(DJIA)

Is the Dow done dropping? It’s everyones question in the market this week. In the image above we can see that price has hit a “Major” support level and it’s holding strong. For now we still play the trend which is down but as traders we must be prepared unexpected movements. This week alone has shown very possitive economic news with an increase in ”CC” (Consumer Confindense) and “New/Existing Home Sales.” With the market being VERY oversold and possitive news theres a chance we’ll see a major pull back. Analysts are speculating a pull back as soon as this week. More info on that in the article below.

Analysts Prediction

As mentioned in the “chat” and “market updates,” several currency pairs, indicies, commodities, etc. are forming, what could be, “double bottoms.” If that price pattern confirms, movements can be expected to retrace as far as old highs/lows. With that being said, wait for confirmation because price rules all and these markets could just as easily continue on down.

In this (crude oil) image you’ll see several points where price has created very significant support at $70. Price is currently sitting around $70 area and seems to be holding. If support continues to hold we’ll most likely see a bounce to $75 area or higher. If support folds, the next significant level is $65.

Currency Correlation: The Canadian doller (CAD) has a strong “possitive” correlation to oil. When Oil is bullish, the CAD will stregthen, vise versa for bearish. Bristish Pound (GBP) also ties strongly into Oil but with less significance to it’s movements.

How to apply this information: If Oil bounces off that $70 support level look to buy loonies. The USD/CAD recently hit a strong resistance at 1.0750 and bounced off. Wait for confirmation and look to sell this pair. If Oil breaks thru $70 level look for buying opportunities at a break of 1.0750.

DJIA

As you can see from this image the DOW has several significant S/R levels to be mindful of. Its currently sitting in a 420 pt. channel so look for a bounce or break of 10,260. Recent trend has been down so if it does break, the next major level is 9,880. If correlations stay true expect to see a continuation of sell offs in Comm currencies and more doller/yen buying.

This is a great recap from market watch covering many of the important topics of last week and surely important issues going into this week.  Have a look at the following articles, they are interesting and relevant to what could be seen happening in the market this coming week.

Enjoy,

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Drop for first time in a year will put further pressure on the Federal Reserve to keep interest rates low to stimulate more growth.  See full story

Rescue your retirement from inflation’s threat

The global recession had largely muzzled inflation’s bite, but actions being taken to cure the developed world’s economic ills could revive threats to bond investors and savers and spoil many Americans’ retirement plans. See full story

Abandoning Treasurys for safer bets overseas

Investors have begun to question whether the U.S. Treasury bond market can still enjoy its generations-long standing as the safest investment in the world. See full story

The second debt storm hits nations

The financial crisis never really went away. The debt mountain that brought down some of the world’s biggest banks and dragged the international financial system to the brink of disaster has simply shifted to governments. See full story

Officials deny report of Sarkozy euro-exit threat

French President Nicolas Sarkozy has reporedly deined threatening to pull his country out of the euro zone unless other members promised to help debt-laden Greece. See full story

The Japanese yen outperformed after equities priced in the possibility that this weekend’s proposed European bailout package may not be enough to fix the problem, but only stop the bleeding temporarily. U.S. stocks rallied through the U.S. trading session because of reports that the U.K. Conservative and Liberal parties agreed to form a united government with a new prime minister. The pound sterling was the day’s big winner. The U.K. currency had been sold off because of concerns the political bickering may drag on. Of course, the euro was the big loser over concerns that countries, such as Portugal and Spain, may not be able to pass tough austerity measures that will reduce budget deficits and the demand for additional funding from other central banks. Lower commodity prices weighed on the aussie and kiwi but the strong U.S. dollar buoyed the Canadian dollar against its commodity-related counterparts.

Analysts Prediction, Euro/Gold

Europe Situation in “Depth”

More updates to come. Next I’ll be posting snap-shots of Indices, commodities, and Futures index concerning “Significant support/resistance levels” and ”Correlations” to currency pairs. Take care all and happy hunting.

Last week we saw the most extreme panic since the global market crash in the end of 2008. Whether or not it was largely artificial, there was definitely “blood in the streets.” Last week The early increase in risk aversion was the result of Greek protests over the passing of austerity measures needed for the country to receive proposed aid from Germany and the International Monetary Fund (IMF) to avoid debt default. Ultimately, the Japanese yen significantly outpaced all its major counterparts.

In fact, the low-yielding Asian currency has risen between 5.5% (kiwi) and 8.5% (euro) against all majors, except the U.S. dollar. The greenback sat at breakeven against the yen, but a flight-to-safety sentiment led investors out of currencies and into other assets like gold. Better-than-expected inflation data lifted the Swiss franc against the euro. Lower risk appetite pushed the New Zealand dollar back down against its U.S. counterpart after strong employment results temporarily helped the commodity currency stay flat against the dollar.

BLOOMBERG ARTICLE