Stocks

European Equities Post Biggest Gain in Six Weeks

Europe Session Key Developments

•    Greek Bond Yields Dip Slightly After Greek Official Says Bailout Unnecessary
•    Crude Oil Posts Sixth Gain in Seven Days, Precious Metals Decline
•    Euro Resumes Bearish Trend Versus Greenback

Stocks in Europe posted their biggest gain in six weeks on renewed optimism over the Greece debt situation and better-than-expected economic data out of the U.S.  The DJ Stoxx 600 Index, a broad measure of European equities, posted its seventh gain in the past eight days.  Investors seemed cautiously optimistic that the debt problems in Greece would not threaten euro area stability after Greek Finance Minister George Papaconstantinou said yesterday that his country had “no actual need for” a bailout and was ahead of its deficit-reduction targets.  The 10-year yield on Greek bonds fell 2 basis points to 6.37 percent, reducing the excess risk premium required over equivalent German bonds by 1 basis point.  Overall, the yield on Greek bonds has increased 184 basis points this year on concern that the country would struggle to reduce the largest fiscal deficit in the euro zone.  As for the economic docket, the only major event out of Europe was U.K. unemployment, which investors managed to shrug off.  Instead, markets keyed on positive economic releases from the U.S. which showed that industrial production rose 09 percent in January and building permits beat expectations during the month.  Overall, European stocks remain 4.8 percent below this year’s high on January 19, but sentiment has clearly improved over the last week.

FTSE 100                         5276.64                     +32.58                     +0.62%
British stocks posted the smallest gain among major European indices after U.K. unemployment claims unexpectedly rose in December to the highest level since 1997.  The ILO unemployment rate for the last three months of 2009 held at 7.8 percent, as expected.  Despite the disappointing news, shares on the FTSE rallied for a third consecutive day and nine stocks gained for each that fell on the index.  Barclays gained 2.9 percent to lead banking shares higher, a day after announcing earnings that soundly beat analyst expectations.  RBS raised its recommendation on the company’s shares from “hold” to “buy” and Bank of America Merrill Lynch raised its price target.  RBS and Lloyds Banking Group gained 3.2 percent and 1.9 percent respectively, on anticipation of their earnings reports due out next week.  Further driving the FTSE today was Man Group, the largest publicly traded hedge fund, which added 5 percent on the day.  Some investors have speculated that the firm may receive a takeover bid from asset manager BlackRock.

CAC 40                             3725.21                     +56.17                     +1.53%
The French index added at least 50 points for a second consecutive session today, led by strength in financials, industrials, and technology shares.  Aerospace and defense leaders EADS was the biggest individual gainer on the index, adding 4.9 percent on news that the company’s seven government clients will pay additional costs for the A400M military plane.  Accor posted the second-largest gain, adding 4.2 percent on news that the hotel operator would increase its operable capacity by over 45 percent.  BNP Paribas, France’s largest bank, led financial shares higher after recording its fourth consecutive quarterly profit.  The bank’s shares rallied 3.9 percent after the company reported 1.37 billion euros of fourth quarter net income, above the 1.06 billion estimate of bank analysts.

DAX                                   5648.34                        +56.22                     +1.01%
The German index rallied for a third consecutive session as financials and industrials gained at least 1.4 percent each.  Deutsche Boerse, Europe’s largest exchange by market value, gained 3.7 percent to lead financials higher after the company announced a significantly smaller fourth quarter loss than analysts expected.  Deutsche Bank followed suit, adding 2.1 percent to its highest close in two weeks, after the German bank announced a sale of wealth manager BHF-Bank.  Industrial shares were led higher by mailing company Deutsche Post, which gained 2.3 percent, and Siemens, which rose 1.6 percent.  Siemens, a leader in electronics and electrical engineering, rallied on speculation that the company may acquire some components suppliers this year.

IBEX 35                          10498.60                     +104.70                 +1.01%
Shares in Spain added a full percent today, led by a 6 percent gain for Obrascon Huarte and a 4 percent increase in Grifols.  Shares of Obrascon Huarte, the Spanish building and infrastructure firm, had dropped in the four prior sesssions on weakness in the construction sector.  Grifols, a plasma firm, gained after its Australian peer CSL confirmed its full-year profit forecast.  Financial shares in Spain followed their global counterparts higher today, led by a 2.8 percent gain in Mapfre, and a 1.4 percent gain for Banco Santander.

