Short term, the market on Tuesday 3/29 had only 15% of all stocks trading above their 20 day moving average. This is a Bearish extreme, and actually indicates an oversold condition. Wednesday's very bullish action worked off a lot of this oversold condition, however it is not unlikely that over the next week that action may trend higher. Our Japanese model generated a sell signal this past week, with Europe just narrowly avoiding a sell signal as well.
NASDAQ 100 Technical Price Analysis
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Some Interesting Dichotomies... are occurring in the economy, and in many ways, we are treading in uncharted waters. On the one hand we see inflationary pressures, especially in the areas of steel, concrete, oil, and commodities of all types. This is offset by the excess of capacity in manufacturing that can be found around the world. Overall price inflation is being held at bay (at least temporarily) as we, in effect, export our inflation overseas. Current money supply growth figures are higher than the current domestic inflation rate. This is a big factor to the falling dollar.
How this will eventually play out is difficult to say. It will ultimately be a political decision as to how it will resolve itself. The European central banks are keeping interest rates very high and Germany is suffering with an unemployment rate of 12.6%, a rate it has not seen since the depression of the 1930s. Europe cannot afford to maintain the Euro at these high levels for much longer. Japan has no room to lower their interest rates as they are effectively at zero now. China pegs their currency to the dollar, yet this is an unrealistic and non free market relationship which will eventually have to decouple. Watch the remainder of 2005, as this game of "International Chicken" will come to a head. Tips of the hand, and clues to the ultimate trends are coming soon.