Chris Ciovacco: 200-Day MAs Should Provide Good Feedback: You do not have to be an investing expert to know events in Europe are dictating the day-to-day movements in all global asset markets. Germany is a leader in Europe because, relative to the rest of the European Union, they have their financial house in order. The trend has been for the stronger nations, such as Germany, Finland, and the Netherlands, to take on more burdens from their over-extended neighbors. As a result, any future bailout activity will impact the finances of the stronger nations. The basic concepts are captured in the following excerpts from Bloomberg:
Proposals for more liberal use of European bailout money are likely to face resistance in creditor countries such as Germany, Finland and the Netherlands, the scenes of growing taxpayer opposition to more aid.
“It’s hard enough to bail out local banks let alone non-domestic banks,” said Harvinder Sian, a London-based fixed-income strategist at Royal Bank of Scotland Group Plc. “A crisis lesson so far is that big ideas coming from Brussels [EU Commission] or the guys taking the money are noise up until the point that the Germans get on the same page.”
Fundamentally, if the German economy and stock market can withstand the next moves in the seemingly never-ending cycle of European bailouts and rescues, the U.S. economy and stock market will most likely show some improvement.
From a technical perspective, the German stock market is a few steps ahead of the S&P 500. The 200-day moving averages for the S&P 500 and German DAX are shown in pink below. The DAX’s performance near the 200-day may provide an early read on where the S&P 500 may be heading.
The video below describes the charts above in more detail, keying on possible scenarios and the impact on your investments. DeMark support and exhaustion counts are also reviewed on daily, weekly, and monthly charts. The video identifies key levels to monitor in the coming days and weeks, providing valuable input for future buy, sell, and hold decisions depending on how things play out in Germany.
Clear and sustained violations of the levels above by EWG would increase the chances of additional pain for global investors. Conversely, if EWG holds above these levels, the probability of a rally in risk assets improves.
Chris Ciovacco began his investment career with Morgan Stanley in Atlanta in 1994. With a focus on global macro investing, Chris uses both fundamental and technical analysis to assist in managing risk while looking for growth opportunities around the globe in all asset classes. If you are looking for an independent money manager or financial advisor, Ciovacco Capital is worth a look. Chris graduated from Georgia Tech with Highest Honors earning a degree in Industrial and Systems Engineering in 1990. His experience in the professional ranks began in 1985 as he began working as a co-op for IBM in Atlanta.
Ciovacco Capital Management, LLC (CCM) is an independent money management firm serving clients nationwide. By utilizing extensive research, disciplined risk management techniques, and a globally diversified approach, CCM prudently manages investments for individuals and businessowners. Our focus is on principal protection and purchasing power preservation in an ever-changing global investment climate.