European Markets, Technicals

Most European Stocks Pause to Consolidate, DAX Breaks Lower

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 broken above falling trend line resistance but the bulls have met some push-back ahead of the 5450.00 level. Initial support is seen at 5386.55, the 23.6% Fibonacci retracement level, while the latest swing high at 5445.17 marks near-term resistance.

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 broken below rising trend line support set from December’s swing low. Initial support is seen at 59387, the 23.6% Fibonacci retracement level.

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

The French benchmark index has overcome triple top resistance near 3868.16 and prices have now taken a breather to consolidate below the swing high at 3976.92. Near-term support is seen at 3933.85, the 23.6% Fibonacci retracement level.

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 were rejected lower from resistance at the intersection of the 1203.22-1210.26 congestion area and the upper boundary of a rising channel that has guided trading for most of December. Initial support has been found at the channel’s mid-line, now at 1193.63.

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 FTSE/MIB index looks somewhat similar to its UK counterpart: prices have taken out falling trend line resistance but the rally has paused ahead of the 23500.00 level. Initial support is seen at 23217.16, the 23.6% Fibonacci retracement level.