FTSE MIB                     21650.81                     +361.61                   +1.70%
Italy’s FTSE MIB posted the biggest gain among major European indicies, rising nearly 2 percent on the day.  Trading in Milan led to a 4.6 percent gain for Fiat, after Italian Industry Minister Caludio Scajola said there are 14 offers for a company plant in Italy.  Intesa Sanpaolo gained over 4 percent on a potential unwinding of an investor agreement between Generali and Credit Agricole.  Fondiaria-Sai fell for a second straight day, dropping nearly 1 percent, after Banca Akros downgraded the insurance firm.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Stocks

European Equities Mixed Today as Plans For Greece Bailout Remain Unclear

Europe Session Key Developments

•    European Union Officials Discuss Budget Concerns in Brussels Today
•    Switzerland Consumer Prices Rise More Than Expected in January
•    Euro Resumes Decline Against Dollar as Greece Plans Remain Unclear

European stocks were mixed today as rhetoric from the European Union meeting in Brussels was unclear regarding its agreement to solve the Greek debt situation.  EU leaders have asked for a descriptive plan from Greece on how the country intends to reduce its debt-to-GDP ratio, but no concrete bailout plan has been announced.  The general consensus from analysts is that a bailout will happen in the near-future, to protect the Euro region and maintain the stability of its currency.  ECB President Jean-Claude Trichet said today that he welcomes the commitment of EU leaders to take the necessary actions to protect financial stability in the region.  President Trichet, along with German Chancellor Angela Merkel and Greek Prime Minister George Papandreou, has called for a close watch of the Greek economy and promised “determined” action to heed off the worst crisis for the euro currency in its eleven-year history.  Despite the commentary, investors showed a great deal of skepticism over today’s Greece agreement, sending four of the five major European equity indices lower on the trading day.  In addition, the euro currency continued its decline against the U.S. dollar, falling against the greenback for a sixth time in the last seven trading days.  The sixteen-nation common currency has dropped over 5 percent against the Dollar this year.  As for the economic docket, German wholesale prices rose 1.3 percent in January and Swiss CPI was slightly higher for the month, but neither had much impact on equities.  Looking ahead to tomorrow, however, economic data should have a major impact on market sentiment as fourth quarter GDP data is released for Germany, France, Italy, and the general Euro-Zone.

FTSE 100                        5161.48                     +29.49                     +0.57%
The FTSE 100 posted the only gain among the major European indices, led by gains in commodities and industrials.  Commodity producers gained on rising energy costs, as crude oil has increased to $75 a barrel this week.  Rio Tinto, one of the world’s largest mining companies, gained 2 percent on rising oil prices and a reinstatement of the firm’s dividend.  Rolls-Royce led industrials higher, gaining over 6 percent after reporting annual profit that beat analyst estimates and an announced payout to investors after winning more defense contracts.  Also pushing the index higher was Sports Direct International, the largest U.K. sporting-goods retailer, which gained nearly 8 percent on positive sales reports.

CAC 40                            3616.75                     -18.86                     -0.52%
Trading in Paris led to a slight decline on the trading day as technology stocks fell over 4.2 percent.  Overall, over two stocks fell for each that gained on the CAC.  Alcatel-Lucent was the worst performing stock on the index, falling 11 percent after posting its third successive full-year loss.  The global telecommunications company also cut its profit-margin target for 2010.  Renault posted the second-biggest decline on the index, dropping over 5 percent, after the French car maker announced that it posted a net loss of $4.2 billion in 2009.

DAX                                 5503.93                     -32.44                     -0.59%
The German index posted its first decline this week as eight of the ten DAX sectors closed lower on the day.  Financial shares posted a 1 percent decline on the day as the country’s largest bank, Deutsche Bank, dropped over 2 percent and Deutsche Postbank fell over 1 percent.  German banks have significant exposure to Greece, Spain, and Portugal, and investors remain skeptical that the regional debt problems have a viable solution.  Furthering the decline in German stocks was the automobiles sector, led by a 2 percent decline for Daimler and Volkswagen.

IBEX 35                          10281.70                    -173.30                   -1.66%
Trading in Spain led to the largest decline among the major European indices, as financials plunged over 2.2 percent on concerns over the country’s debt problems and lacking economic recovery.  The National Institute of Statistics announced today that the country’s GDP fell 3.1 percent in the fourth quarter on an annual basis and slowed 0.1 percent on a quarterly basis.  Construction firms were hit especially hard today on spending concerns, as FCC and Ferrovial each fell over 2 percent.

