At key resistance lines; focus on next moves
•At key resistance — The euro/dollar rate and DJIA have hit key support lines at lows of $1.3852 (2/1) and 10,067 (1/29), respectively. We believe this will be a turning point that will determine whether this puts the brakes on the trend of euro weakness/dollar strength and a correction in global equities that has gathered momentum since mid-January.
•Euro at $1.3852 (2/1) — The euro has continued its decline since falling through the near-term bottom of $1.4218 (12/22) in December 2009, but has arrived at the key support level of $1.3852 (2/1). We expect the near-term focus to turn to whether it stops falling at $1.3852 (2/1) and can go on to surpass $1.4215.
•Euro/dollar outlook — 1) If the euro can push past $1.4215, then $1.3852 (2/1) was likely a near-term bottom and an intermediate rally to $1.437–$1.443 is possible, but 2) if it falls below $1.3852 (2/1), we think the decline will likely take it down to $1.365 or $1.329 by March.
• DJIA at 10,067 (1/29) — Since peaking at 10,725 (1/19), the DJIA has remained weak, but it met a key support line at 10,067 (1/29), the theoretical low derived by subtracting from 10,725 (1/19) the magnitude of last year’s June–July decline. Whether the index ends its decline at 10,067 (1/29) and goes on to push past 10,507 will be a near-term focal point, in our view.
•DJIA outlook — 1) If the DJIA rises above 10,507, it could keep rallying to an eventual high of 10,980. 2) A fall through 10,067 (1/29), however, would confirm that the DJIA had entered a correctional phase given that it would make this the largest pullback since last March and take the index below its resistance band. In this case, we think selling pressure could take it down to
9,840 or 9,240 in the short run.
• Nikkei 225 — Although the Nikkei 225 has fallen through support at 10,290, the decline has been limited to date. 1) If it pushes past resistance at 10,590 early, we think it could continue to rise to a high of around 11,100 by March. 2) If, on the other hand, it falls through 10,198 (1/29) and does not look as if it will stop at 10,030, we think the near-term correction would likely expand to 9,700 or 9,420.
Technical analysis: Euro and DJIA
At key resistance; focus on next moves The euro/dollar rate and DJIA have hit key support lines at lows of $1.3852 (2/1) and 10,067 (1/29), respectively. We believe this will be a turning point that will determine whether this puts the brakes on the trend of euro weakness/dollar strength and a correction in global equities that has gathered momentum since mid-January.
Euro/dollar
The euro has continued its decline since falling through the near-term bottom of $1.4218 (12/22) in December 2009, but has arrived at the key support leve of $1.3852 (2/1). We expect the near-term focus to turn to whether it stops falling at $1.3852 (2/1) and can go on to surpass $1.4215.
•$1.3863: Derived by subtracting from $1.5145 (2009/11/25) the magnitude of the rise from $1.2457 (2009/3/4) to $1.3739 (2009/3/19)
•$1.3856: Derived by subtracting from $1.458 (2009/1/13) twice the magnitude of the rise from $1.4218 (2009/12/22) to $1.458 (2009/1/13)
•$1.4214: Derived by adding to $1.3852 (2010/2/1) the magnitude of the rise
from $1.4218 (2009/12/22) to $1.458 (2010/1/13)
1) If the euro can push past $1.4215, then $1.3852 (2/1) was likely a nearterm bottom and an intermediate rally to $1.437–$1.443 is possible, but 2) if it falls below $1.3852 (2/1), we think the decline will likely take it down to $1.365 or $1.329 by March.
•$1.4371: Derived by adding to $1.3852 (2010/2/1) the magnitude of the rise from $1.4626 (2009/11/3) to $1.5145 (2009/11/25)
• $1.4443: Derived by adding to $1.3852 (2010/2/1) the magnitude of the decline from $1.4339 (2009/6/3) to $1.3748 (2009/6/16)
•$1.3653: Derived by subtracting from $1.4580 (2010/1/13) the magnitude of the decline from $1.5145 (2009/11/25) to $1.4218 (2009/12/22)
•$1.3291: Derived by subtracting from $1.4218 (2009/12/22) the magnitude of the decline from $1.5145 (2009/11/25) to $1.4218 (2009/12/22) DJIA
Since peaking at 10,725 (1/19), the DJIA has remained weak, but it met a key support line at 10,067 (1/29), the theoretical low derived by subtracting from 10,725 (1/19) the magnitude of last year’s June–July decline. Whether the index ends its decline at 10,067 (1/29) and goes on to push past 10,507 will be a near-term focal point, in our view.
