Technical Weekly 24112006

Equities
Last week I said a correction could start soon and that the DJ Euro Stoxx 50 could be break down from a large rising wedge.
Unfortunately that is what is happening now.
The rising wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows.
The correction that follows is often steep and quick in time.
The first support on the index is located around 3990-4000 and a more important one around 3880.

Commodities
Brent
The rebound we anticipate last week is coming.
After the confirmation of the falling wedge a few days ago, I anticipate now a strong rebound, maybe towards the 70$ level.

Gold
Trades above 630$ and is forming a big “W” bullish pattern.
If gold is able to continue rising in the coming days it will reintegrates the bullish long- term channel.
As you can see on the chart this could lead to much higher prices in the coming months.

German 10 Year Yield
Yields seem to stabilize around the 3.7% level, but a deeper correction in the stock market could trigger a “flight to quality” and a rally for bonds.
On a long term basis the overall trend remains negative on bond yields.

Euro-dollar
Over the last few weeks, I regularly highlighted that the euro-dollar was challenging a key resistance zone.
The breakout through the 1.3 level is an important technical buy signal because it have trigger significant stop losses from traders that were bullish for the $.
This could lead to a significant acceleration upward towards 1.37-1.38 in the short- term. period.