European Markets, Technicals

European Stocks Rebound But Resistance Looms Ahead

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 rebounded above support-turned-resistance at 5299.57, with prices now on pace to test downward-sloping trend line resistance at 5352.57. A push above that will open the door for a move to November’s high near 5400.

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

German shares have rallied through resistance in the Fibonacci zone, with prices now on pace to challenge the 58000 handle. A push beyond that will clear the way for a test of double top resistance at 58360.

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

Paris issues have pushed above resistance at 3769.85, the 61.8% Fibonacci retracement level. From here, prices are set to test falling trend line resistance at 3785.64, with a break above that opening the door for a move to November’s high at 3868.16.

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 pushed higher since gapping lower at the beginning of the trading week, with prices consolidating between the 50% and 23.6% Fibonacci retracement levels (1164.12 and 1188.48, respectively). A break higher sees near-term resistance at falling trend line resistance set from November’s swing top (1196.51), while a move lower will target 1140.

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

Italy’s benchmark index has moved above resistance at the 20-period moving average and is now testing the 50% Fibonacci retracement level at 22551.20. A break higher will target 22556.05.