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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Sunday, September 24, 2017

German, Euro and Emerging Market Headwinds

As early polling results on Sunday show that, although Chancellor Angela Merkel has been elected for a fourth term, her party has lost ground to the far right, and a coalition government will need to be formed amid much discussion over, what could take, months.



The German DAX Index is near long-term uptrend resistance, as shown on the following Monthly chart, so support may taper off during Q4 of 2017, as Q3 ends this week, and investors mull over their next moves in Europe and in other world indices.


The EURO is at long-term price resistance, as it faces a great deal of overhead supply above 1.1900, as shown on the following Monthly EUR:USD Forex chart.


Conversely, the US Dollar is sitting above long-term major support at 90.00, as shown on the following Monthly chart.


The following Monthly chart of the Emerging Markets ETF (EEM) shows that the 2-year rally has now hit long-term major price resistance around the 45.00 level.



The DAX:SPX ratio shows that price is caught in between the 50 and 200-day moving averages, near-term price support (5.00) and resistance (5.10), and the 40 and 50% Fib retracements levels, as shown on the following Daily ratio chart. It also faces a great deal of overhead supply resistance above its current price.


The following Monthly chart of the SPX shows that price has further to run before running into long-term uptrend resistance.


Whether we see continued investor support for the SPX, as well as a possible turnaround in the US Dollar, versus a rotation out of the DAX and the EURO, may depend on:
  • signals that we see from both the Fed and the ECB during Q4 regarding inflation and economic data
  • Ms. Merkel's progress in forming a coalition government
  • potential trade headwinds with the EU from the (unpredictable) Trump administration
  • political instability in Asia (North Korea)

Furthermore, if buyers take hefty profits in EEM this week, they may favour putting their money into the U.S. equity markets.

Watch to see if momentum and rate of change pick up in the SPX and the US Dollar and, alternatively, decline in the DAXEURO, and EEM over the coming days/weeks.