FTSE MIB                       21076.45                   -165.18                   -0.78%
Italy’s FTSE MIB posted the second-largest decline among major European indices, declining nearly a full percent on the day.  The most actively traded stocks to the upside included the country’s largest oil company, Eni, which added nearly 1 percent on rising oil prices, and Saipem, which gained 3 percent after analysts upgraded their recommendations on the stock.  On the losing end of trading today was Parmalat, as the dairy company fell over 2 percent after being cut at BNP Paribas from “neutral” to “underperform.”  Analysts at the bank said to avoid the stock before its February 25^th earnings release.  Also declining today was Intesa Sanpaolo, falling 3 percent after announcing plans to shut down its investment-banking unit in Athens.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Stocks

U.S. Equities Continue Their Descent

U.S. Session Key Developments

• Commodities Take a Hit as Dollar Recovers
• Decrease in New Home Sales Adds to Concern Over Economic Recovery

U.S. equities closed lower for a fourth consecutive day as investors once again fled risky assets such as stocks and commodities for the safety of the U.S. dollar and Treasury securities.  The greenback gained against all of its major crosses except for the Japanese Yen, while the U.S. Treasury continued to find great demand for its debt securities.  Equities around the globe fell as the MSCI World Index of 23 developed nations shed 2.1 percent.  In the morning session, an unexpected decrease in new-home sales by 3.6 percent in September added fuel to investor concern that the seven-month equities rally has outpaced economic fundamentals.  Home builders Lennar Corp. and D.R. Horton dropped over 5.8 percent each on the housing news, while Exxon Mobil and Chevron fell on a drop in crude prices.  Holding up U.S. equities from free-fall is positive news out of earnings season where 82 percent of the companies in the S&P 500 to report earnings have beaten expectations.  Looking forward, all eyes will be on Thursday’s report on third-quarter gross domestic product in the U.S.  Goldman Sachs today cut its forecast for third-quarter U.S. GDP growth to 2.7 percent from 3 percent.

DJIA 30                 9,762.69                   -119.48                         -1.21%
The Dow Jones Industrial Average fell hard after posting a slight gain in yesterday’s session.  Alcoa and Caterpillar were two of the weaker components as they fell 6 percent and nearly 4 percent respectively due to demand concerns that weakened commodities prices.  Telecommunications were once again the bright spot of the index as Verizon added 2 percent and AT&T added a percent.

S&P 500                  1,042.63                    -20.78                          -1.95%
The S&P 500 traded lower as nine of its ten sectors traded fell on the day, with telecommunications the lone exemption.  Overall, eight stocks fell for each that gained and investors showed concern over the strength of the economic recovery.  Discretionary goods had another down day while the financial sector and basic materials sector each dropped over 3 percent.

NASDAQ                 2,059.61                    -56.48                        -2.67%
The tech-heavy NASDAQ was once again the worst performing index, falling over 2 percent.  Apple, Microsoft, and Intel stock all fell over 2 percent on the day.  Apollo Group shed nearly 18 percent on news of a legal suit that could cost the firm over $80 million.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Stocks

Gold Ends the Week in Congestion as Risk Appetite Struggles to Advance

Commodities – Energy

Crude Oil Closes a Fourth Week of Gains at 12 Month Highs

Crude Oil (WTI) -  $80.86  //  -$0.33  //  -0.41%

Week-over-week, oil has offered another strong performance. The key commodity has closed its fourth consecutive bullish week, extending the initial surge sparked last week, pushing to new 12-month highs. Taking a more granular approach to the market’s health however, doubts and suspicions have started to bear down on the steady rally. We can see the hesitation in carry prices to new highs with the past two days worth of price action where congestion below the recent high of $82 and the trend low $80. A break is inevitable; but direction is up in the air.

The fundamental bearing on the oil has not been very clear lately. If underlying supply and demand were the only facet of price determination, crude would likely have collapse these past two weeks rather than rally to new highs. This past week’s US Energy Department inventory figures reveal the glut of supply that has refiners reducing imports. Through the week ending October 16th, crude stockpiles rose 1.31 million barrel to 339.1 million – 9.4 percent above the average levels for this period over the past five years. Further down the refinement line, gasoline supplies unexpectedly contracted 2.3 million barrels to 8.95 million; yet supplies are still significantly higher than the five year average. If demand were robust enough to absorb excess inventories while production levels continued unchanged, there would be a reasonable argument to be made for further appreciation. However, demand for fuel actually dropped 1.4 percent last week and consumption has largely struggled to recover despite the consensus that an economic recovery is underway.

