Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Stocks are at Key Resistance Lines

Sunday, 18 March 2012

Stocks are at Key Resistance Lines

Stocks are targeting the highs of 2008. However, the secular cycle remains bearish.

Citigroup challenged.
As expected, the Federal Reserve left rates unchanged. The institution sees some improvement in the unemployment struggle and monitors the increase of oil prices very closely. It should continue with Operation Twist until the unemployment rate will decline further.  Las week, the institution also announced the majority of U.S. banks passed a new round stress test. The simulation included a deep world’s recession, a 21% decline in house prices, a 50% slump of equities, the unemployment rate rising to 13% and the failure of a large European bank. In order to be promoted, banks had to keep the ratio of common equity to risk-weighted assets above 5%. Only four of the banks, out of nineteen, failed the test. It includes a large institution such as Citigroup. Another bank, Goldman Sachs, is adjusting with some difficulty to the new reality of becoming a commercial entity in compliance with Fed regulation. Earning prospects have been reduced, since the bank was forced to give-up the lucrative derivative business. Talents are leaving the bank.

The combination of job and GDP growth should continue for some more time and the S&P 500 index could target 1450/1500 over the coming months/weeks. Nevertheless, the longer-term cycle is still bearish. In the past 100 years, lateral consolidations lasted for 15/13/17 years top/bottom.  
Greece saved for now.

With the acceptance of a bond-swap deal by private creditors, the Greece’s saga might be behind us (for now), but the European debt crisis is far from over. More and more capital is flowing out of peripheral European countries into German banks. The capital flow is affecting core states such as France and Belgium. E.C.B outstanding of loans to banks, via the three-year loans practiced in December and February, rose to more than euro 1.100 billion and the main beneficiaries are Spain, Italy, Portugal, Ireland and Greece. The risk for new toxic assets, within a fragile balance sheet, is always possible. As a result, Portugal progress in implementing the reforms will be closely monitored by the financial community. Greater federalization is the key for Europe. However, for now, local interests have prevailed over a true European policy. Austerity measures alone are not enough. Growth should follow. A new economic contraction would put the fragile euro zone’s system at risk again. Historically, world recessions have occurred every 4/5 years. The last one was recorded in 2008.  
Angelo Airaghi,

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