European Markets, Technicals

European Stocks Vulnerable as Prices Approach Resistance

WEEKLY STRATEGY

FTSE 100

Long-term Technical Outlook

The FTSE is testing channel support and a break below would strongly suggest that the advance from the 2009 low is complete. The rally is in 5 waves and is therefore probably just the first wave of a larger correction (b wave underway now). Initial support is 4955.

Short-Term Technical Outlook

The FTSE is approaching a critical upside barrier at 5383.72, the 61.8% Fibonacci retracement of the downswing from the swing high in mid-January, a level reinforced by support-turned-resistance at the bottom of a previously broken rising channel. Relative strength studies area heading into overbought territory, hinting that some manner of pullback may materialize in the near term. Initial support is seen at 5316.79, the 50% Fib.

DAX

Long-term Technical Outlook

The DAX is in the same position as the FTSE. The index is testing channel support now and dropping below would suggest that the rally from the 2009 low is complete as an A wave. Initial support is 5159.

Short-Term Technical Outlook

German are approaching key resistance at 57400, the top a near-term rising channel and the previous swing top from earlier this month. Negative RSI divergence suggests a move lower is likely from here, targeting the channel bottom at 56012.

CAC 40

Long-term Technical Outlook

The CAC 40 has dropped below trend line support and a large B wave may be underway now towards 3398. Favor the downside against the January high.

Short-Term Technical Outlook

The French benchmark index has pushed through resistance at 3764.00, the 76.4% Fibonacci retracement of the decline from February’s swing high, but negative RSI divergence suggests below falling trend line resistance bodes ill for continued bullish momentum. Initial support lines up at 3722.33, the 61.8% Fib.

IBEX 35

Long-term Technical Outlook

After reversing in January, the IBEX has declined in impulsive fashion. Additionally, RSI divergence on the weekly suggests that the top is important. Favor the downside. The next support is 993.

Short-Term Technical Outlook

The IBEX is approaching resistance at 1071.62, the 61.8% Fibonacci retracement of the down move from early February. Negative RSI divergence argues for a reversal lower at this juncture, with the initial downside barrier at the 50% Fib (1056.63).

S&P/MIB

Long-term Technical Outlook

The FTSE/MIB reversed from the 38.2% retracement of the decline from the 2007 high and has fallen beneath channel support. The drop below channel support indicates that the path of least resistance is lower. The next level of support is 20702.

Short-Term Technical Outlook

Italian issues has overcome resistance at the 61.8% Fibonacci retracement of the down move from this month’s swing high (21724.43), but a formidable barrier lines up nearby at the top of a rising channel formation. If bullish momentum persists, the next relevant boundary lines up at 22021.84, the 76.4% Fib retracement. Alternatively, a turn lower sees initial support at the 50% Fib level (21484.05).