So, while supply and demand imbalances will be a background concern, the true catalyst for price action will almost certainly be investors’ taste for risk and the pace of the US dollar. With the broader market recovery, confidence has led funds not only to yield bearing assets but also to those that can only provide capital gains. An optimistic outlook for steadily advancing markets is the foundation to stability. Should risk appetite falter, profit taking and a fundamental equilibrium set well below current price would act to accelerate crude’s plunge.

Commodities – Metals

Gold Ends the Week in Congestion as Risk Appetite Struggles to Advance

Spot Gold  -  $1055.40 //  $2.00  //  0.19%

Gold may have closed its fourth consecutive weekly advance; but the pace on the rally to record highs has certainly cooled. The commodity has yet to significantly retrace its surge over the past two weeks and yet neither have we seen a new record high after the $1,070.80 benchmark was set back on the 14th. A steady, rising trend channel calls up congestion at the end of a very prominent bull run. This is the same general chart pattern that can be seen in the Dow Jones Industrial Average and (the inverse of) the US dollar. From this, it is clear that all three are responding to the same driver: sentiment. Should optimism give way, the lack of any yield income to offset the potential capital losses will mean a sharp correction through profit taking. At these levels, demand is largely speculative. According to the COT figures, commercial positioning is 383,718 short contracts to 86,225 long. In contrast, non-commercial long positions have hit a record high of 286,864 contracts.

Spot Silver  -  $17.69  //  $0.02  //  0.11%

Congestion in silver prices is as absolute as it is for gold. However, in contrast to its more expensive counterpart, positioning in silver is not pushing an extreme. Commitment of Traders statistics show net non-commercial interest actually slipped from last week’s 15-month high. On the other hand, net commercial positioning of 66,004 shorts marks the most extreme differential since the week ending July 25th, 2008. Among the largest silver-based ETF’s, the iShares Silver Trust’s holdings were unchanged for yet another session at 8,612.57 metric tons while ETF Securities reported assets rose 0.5% to a record 6,625 metric tons.

Stocks

Dow Targets 11,000 With Only Fibo-Zone As Resistance

As is often the case in Elliott, the picture is becoming much clearer as the rally has matured and nears its end.  The advance from the March low is a complex W-X-Y (a-b-c-x-a-b-c) rally.  The Dow has actually satisfied minimum expectations for the rally by exceeding 9918 (wave iii of c) so a reversal could occur at any time.  Wave c of y would equal 61.8% of wave a of y at 9947.  Momentum is as one would expect at an important top with RSI failing to confirm the new price high.

The Dow continues to march higher after breaking above 10,000 which leaves the 50.0% Fibo level of the 14,198- 6,470 decline at 10,390 as the next barrier. The Fibo-zone is the only true resistance levels before a test of 11,000.

The S&P is in the exact same position as the Dow. The analysis presented there applies here.

The S&P 500 like the Dow continues to see continued support and is now looking to test 1,120-50.0%Fibo of 1,576-666.

The NASDAQ pattern is the same as the Dow and S&P patterns with one exception – this index has yet to exceed its September high.  It’s interesting that the NASDAQ is the weaker of the 3 indexes at this point since it is the one that has led the advance since March, retracing a larger percentage of its 2007-2009 decline.  It is possible that the divergence (new highs in Dow and S&P, not in NASDAQ) sets up a non-confirmation that results in a turn lower.  In Elliott terms, failure to exceed iii of c would constitute a truncation.

The NASDAQ eclipsed its yearly high of 2,167 and continued bullish sentiment could lead to a test of 2,250- 61.8% Fibo of 2,861-1,265.

Stocks

Crude Rallies an Eighth Session along with Equities

Commodities – Energy

Crude Rallies an Eighth Session along with Equities

Crude Oil (WTI) -  $78.84  //  $0.31  //  0.39%

Crude has extended its impressive rally to fresh yearly highs for an eighth consecutive day. This is the one bullish close short of the advance between July 15th and 23rd – though the current bull wave is far stronger than its predecessor with a 13.6 percent climb. However, with each daily advance, fundamental buoyancy is steadily shifted to speculative lift – a fickle and ultimately limited driver. Guiding price action today was the general advance in market sentiment. Oil’s push to a new high matches the Dow’s advance to a fresh 12-month high of 10,092.19. Yet, unlike this attractive, capital market; this commodity has a more pertinent economic use and greater curbs on traders’ interests.

