Technicals

European Stocks Rebound, Meet Key Resistance

WEEKLY STRATEGY

FTSE 100

Long-term Technical Outlook

The FTSE remains constructive until a drop below 4955. Potential channel resistance is not until 5483 today. The structure of the rally is bearish, taking the form of a correction (3 waves). What’s more, wave c is equal to wave a in percentage terms.

Short-Term Technical Outlook

The FTSE has risen to re-test resistance at 5298.54 for a potential double top. The hurdle to further bullish momentum is reinforced by support-turned-resistance at a rising trend line established from the low in August. A reversal will see near-term support at 5184.48.

DAX

Long-term Technical Outlook

The DAX has found support from a support line extended from the March and July lows. A short term former support line may act as resistance at the current level. A continuation of the bear trend would be signaled on a drop below 5313. In the event of a new high, the 6000-6110 zone is resistance.

Short-Term Technical Outlook

The German benchmark index has pushed above resistance at 56749, the 61.8% Fibonacci retracement level. From here, prices will aim to test support-turned-resistance at 57365, a level that has proved to be a significant inflection point at least since September.

CAC 40

Long-term Technical Outlook

The CAC 40 reached its 100% extension at 3892 and reversed sharply, eventually falling beneath the October low. A larger turn would be signaled on a drop below 3550. Trading above the October high would shift focus to 4000 and then channel resistance.

Short-Term Technical Outlook

French issues have pushed higher in a well-defined rising channel to surpass resistance at 3805.09 to find themselves squarely at the channel top. A correction lower now sees 3805.09 as support, while an acceleration of bullish momentum would aim for 3906.49.

IBEX 35

Long-term Technical Outlook

TThe IBEX reversed at January 2008 low of 1194. Also, the index broke beneath the October low (red line) and trendline support. The rally from 1118 raises the possibility that the break was false however. Trading to a new high would expose a measured level at 1247. Under 1118 signals that the larger decline has resumed.

Short-Term Technical Outlook

Spanish shares have advanced to re-test support-turned-resistance at the bottom of a rising channel that had previously contained prices since the lows in August. Continued bullish momentum will aim to test the double top at 1194.57, with near-term support at the 23.6% Fib mark (1172.38).

S&P/MIB

Long-term Technical Outlook

The FTSE/MIB broke beneath its support line for several days as well as its 50 day SMA. The moving average may be resistance now. The rally from March is in 3 waves and the recent reversal occurred following what appears to be completion of an ending diagonal. This is bearish evidence so I am looking for the decline to continue.

Short-Term Technical Outlook

The FTSE/MIB has surpassed resistance at the 50% Fibonacci retracement level (23179.51) and now aims to challenge the 61.8% Fib at 23504.94. A break beyond that will look for a re-test of support-turned-resistance at 25502.02, the bottom of a rising channel that had guided prices since September.