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Keeping an Eye on Spain and Portugal Stock Markets

Stock-Markets / European Stock Markets Nov 19, 2010 - 01:01 PM GMT

By: Chris_Ciovacco

Stock-Markets

Best Financial Markets Analysis ArticleCurrently, our fundamental concerns primarily center on the possibility Portugal will become the market’s next target soon after some bailout is finalized in Ireland. Eventually, market participants will come after both Portugal and Spain; the question is how much time will the Ireland bailout buy the markets. We will need to keep an eye on Europe for the foreseeable future.


The bond markets are properly the primary focus in Ireland, Spain, and Portugal. However, their stock markets can also help us better understand the acceptance of, or aversion to, risk in those local markets. The bond markets tell us Portugal is weaker than Spain. The fact the stock markets are painting a slightly different picture is a development worth monitoring. As long as the A (Portugal) and B (Spain) lines in the chart below are rising, then risk aversion is not high in those markets relative to the S&P 500. If the A and B lines below continue to make lower lows over the next few weeks, it would add to our concerns about global risk assets in general.

Stocks in Portugal recently found some buyers at a logical point on the chart below. Portuguese stocks have some signs of increasing strength in the short-term.

Stocks in Spain have also bounced at a logical point recently, but they look more vulnerable than their Portuguese counterparts.

Back in the U.S. on Thursday, jobless claims came in better than expected, leading economic indicators increased by 0.5%, and the Philly Fed survey came in way above expectations. The Philly Fed number represented the 7th largest increase on record.

The chart below is a weekly chart of the S&P 500 ETF (SPY) as of 9:50 am on Friday (11/19); it can help us better understand the probable downside risks over the next two weeks. Several forms of possible support intersect near 114.90 for SPY which is roughly equivalent to 1,145 on the S&P 500. If 114.90 does not hold in SPY, then 109.98 becomes important (roughly 1,198 S&P 500). SPY also has some support near 119.25.

1,145 and 1,198 on the S&P 500 align well with the longer-term detailed analysis in How Far Could Stocks Fall? We are working on a similar long-term analysis for the gold ETF (GLD).

By Chris Ciovacco
Ciovacco Capital Management

    Copyright (C) 2009 Ciovacco Capital Management, LLC All Rights Reserved.

    Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

    Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

    All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

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