A lack of specific, fundamental news related crude likely opened the market to risk appetite and preserved the steady trend. Looking ahead, the next round of scheduled inventory data from the Department of Energy is due at the usual, Wednesday release time. Forecasts from a Dow Jones Newswires survey has called for a 1.1 million barrel drop in crude inventories last week – offsetting the advance from the previous period. What’s more, gasoline supplies are expected to extend their steepest contraction in more than year as refiners make seasonal repairs. Nonetheless, even if stockpiles slip as expected, it will do little to deflate bloated supplies. Refiners are running at their lowest capacity levels on record for this time of the year as they wait for excess inventories to be absorbed before putting new product on the market. Another consideration to factor in for tomorrow is the expiration of the November NYMEX crude contract and rollover to December. This may lead to interesting price action and may even call an end to crudes steady advance.

Commodities – Metals

Gold and Silver Follow a Tentative Advance as Speculative Interests Struggle with Market’s Heights

Gold  -  $1057.40 //  $3.80  //  0.36%

Gold prices rose through Monday’s session; but the advance was far more reserved than the bullish moves seen in crude and equities. This is likely a side effect of the rally’s dependency on sentiment. While stocks and other asset classes continue to retrace ground lost through the financial crisis through the past few years, gold is burdened with raising the bar with record-breaking highs. For an asset that does not bear traditional interest or dividends but is instead dependent on capital gains; speculators consider it a dangerous proposition to extend the precious metal’s climb without running the risk of a significant retracement. Last week’s CFTC Commitment of Traders report puts it perfectly into perspective. Non-commercial long interest on the COMEX hit 288,214 contracts while shorts were a sparse 34,259. This is the greatest contrast on record.

Silver  -  $17.59  //  $0.13  //  0.75%

With more room to run, silver is not the speculative burden that gold is. Nevertheless, it is important to note the substantial role that risk appetite is playing in the metal’s appreciation. Silver’s largest, single-day rally in nearly two weeks found more than a little support from the impressive advance in equities – which was itself bolstered by promising earnings forecasts. Another fundamental accomplice to today’s bullish interest was a reported 48-hour strike in Peru copper production which has spilled over to this semi-industrial metal. From Friday’s COT report, we can see that long, non-commercial positions rose 918 contracts to 55,532. Short interest in contrast slipped to a total 7,257 contracts.

-Written by John Kicklighter, CFDTrading Research
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

Stocks

3Q Earnings Season May Draw More Skeptics This Time Around

Few have forgotten the impact that the US second quarter earnings season had on the markets. Better-than-expected earnings reports were the norm and the impact on sentiment was clear. Risk appetite was feed and stocks rallied for the weeks afterwards. However, the accounting for that period was special as it confirmed the recovery was taking place for the corporate sector. This time around, enthusiasm will be generally more muted. No longer are we merely looking for a rebound from the worst of the crisis; instead, market participants will analyze the data for the pace of the recovery. And, should the market reflect on the numbers with a little more skepticism; they may very well be disappointed by what they see.

Taking a look at the general cut of the second quarter earnings numbers, it is safe to say that cash flows, revenue, invest and all other relevant measures of health are far below the figures we had come accustomed to up through 2007 and even 2008. The full brunt of the recession and financial seizure has severely stalled economic activity; and in turn demand for goods and services has naturally shriveled. With domestic US demand continuing to shrink as wages wither and unemployment marches higher, tight credit conditions prevents expansion and economic hardship and protectionist measures cool exports; the outlook for corporate earnings over the coming years (much less the past three months) looks anemic.

What should we look for specifically to gather a sense of direction from this data? The most important consideration is how the markets respond to the data. Better-than-expected or not, if the general consensus is one of skepticism for the future, sentiment can collapse under its own heights. At the same time, the surprises as compared to forecasts will act as a good catalyst for market activity either way. We should watch the numbers from the biggest corporations – those that represent the entire business sector. This is the first week for major releases; so expect the volatility to begin here (if at all).

It is especially important to watch the announcements from the four major US banks this week. While the rest of the firms’ numbers will be reasonable measures of economic health; the banks health is a necessary measure for growth, credit conditions and financial stability amongst other things. Write downs are especially important. The IMF has projected that the world’s banks have only accounted for half of their losses (and the US specifically 60 percent). Accounting rules may have allowed for roll over losses; but defaults and mortgage security-based losses will factor in sooner or later. Also, as the catalyst for the bullish drive during the second quarter season, Goldman Sachs will likely be under greater scrutiny than its peers.

