Technical weekly 23022007

Equities
The Dow Jones Stoxx 600 Index has dropped from a six-year high this week as concern about rising inflation and borrowing costs in the U.S. outweighed better-than-expected earnings from some of Europe's biggest companies.
My view is that trends are still bullish but slightly weakening.
In the US, the latest reading of the Bull Ratio (AAII survey) finally showed investors turning optimistic. While not yet in excessive optimism, the series exceeded the level reached in April 06 and is at a 52-week high.

Another proof that the US stock market is over-extended is that over 80% of the stocks in the S&P 500 are now trading above their 20 and 200-day moving averages.
However we believe that in the mid-term this is a bullish sign of strength.
When some sector/industries perform better it is because there are positive news head.
In the US, transportation turned up with a good relative strength, which is good for the economy and the stock market.
The Consumer Discretionary and industrials sectors are also in an interesting bull market in Europe and in the US.
These sectors are leading indicator of consumption, and consequentially of the economy growth.
Finally I was still waiting for a break-out for the semiconductor index.

This is happening right now and that plays in favor of my (still) bullish view on equities.

In Japan, the Nikkei is showing remarkable strength.
And finally, after a period of 15 years trading in a descending range, the Nikkei took out its important resistance level.
Definitely a very bullish sign for the Japanese stock-market!
Supported by the rising momentum indicators further strength is still on the cards.

Bonds
Yields are consolidating in a symmetrical triangle.
I'm watching support and resistance levels for further indications.
The resistance is 4.15% and my mid-term target remains around 4.4% in the coming weeks/months.

Euro
The failure to break above 1.326 indicates a consolidation.
But as long as the Euro remains above support zone, the outlook would remain higher towards 1.326.

Brent
Oil advanced to the highest level this year and the Brent is now breaking out above resistance, which means that the medium term downtrend is now over.
Momentum indicators favor further strength.