The volumeless rally in equities continues and for the S&P 500, despite some whipsaw behavior in yesterday's session, the expectation is that the 1130 target could now be seen in the next few sessions, possibly even today.
Plenty of cheerful commentators are to be found, and the Eurozone woes, which were hanging over the market just a few weeks ago, seem to have been relegated to the bottom of the pile of things to worry about, along with evidence of anemic growth in the "mature" economies, weak consumer sentiment and evidence that local and governments throughout the US are facing major budgetary crunches.
Just for perspective it is worth recognizing that current world GDP is about $60 trillion and about half of that total is accounted for by the US and EU states. The often cited powerhouse economies such as India and China together make up less than 10% of the total, although their rates of growth are far in excess of anything seen in western Europe and North America. Weighed against the bullish case for the BRIC economies, much of the rest of the world continues to de-leverage and as the consumers of last resort in the US, UK and other states which previously never saw a new product which they didn't immediately want to own, have either exhausted all of their available collateral for credit or are too cautious to carry on with their previous profligacy.
Anyway back to the charts and purely from a technical perspective one would expect there to be strong resistance at the 1130 zone, although a nice false break above it could lure some cash off the sidelines.
Should we see a decisive break through the obvious flat cloud top (which serves to underline the strength of the resistance) on the chart, then the absence of any further cloud above suggests that the bulls could really run with the ball during August. However, as mentioned here last week, one should remember that the month of the year when many investors are more concerned about reaching for the suntan lotion than monitoring their portfolios, has had a track record of creating nasty surprises.
The Japanese yen could fall to the 112 level in this inverted chart of the more customary dollar/yen pairing before the uptrend would have been technically violated. That would equate to 89.20 on the…
