Europe will likely move front and center in the weeks ahead. Earnings season is running out the clock and most of the US economic news shows signs of slumping. As a result, EU headlines could be the main driver of equity performance for the next couple of weeks.
We are back to the Greek debt version of she loves me, she loves me not. Instead, the kids’ spring love jingle has been updated to, she stays in the union, she goes from the union. Top Equity News says the final pedal will be she goes.
There are plenty news stories littering the internet with some version of Europe prepares for the return of the Greek dollar, the Drachma. It’s no coincidence that so many stories on the same subject pop up at the same time. It’s coming, when is the only unknown.
Before Greece goes back to the future, stocks have important support levels to maintain in order for stocks to build momentum. The NASDAQ must maintain 2900, the Dow 12,700, and the S&P on top of 1340.
If the indexes can hold on by their whitened fingertips to their respective technical edges, then stocks are likely to be range bound i.e. sideways trading. If the grip on the bull market slips and the backstop fails, then a replay of last summer could return.
Many market technicians see head-and-shoulders patterns taking form on the three main indexes’ charts, with the levels we outlined up top as the respective “necklines”. Break the key trend-lines and the equity markets could be pooling right before the waterfall drop.
Obviously, TEN doesn’t hope for or want stocks to trace last year’s debt crisis selloff. We just believe it is important for our readers to know what to look for. As an old mentor used to say, “It’s better to be out of the market wishing you were in than in the market wishing you were out.”
Before you rush to your online account and sell everything for a 4X inverse ETF, Top Equity suggests waiting for the sell signal before taking a short position, but if we get the neckline breakdown, a short fund like ProShares UltraShort Dow30 (DXD) could be an excellent insurance policy against losses.
On the other hand, if stocks start to regain ground, which is possible according to some of our models, Top Equity believes top side could be limited by overhead resistance.
TEN will update our mentor’s axiom with a little hockey metaphor mixed in, before you go over the boards, it’s better know if you are playing offense or defense. We wait for the market to tall us which side of the blue buy/sell line the puck is on before the skates touch the ice. Hopefully, we get the answer this week.
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