Written by: John Kicklighter, Strategist for CFDTrading.com
Questions? Comments? Send them to John at jkicklighter@cfdtrading.com.

Stocks

Japanese Stocks Test Their Month-Long Range

Nikkei 225

Short-Term Technical Outlook

The Japanese Nikkei 225 extended its pull back from Friday with its biggest one-day drop since the plunge on August 9th. Short-term momentum has been significant; but follow through is a major burden considering the stability support at 10,170 has established. Not only has this level acted as a pivot (previous resistance in June and July, and support ever since then); but now we have the floor in the rising trend channel beginning with the March reversal as well as the 20-day moving average to fortify this general region. A short-term bounce is the more probable outcome; but a bearish break would garner the greater level of volatility in a plunge towards 9,000.

S&P/ASX 200

Short-Term Technical Outlook

Australian shares continue to rise from their March reversal; but progress has certainly slowed – especially in the steep trend beginning in July. Monday’s sharp retracement (the most volatility we have seen in a few weeks) has turned former resistance founded in the long-term 38.2 percent Fib retracement into new support. There is also a notable trendline that can be established through the lows of the past three months; but it has far less relevance from a technical perspective. Watch for any breaks of 4,520 to develop a short-term drop; but the market will struggle for follow through given such dense congestion on the way down.

Hang Seng

Short-Term Technical Outlook

The long-term 50 percent Fibonacci retracement of the 2007-2008 bear wave has proven itself to be a significant hurdle for the Hang Seng Index. While the past two weeks’ upswing has pushed set new highs for the six-month bull wave; the market has not overwhelmed the aforementioned technical level just yet. Should this hold as a double top, it would mark a barrier. However, to truly find their footing, bears would need to produce a lower swing low (a drop below 19,425) to knock this market off its trend.

Written by: John Kicklighter, Strategist for CFDTrading.com
Questions? Comments? You can email them to John at jkicklighter@cfdtrading.com.

Stocks

European Stocks Validate Bearish Bias, Break Past Key Support

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE has broken out of the Rising Wedge that we identified earlier this week, with prices now positioned to test the 38.2% Fibonacci retracement level at 4816.64. A break beyond that will target the 50% Fib at 4777.25.

DAX

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The German benchmark index has sold off as expected and is now positioned above the 61.8% Fibonacci retracement level at 53198. A break lower targets the 76.4% level at 52587.

CAC 40

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Our bearish forecast for the French equities has been validated: prices fell through the bottom of a rising wedge formation and taken out the 38.2% Fibonacci retracement level at 3599.14. From here, the bears will look to take the index to the 50% Fib at 3560.47.

IBEX 35

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

As with most other European exchanges, Spanish shares sold off to break beyond the Rising Wedge we identified at the beginning of the week. Prices now target the 38.2% Fibonacci retracement level at 1113.66.

FTSE MIB

Long-Term Technical Outlook

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as other European benchmark indexes: prices validated our bearish scenario, breaking below Rising Wedge support to challenge resistance-turned-support at 21981.13. A move lower from here would target the 21947.83 – 21762.62 congestion region.

Stocks

European Stock Exchanges Position to Reverse Lower

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE is setting up a Rising Wedge chart formation indicative of a bearish reversal ahead. Negative divergence on the RSI oscillator bolsters the downward bias. Near-term support is seen at 4888.90.

DAX

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

As with the FTSE, the German benchmark index is showing a bearish Rising Wedge with negative RSI divergence. A break of support at 55023 opens the door for a move to resistance-turned-support at 54420.

CAC 40

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Another rising wedge is seen on the CAC 40, again with negative RSI divergence. Near-term support is seen at 3668.40. A break below this will likely see a test of the psychologically significant 3600.00 handle.

IBEX 35

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Spanish shares fit in with positioning noted on other key exchanges: a Rising Wedge points to a bearish bias, and negative RSI divergence offers confirmation. A break below the wedge bottom at 1141.81 opens the door for a move to the 23.6% Fibonacci retracement level (1128.42).

FTSE MIB

Long-Term Technical Outlook

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as other European benchmarks, with a Rising Wedge and negative RSI divergence clearly in place. A move below the wedge bottom at 22609.38 will aim below the 22500.00 handle.

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