Market Outlook as at November 14, 2012

Over the past few days, the US stock markets had performed rather poorly. Not a few market pundits have blamed the drop in US share prices on the re-election of President Obama. As noted in my post in late October (here), the US main market barometers, DJIA & Nasdaq had broken its intermediate uptrend line (that dated back to June 2012). What is worrying now is that these two indices had also broken the uptrend line that dated back to August 2011. This could signal further decline of 5-6% for both indices: to 12000 for DJIA and 2700 for Nasdaq.


Chart 1: DJIA's daily chart as at Nov 13, 2012 (Source: Stockcharts)


Chart 2: Nasdaq's daily chart as at Nov 13, 2012 (Source: Stockcharts)

S&P is resting on its uptrend line that dated back to August 2011. It is hard to see how S&P can stay at or above its uptrend line since DJIA & Nasdaq had broken theirs.


Chart 3: S&P's daily chart as at Nov 13, 2012 (Source: Stockcharts)

Meanwhile, European markets, which were capped by overhead downtrend line, had recently broken their intermediate uptrend line. With this breakdown, I foresee European markets will join their brethren across the pond soon.


Chart 4: DAX's daily chart as at Nov 13, 2012 (Source: Stockcharts)


Chart 5: CAC's daily chart as at Nov 13, 2012 (Source: Stockcharts)


Chart 6: FTSE's daily chart as at Nov 13, 2012 (Source: Stockcharts)

Over in Asia, we can see that Singapore STI & Hang Seng index had both tested its downtrend line and corrected back. This setback is experienced across many markets in Asia.


Chart 7: STI's daily chart as at Nov 13, 2012 (Source: Stockcharts)




Chart 8: HSI's daily chart as at Nov 13, 2012 (Source: Stockcharts)

The broad correction in the global equity market is understandable after the rally that began in June. With signs of the Chinese economy turning around & US economy picking up plus the announcement of quantitative easing by ECB, Fed & the Japanese central bank, one would expect the global equity markets to continue with their uptrend. If that view holds true, then this correction could be an opportunity to buy for the next rally.