Technical Weekly 21052007

Equities
65% of the members of the DJ Euro Stoxx50 are trading above the 20 day moving average, 76% above the 50, 77% above the 100 and 90% above the 200.
This means that the index remains in a clear uptrend.
On the other way, indicators (see table below) are still giving a mixed picture and the market is entering a flat seasonal period between May and October.

click on the table to enlarge

Last week I thought that the index was validating a bearish breakdown, but buyers are still buying the dips quite agressively and the as you can see on the chart the index was able to break above the 4440 resistance zone.
You can also see that the RSI is close to be overbought again, but for now
I will respect and continue to ride the trend.
I stay with an overweight equity exposure but will be vigilant in the coming weeks. If the market turns parabolic, I will not hesitate to sell and take some profits.

Bonds
A simple line chart of the generic bund future with two moving averages (50 in green and 200 in yellow) shows that bonds are now in a bear market.
Last week I said that the German bond yield was forming a bullish flag continuation pattern.
So, I keep my targets of 4.5% and may be 4.85% for the coming weeks/months.

Brent
The Brent is now facing resistance at the 70$ level.
The stochastics indicator is still rising but is now overbought.
A break above this level would open the door towards the 78$, which is the top of the trend channel.
Strong support is located around the 60$ level.

Euro
The rate is now trading below the 1.35 level, which means that a deeper pull-back towards the major support line (red line on the chart) is a strong probability.
The first minor support is 1.33 (red dot line).
The long term trend is still up for the Euro.