•10,072: Derived by subtracting from 10,725 (2010/1/19) the magnitude of
the decline from 8,799 (2009/6/12) to 8,146 (2009/7/10)
•10,507: Derived by adding to 10,067 (2010/1/29) the magnitude of the rise
from 10,285 (2009/12/8) to 10,725 (2010/1/19)
1) If the DJIA rises above 10,507, it could keep rallying to an eventual high of 10,980. 2) A fall through 10,067 (1/29), however, would confirm that the DJIA had entered a correctional phase given that it would make this the largest pullback since last March and take the index below its resistance band. In this case, we think selling pressure could take it down to 9,840 or 9,240 in the short run.
•10,983: Derived by adding to 6,547 (2009/3/9) the magnitude of the decline
from 11,722 (2000/1/14) to 7,286 (2002/10/9)
• 9,845: Derived by subtracting from 10,725 (2010/1/19) twice the magnitude
of the rise from 10,285 (2009/12/8) to 10,725 (2010/1/19)
• 9,243: Derived by subtracting from 10,725 (2010/1/19) the magnitude of
the rise from 7,552 (2008/11/20) to 9,034 (2009/1/2)
•At key resistance — The euro/dollar rate and DJIA have hit key support lines at lows of $1.3852 (2/1) and 10,067 (1/29), respectively. We believe this will be a turning point that will determine whether this puts the brakes on the trend of euro weakness/dollar strength and a correction in global equities that has gathered momentum since mid-January.
•Euro at $1.3852 (2/1) — The euro has continued its decline since falling through the near-term bottom of $1.4218 (12/22) in December 2009, but has arrived at the key support level of $1.3852 (2/1). We expect the near-term focus to turn to whether it stops falling at $1.3852 (2/1) and can go on to surpass $1.4215.
•Euro/dollar outlook — 1) If the euro can push past $1.4215, then $1.3852 (2/1) was likely a near-term bottom and an intermediate rally to $1.437–$1.443 is possible, but 2) if it falls below $1.3852 (2/1), we think the decline will likely take it down to $1.365 or $1.329 by March.
• DJIA at 10,067 (1/29) — Since peaking at 10,725 (1/19), the DJIA has remained weak, but it met a key support line at 10,067 (1/29), the theoretical low derived by subtracting from 10,725 (1/19) the magnitude of last year’s June–July decline. Whether the index ends its decline at 10,067 (1/29) and goes on to push past 10,507 will be a near-term focal point, in our view.
•DJIA outlook — 1) If the DJIA rises above 10,507, it could keep rallying to an eventual high of 10,980. 2) A fall through 10,067 (1/29), however, would confirm that the DJIA had entered a correctional phase given that it would make this the largest pullback since last March and take the index below its resistance band. In this case, we think selling pressure could take it down to
9,840 or 9,240 in the short run.
• Nikkei 225 — Although the Nikkei 225 has fallen through support at 10,290, the decline has been limited to date. 1) If it pushes past resistance at 10,590 early, we think it could continue to rise to a high of around 11,100 by March. 2) If, on the other hand, it falls through 10,198 (1/29) and does not look as if it will stop at 10,030, we think the near-term correction would likely expand to 9,700 or 9,420.
Technical analysis: Euro and DJIA
At key resistance; focus on next moves The euro/dollar rate and DJIA have hit key support lines at lows of $1.3852 (2/1) and 10,067 (1/29), respectively. We believe this will be a turning point that will determine whether this puts the brakes on the trend of euro weakness/dollar strength and a correction in global equities that has gathered momentum since mid-January.
Euro/dollar
The euro has continued its decline since falling through the near-term bottom of $1.4218 (12/22) in December 2009, but has arrived at the key support leve of $1.3852 (2/1). We expect the near-term focus to turn to whether it stops falling at $1.3852 (2/1) and can go on to surpass $1.4215.
•$1.3863: Derived by subtracting from $1.5145 (2009/11/25) the magnitude of the rise from $1.2457 (2009/3/4) to $1.3739 (2009/3/19)
•$1.3856: Derived by subtracting from $1.458 (2009/1/13) twice the magnitude of the rise from $1.4218 (2009/12/22) to $1.458 (2009/1/13)
•$1.4214: Derived by adding to $1.3852 (2010/2/1) the magnitude of the rise
from $1.4218 (2009/12/22) to $1.458 (2010/1/13)
1) If the euro can push past $1.4215, then $1.3852 (2/1) was likely a nearterm bottom and an intermediate rally to $1.437–$1.443 is possible, but 2) if it falls below $1.3852 (2/1), we think the decline will likely take it down to $1.365 or $1.329 by March.
