Technical Weekly 16032007

Equities
Markets have remained extremely volatile since last week and this should continue.
Investors will likely remain nervous in the near term.
Many of near-term price momentum oscillators are at levels comparable to other significant lows of the past few years. However, without confirming pessimistic extremes from sentiment measures, I believe there is still downside price risk.
That oversold condition is, in my view, the big question mark.
It makes any potential ounce likely to be a strong one, but we can get and stay oversold for long periods of time. If this is such a case, then being oversold actually has bearish implications.
Moreover, a break below important support level could trigger another wave of panic selling, in which case the next significant technical supports would be around 3470 for the DJ Euro Stoxx 50 (June 2006 low).( chart 1-DJ Euro Stoxx 50-weekly)

Equities should thus undergo more stress but technically speaking in terms of risk/return this is a poor time to consider reducing equity exposure, because most indices are now close to major supports on a long term basis.
This means that the bull market that started in 2003 is still intact.
Rather, investors should be watching closely supports levels (3900 on the DJ Euro Stoxx 50) and buying some stocks if the double bottom is validated and sell some stocks if the support is broken.(chart 2-DJ Euro Stoxx 50-Hourly).

Bonds
Technically speaking the 3.9% level is an important support zone.
This level is close to be broken and this could trigger another downside move towards the 3.7- 3.65% zone.

Brent
No change, after having broken up the medium term downtrend, the Brent faces another resistance line around the 62$.
Daily indicators seems to be rolling over which could means that :
- a break throught this level will not occur (at least in the near term).
- a re-test of the lows seen in January may follow.

Euro
Last week I said that as long as the Euro remains above support zone, the outlook would remain higher towards 1.326 short-term and 1.377 mid-term.
Now, the rate is breaking over resistance and since the volatility is very low, a (strong) upside move is likely.