Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
New Tech To Revolutionize The Billion Dollar Marijuana Business - 28th May 18
A Recession Indicator for Independent Thinkers - 28th May 18
Economy Still Too Strong to Induce Stocks Bear Market Recession - 28th May 18
Theme Parks 2 Min Bar Hang Challenge - Normal vs Spinning / Rotating Bar - 28th May 18
Blackstone, BlackRock or a Public Bank for California’s Money? - 27th May 18
Stock Market Study: How Long After a 10%+ “Small Correction” to Make New Highs? - 27th May 18
Gold, US Stocks and Bonds - 26th May 18
Climate Change Canaries and Our Changing Climate - 26th May 18
Gold Junior Stocks GDXJ ETF Fundamentals - 26th May 18
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 25th May 18
Merlin Passes Top Tips for Buying and Using Premium vs Standard, Theme Parks UK - 25th May 18
Trump “Victories” on Trade are Anything But - 25th May 18
Crude Oil: It’s Here! - 25th May 18
Stock Market Distribution Pattern Revealed - 25th May 18
Stock Market Topping - Everything Looks Rosy at the End of a Trend! - 25th May 18
Trump Puts North Korea Nuclear WAR Back on Track as Plans for Nobel Peace Prize Evaporate - 25th May 18
Insane EU GDPR SCAM Triggers Mass Email Spam Attacks! - 24th May 18
Stock Market Higher Again, but Still No Breakout - 24th May 18
Study: Slowing Global Economic Growth IS NOT Bearish for U.S. Stocks - 24th May 18
What if This Week’s Rally in Gold is Already Over? - 24th May 18
EUR/USD – Reward for Bears - 24th May 18
5 Terrible Trading Mistakes That Rookie Investors Keep Making - 24th May 18
More Clarity for the Short Term for Bitcoin Price - 22nd May 18
Study: A Rising and Strong U.S. Dollar Isn’t Consistently Bearish for the Stock Market - 22nd May 18
Gold, Silver & US Dollar Updates with Review of Latest COTS - 22nd May 18
Upside DOW Stock Market Breakout May Be Just the Beginning - 22nd May 18
5 Reasons Why Forex Trading Is Becoming Such A Big Deal In SA - 22nd May 18
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18

Market Oracle FREE Newsletter

Trading Lessons

Stock Market Correction Due, Awaits Technical Breakdown

Stock-Markets / Stock Markets 2011 Feb 15, 2011 - 12:50 PM GMT

By: Christopher_Quigley

Stock-Markets

Best Financial Markets Analysis ArticleThe market is at a very interesting juncture. On all my favourite indicators (A/D Line, McClennan Summation, Slow Stochastics, Fast Stochastics and MACD) the current bull run is very much overbought. Given that this highly profitable move has been in place since last September it is logical that we are due a correction, but there is no sign yet of any technical breakdown. If you are not in the market or have been stopped out from positions I would hold my powder dry for the moment as the risk/reward ratio is negative.


Of particular note I would point out that despite indications of slight consumer recovery, inflation creep and mounting tensions in the Middle East the price of oil has remained low. I do not think this situation can long continue. When oil does finally takes off expect a sharp market reaction because the wriggle room available to the FED to hold interest rates low will be seriously diminished. Once interest rate increases commence a new dynamic will enter the scene. If this trend change is not timed to perfection by Mr. Bernanke and friends serious valuation problems could ensue, increasing market instability.

The sovereign debt elephant in the European parlour room has not gone away but has merely learned some social graces since its tantrum last autumn. When Euro rates start their inevitable rise, further pressure will be placed on Euro-zone nations trying to service exploding national debt. Eventually the outcome will have to involve some form of agreed default and rate discount. Without these safety valves the Euro project will remain vulnerable. Current talks in Brussels are beginning to attempt to grasp this possibility. In Ireland, in particular, the outcome is fundamental to the recent IMF/EU bailout plan working. It order to keep Irish economic growth figures on track  the rate of interest agreed in that disastrous package must be brought down from the existing punitive 5.9% level. Ireland goes to the polls the 25th. of the month and the first item on the agenda of Mr. Enda Kenny, the politician expected to win the election, is to renegotiate draw-down rates on European Financial Stabilization Funds. If this endeavour is unsuccessful additional taxes will have to be earmarked for debt repayments, seriously deflating an already stalled Irish economy.  Where Ireland goes the Euro will follow. Success in negotiations for Ireland will mean other Euro stressed countries like Greece, Portugal and Spain will also obtain some relief when issuing new sovereign debt.

In an article in 2008 on contracts for difference I mentioned that if New York physical market makers did not embrace CFD’s and new technological development the survival of the NYSE, as we knew it, could be called into question. I did not think events would move as fast as they have. The buyout of the hallowed NYSE last week by Europeans will see huge changes in the type of trading instruments and platforms being presented to Americans. Order matching and funding technologies are developing fast and it is no longer possible for any group, however powerful, to ignore quantum changes in trading execution. The main liquidity behind this evolution is coming from the off-shore, 18 trillion valued, Euromarket and this is why London (the center of the Eurobond market) is fast becoming the new financial capital of the world.  I anticipate that the next American institution to come under threat will be the Chicago Exchange. This is due to the fact that spread-contracts, instruments that actually have no time expiration, have all but rendered options obsolete.

Dow Jones Industrial 3 Day Chart:

United States Oil Fund 9 Day Chart:

Advance Decline Line 3 Day Chart:

McClennan Summation Index 3 Day Chart:

By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin and holds a Batchelor Degree in Accounting and Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in 1989. in Belmont, California where he lived for 6 years. He developed the Wealthbuilder investment and trading course over the last decade as a result of research, study, experience and successful application. This course marries Fundamental Analysis with Technical Analysis and focuses on 3 specific approaches. Namely: Momentum, Value and Pension Strategies.

Mr. Quigley is now based in Dublin, Ireland and Tampa Bay, Florida.

© 2011 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules