term moving average) and its RSI is trying to move over the very important middle 50 level. The Bulls need these events to succeed also.
5. (Right Lower Corner): The ETF representing an aggregate of US treasuries is starting to rollover. US government bonds represent the best of safe heaven possible and selling them will give us the sign that some of the risk aversion situation is finished. Look how the up trend line of the RSI was broken and tested, with the ETF trying to cross the 10 WMA. An assertive move down will give a very bullish sign.
These five small charts are showing the first sign for the recovery. There is a lot to do yet for the Bulls but the light at the tunnel can really be seen.
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