By Greg Peel

Thursday night's trade on Wall Street provided some indication the market now considers stocks to be oversold after the June sell-off, at least in the short term. Much has been made of technical signals this past week, including both the breach of the S&P 500 below 1040, in theory confirming a bearish head-and-shoulders pattern, and of a potentially approaching “death cross”, in which the 50-day moving average of the S&P falls below the 200-day moving average.

Market talk suggests hedge funds have been playing the short side through June, and the turnaround on Thursday night would tend to suggest short-covering – perhaps ahead of the long weekend in the US which heralds in the summer, but likely taking the opportunity of all the doom and gloom technical talk to play the contrarian game and use weakness to take profits.

Most notable was the sudden reversal of the short euro/long gold trade which has been such a winner for funds playing on fear these past few weeks. A successful Spanish bond auction was the trigger, providing some relief on fears of a European collapse under weight of debt.

With economic data continuing to be weak in the US, there are no guarantees any short covering rally might be sustainable. But throw in a complete rejigging of the Australian government's proposed resources tax, bowing to industry outrage, and the scene may be set for a typical bounce in the first sessions of July.

But first we have to get past tonight's jobs report in the US. Given Wall Street is braced for a weak figure, any downside reaction may be limited.

It's a quieter week for economic data next week. The US kicks off with a public holiday on Monday in lieu of Independence Day falling on a Sunday this year. Thereafter the US will see releases for the PMI services index, consumer credit, same-store sales for the major chains, and wholesale sales and inventories.

It's jobs week in Australia, with June unemployment data due on Thursday. Prior to the jobs report we will see the latest ANZ job ads numbers, the monthly TD Securities inflation gauge, and the May trade balance. The RBA will make a rate decision on Tuesday but there is no expectation of any change. More interesting will be Glenn Stevens' latest take on the state of the global and local economies.

Rate decisions will also be made by the ECB and Bank of England next week, with again no changes expected. Markets will be watching closely, nevertheless, to see whether the ECB has any further ideas of quantitative easing up its sleeve given the negative impact of austere fiscal measures among the EU.

The eurozone will also provide its final revision of first quarter GDP next week.

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.

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