Como se combate o populismo? "Com eleições", responde Fukuyama

[Keyser Soze]

Funny how just one week of rallying can impact sentiment. As we headed off to the weekend on Friday, popular opinion would have us believe that the sell-off was merely short-term, i.e. buyers would be coming back soon. Monday was basically dead space with US and UK closed so we sat around waiting for Tuesday's action to commence. Well, the dead cat couldn't bounce anymore as macro data and uncertainty regarding USD weakness hammered stocks lower. National benchmarks fell in all 18 western European markets except Iceland. The FTSE 100 in the U.K. dropped 2.4 percent. France's CAC 40 lost 2.4 percent and Germany's DAX shed 2.3 percent. Emerging markets took a beating as well. Utilities and insurers lead declines in a market that saw all industry groups lower.

The sell-off is far from over in our view and we've established strategic short positions in both DAX and Nasdaq 100. Whoever contributed to the bounce seen last week have left the market or are out of funds and we believe European indices are on course for a new set of lows for the year. Thus near-term targets are:

FTSE below 5500, a close below 5515 (61.8% Fibo retr. of the Post-October bull trend) signals full reversal to 5130.

DAX below 5500, next key support is 5460 (50% retr.)

Stoxx50 below 3525, next key support is 3474 (61.8 retr.), a close below gives scope for full reversal to 3212.

Suffice to say, we're firmly in the bears' camp as we have been ever since the key reversal three weeks ago with the violation of the post-October bul trend. The focus is now increasingly on inflation fears, a global economic slowdown in early 2007 and not least the dominant 4-year stock market cycle. It's been 3½ years of rallying and so it's finally time for a "scheduled" large-scale correction. The hard part in trading this market is reversing your approach to selling rallies from buying dips. The latter strategy has been immensely profitable for a long time but just to put things in to perspective: the 4-year cycle calls for a move to 1060 in S&P 500. The index closed at 1259.84 last night.

saxo bank