•$1.4371: Derived by adding to $1.3852 (2010/2/1) the magnitude of the rise from $1.4626 (2009/11/3) to $1.5145 (2009/11/25)
• $1.4443: Derived by adding to $1.3852 (2010/2/1) the magnitude of the decline from $1.4339 (2009/6/3) to $1.3748 (2009/6/16)
•$1.3653: Derived by subtracting from $1.4580 (2010/1/13) the magnitude of the decline from $1.5145 (2009/11/25) to $1.4218 (2009/12/22)
•$1.3291: Derived by subtracting from $1.4218 (2009/12/22) the magnitude of the decline from $1.5145 (2009/11/25) to $1.4218 (2009/12/22) DJIA
Since peaking at 10,725 (1/19), the DJIA has remained weak, but it met a key support line at 10,067 (1/29), the theoretical low derived by subtracting from 10,725 (1/19) the magnitude of last year’s June–July decline. Whether the index ends its decline at 10,067 (1/29) and goes on to push past 10,507 will be a near-term focal point, in our view.
•10,072: Derived by subtracting from 10,725 (2010/1/19) the magnitude of
the decline from 8,799 (2009/6/12) to 8,146 (2009/7/10)
•10,507: Derived by adding to 10,067 (2010/1/29) the magnitude of the rise
from 10,285 (2009/12/8) to 10,725 (2010/1/19)
1) If the DJIA rises above 10,507, it could keep rallying to an eventual high of 10,980. 2) A fall through 10,067 (1/29), however, would confirm that the DJIA had entered a correctional phase given that it would make this the largest pullback since last March and take the index below its resistance band. In this case, we think selling pressure could take it down to 9,840 or 9,240 in the short run.
•10,983: Derived by adding to 6,547 (2009/3/9) the magnitude of the decline
from 11,722 (2000/1/14) to 7,286 (2002/10/9)
• 9,845: Derived by subtracting from 10,725 (2010/1/19) twice the magnitude
of the rise from 10,285 (2009/12/8) to 10,725 (2010/1/19)
• 9,243: Derived by subtracting from 10,725 (2010/1/19) the magnitude of
the rise from 7,552 (2008/11/20) to 9,034 (2009/1/2)
Nikkei 225
The January high of 10,982 (10/1/15) replicated the theoretical value shown below. Although the Nikkei 225 subsequently fell from 10,982 (1/15) through support at 10,290, the decline has been limited, stalling at 10,198 (1/29). The recent low of 10,198 (1/29) replicates minor support as shown below. Whether the decline ends at 10,198 (1/29) and the index rises above 10,590 will be the near-term focus, in our view.
•10,987: The midpoint of 10,878 and 11,097, derived below
•10,878: Derived by adding to 7,054 (2009/3/10) the magnitude of the rise
from 14,437 (2006/7/18) to 18,261 (2007/7/9)
•11,097: Derived by adding to 7,054 (2009/3/10) the magnitude of the rise
from 14,218 (2006/6/13) to 18,261 (2007/7/9)
•10,294: Derived by subtracting from 10,982 (2010/1/15) the magnitude of
the rise from 9,674 (2009/10/5) to10,362 (2009/10/26)
•10,192: Derived by subtracting from 10,982 (2010/1/15) the magnitude of
•10,590: A 50% retracement of the decline from 10,982 (2010/1/15) to
10,198 (2010/1/29)
1) If the Nikkei 225 pushes past resistance at 10,590 early, we think it could continue to rise to a high of around 11,100 by March. 2) If, on the other hand, it falls through 10,198 (1/29) and does not look as if it will stop at 10,030, we think the near-term correction would likely expand to 9,700 or 9,420.
•10,031: A 50% retracement of the rise from 9,081 (2009/11/27) to 10,982
(2010/1/15)
• 9,701: Derived by subtracting from 10,982 (2010/1/15) the magnitude of
the decline from 10,362 (2009/10/26) to 9,081 (2009/11/27)
• 9,424: Derived by subtracting from 10,982 (2010/1/15) the magnitude of
the decline from 10,639 (2009/8/26) to 9,081 (2009/11/27)
[citibank- Yutaka Yoshino]
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