Technical Weekly 12122006

Equities
The DJ Euro Stoxx 50 rebounds last week and could soon challenge resistance around 4100.
I would prefer a deeper pullback around the 3880- 3900 levels to add some long positions.
I believe that the index could trade between these levels (3900-4100) in the short term.
Unlike European indices, the trend of the SP 500 remains very strong.
However, US indices are now overbought and that is why technically, I prefer to invest in emerging markets.
The chart below shows the MSCI emerging market in red and a ratio comparing this index with the Stoxx 600 in black.
We can clearly see on the relative chart that after an under-performance between May and June, investors are now boosting their exposure to emerging market equities since mid-November.

Commodities
Brent

Still short term bullish but the brent must not fall below short term support (red line), otherwise renew weakness may follow towards the lows.

Gold
Was not able to break above 650.This is rather a neutral chart and not(yet) the start of a major advance I had forecast a few weeks ago.

German 10 Year Yield
No change, yields seem to stabilize around the 3.7% level.On a long term basis the overall trend remains negative on bond yields but in the short- term bond yields have been quite stable.

Euro-dollar
After a strong rise, the Euro-dollar is correcting and the daily Macd indicator is now close to give a sell signal.
I think that this consolidation is just a minor pullback and that the downside potential is limited.Watch the ascending trendline (in red) as potential support in the coming days.