The Week Ahead 2 - 22nd to 26th April 2013

The week ahead.

Data:

22nd April 

EU Consumer Confidence Indicator 

23rd April 

US House Price Index 
US New Homes Sales 

25th April 

UK GDP (Preliminary) 
US Bloomberg Consumer Confidence
US Continuing Claims   
US Initial Jobless Claims 

26th April 

US GDP (Advance)  
EU M3 Money Supply  
US Personal Consumption Expenditures, Income, Spending  
US U. of Michigan Confidence 

Company Announcements

24th April 

Finals - Home Retail Group. Been going well recently but the fundamentals are looking quite generous for a retailer. Will be interesting to see what effect if any the March/April winter weather has had on business. Note - my mistake this result is due next week.

Finals - Brown N Group. I first mentioned Brown in this post, Retailers Under The Cosh as one to watch in the FTSE250, potential takeover target and probably undervalued. Back then it was around 242p, today 420p as of Friday's close. Be interesting to see if it can maintain this momentum once it announces its finals. Didn't give anything away back in March as to what to expect.

25th April 

Interim Management statement - Playtech. Has done well lately out of doing business with William Hill and has also recently agreed a deal with Ladbrokes.

Markets and charts

FTSE100 Update - Finally rolling over?

A couple of days ago I posted a chart showing the FTSE100, it looked like it was ready to go up again. Indicators suggested that we might be in for an early reversal of a minor downtrend that had been in place over the previous couple of weeks. Well, it looks like we got a classic example of indicator headshake, looks like it is going one way and then suddenly reverses, the previous trend still in place.

This is something that needs to be watched out for whenever indicators look like they are reversing from an existing trend. I call it the headshake, because a little like the dummy move that defenders (put in your favorite sport here) are often sold by attackers, you can go one way and then suddenly find your foe has gone in the opposite direction. Yes, you can look like a dummy and markets behave in the same way to.

A typical example of this is the headshake that often happens in the early stages of a Bollinger Band expansion. The Bollinger Band will often, especially after a period of consolidation, open wide, the direction can be up or down. You can see on the chart below how the band opens like a bubble in places, but quite often the initial move that price is making is not the direction that price eventually goes. In other words, you might think the bands are opening to the upside because price seems to be heading that way when in fact it is going to eventually reverse after the initial move and go in the opposite direction. This why it is often important to wait for confirmation. It means you will always miss the early part of a move, but it should keep you clear of the headshake.

As for the FTSE100, the MACD has reversed, moving averages are under pressure and the Parabolic Sar didn't hold. The chart now looks negative, with the Bollinger Band opening towards the downside, unless of course what we are seeing is another headshake. Perhaps the US numbers due out later today will confirm one way or another the direction? If they don't meet market expectations, the charts are telling us we should go lower.

Chart:

Dow, S&P and Nasdaq, downward trends in place?

Certainly looks like all three of the major US indices are trending downwards as we head into the Presidential election. Who does Mr Market want to win?  A quick search on the web suggest's opinion is divided, but here is one view that just about sums up what is likely to happen regardless of who wins.

So, what does the outcome hold for the global equity and bond markets? Have the markets already discounted the poll outcome?

Says Dr. Andrew Freris, Chief Investment Strategist (Asia), BNP Paribas Wealth Management, “The US presidential election will involve a major political problem in resolving the "fiscal cliff" issues irrespective of who wins.”

“Just like in September 2011 when there was a short-lived bloodbath in the US markets over the related issues of the US downgrade and the raising of the fiscal ceiling, the inability (or unwillingness) of the US politicians to resolve the fiscal issues before the elections, means that after 8 November and till 31 December (the fiscal deadline), there could be a lot of volatility in all equity markets,” he adds.

“There will be some changes in policy, particularly concerning fiscal issues, but overall, despite the fact that Americans are presented with a very clear choice between Obama and Romney, I don’t think we are going to see any big shifts in any particular direction, irrespective of the outcome,” noted Alastair Newton, Senior Political Analyst, Nomura in a report dated October 29.

“For big picture policy, although the election is important, we are still going to be dealing with a deeply divided Washington, where resolving some of the major challenges facing America like long-term debt and deficit issues is going to be a severe challenge,” Newton points out.

http://www.business-standard.com/india/news/web-exclusive-us-pollsits-impactglobal-markets/194421/on

Charts;