€/$

The $ bounce is over as the eur is now trading above the 1.345 resistance level.
Next target towards new highs in the coming weeks.(dot green line)

TA-double tops update

Today many equity indices are close to confirm double tops patterns.
In the US, the SP 500 is already trading below the neckline.
If they don't quickly move above this danger level (1490 for the SP 500) then I'm betting on a retest of the 200 day moving average in the coming weeks.(+-4% decline).

BONDS

After some very difficult weeks on the bond markets, we see some (early) signals that the worst could be over.
The Bund has tested the 4.70% resistance level in recent days and has now turing down.
MACD and slow Stochastic are showing sell signals, which could indicate that the correction is not over.
We could find around 4.50% the first support level, but if we break below (for now I don't think so) , bond investments could start making some money in the coming months.

PUT CALL RATIOS

Les put-call ratios sur les grands indices (graphique du Dax et du SP500 ligne noire et ligne rouge pour le put-call ratio) ont récemment atteint leur plus haut niveau.
Les investissurs (surtout les professionnels) ont donc acheté massivement des protections.
Ceci implique que ces derniers n’auront pas besoin de vendre en masse si les marchés continuent à corriger.
Cette situation est donc fort différente de ce qui s’est passé en 2000 où les investisseurs étaient forts complaisants.
Concrètement si l’on se base sur cet indicateur, le potentiel de baisse à court terme des marchés d’actions semble donc limité.

Double tops?

De nombreux indices sont sous la menace d'une figure baissière en double top.

Par exemple le SP500 dont la ligne du coup se situe à 1490 points, l'Euro Stoxx50 ou la Chine(indice CSI300).

A ce stade, aucune des figures n'est validée mais cela vaut la peine de faire très attention dans les prochains jours car un risque d'accélération baissière faisant suite à la cassure de la ligne du cou est probable.Néanmoins si baisse il y a elle devrait rester peu importante en amplitude (mais rapide en temps)

Maximun buy&sell DJ Euro STOXX 50

DJ Euro STOXX 50

L'indice se rapproche d'un soutien important mais il y a un risque d'accélération baissière (double top) si ce dernier ne tient pas.

Ce message est confirmé par le MACD qui est toujours baissier mais pas encore en-dessous du zéro et par la stochastique lente qui vient juste de valider un signal de vente.

En terme de vagues d'Elliott la vague C est toujours en cours ce qui renforce encore mon sentiment de prudence à court terme.

Technical weekly 22062007

Equities
The chart below is an update of last week’s hourly chart of the DJ Euro Stoxx 50.
As you can see the confluence of resistances was to strong and the index fails to break above those lines.

I'm forecasting a more sideways market for the coming weeks.
In term of seasonality the period between May and October is often flat.
During these sideways markets, active management strategies offer the best potential in terms of risk/return.
For instance cyclical sectors remain very strong, health care very weak and the relative performance of the oil&gas and techno sectors continue to improve.
On the sell side real estate (EPRA index) has recently made a substantial bearish top pattern.
Last week’s bullish reversal in equity indices in strong volumes suggests that investors continue to consider pullbacks as buying opportunities but on the other way sell signals highlighted end May on the daily chart are still valid.(see arrows on the chart for the last three TD Combo hourly signals-amazing!).

Bonds
Last week I said that yields were very overbought and that a short term pullback was possible.
Now the pullback is underway (possibily towards 4.5%) but I still believe that renewed strenght should follow towards the technical target of 4.85%.

Brent
The Brent could soon challenge the 75$ resistance zone but this could take time as most momentum indicators are flat.
In the beginning of July, oil will enter in its best period of the year (from July to September)

Euro
The rate rebounds strongly on the support level.
The long term trend remains positive for the Euro and a break above 1.345 could trigger an acceleration towards new highs in the coming weeks.

US YIELD CURVE AND SP500

I few months ago everybody was speaking about the inverted yield (black line) curve in the US.
There was a concern that the inversion may be bad for stocks.
Recently the curve moves into positive territory and nobody seems to care about that.
But as you can see on the chart over the last 10 years the SP 500 (red line) and the
yield curve have often moved in opposite directions(correlation = -0.056).

Some statitics

52% of the members of the STOXX 600 have a short term bullish trend and (more important) 80% of them have bullish long term trends.click on the chart to enlarge













Commodities are also bullish on all time frames.
Click on the chart to enlarge















Bonds remain bearish on all time frames.
Click on the chart to enlarge

Bull or bear?

We see a big battle in the European stockmarkets right now: first a quick drop and then an even quicker rally.
We are retesting the same resistance levels we saw two weeks ago: 400-405 for the Stoxx600-4600 for the DJ Euro Stoxx 50.
We are also still facing the same short term divergences, so we should stay awake and be careful on the short term but...
On the other the leading indicator in Europe (the DAX) is making a new high.
The conclusion of this : don't be focalised on the big indices, there are still lots of opportunities.(technical analysts love this kind of markets!)
For instance technically speaking I 'm bullish on techno and oil stocks but berarish on the EPRA index (real estate-see chart below)

Technical Weekly 15062007

Equities
Equity markets are recovery strongly.
This can be seen in the hourly chart of the DJ Euro Stoxx 50 which is showing a double bottom bullish pattern.(circle)
The long term picture is clear as it remains bullish; it is the shorter term that needs constant analysis and reassessment.
And the question here is: is the market sell off done now and is this a new buying opportunity?

I think a trading range is the highest probability in the coming weeks : as it remains difficult to find sell ideas but on the other way we do not forget that tops often take a long time to develop.
For now the index makes a classic pull-back to the resistance line that was broken last week.
On a sector basis Health Care continue to under-perform strongly while Oil&Gas and Technology are confirming their re-rating process.

Bonds
I don’t change my technical target of 4.85% for the coming weeks /months for the German 10-year bond yields.

But yields are now strongly overbought on all time frames, so that a short term pullback is possible.

Brent
No change, still bullish above 70$.
The Brent could soon challenge the 75$ resistance zone(rectangle on the chart).

Euro
The long term trend remains positive for the Euro and the short term trend positive for the $.
We are now very close to support around 1.33.
This support must hold in order to expect a resumption of the uptrend.

Technical scoring Stoxx sectors

This is a technical scoring based on the 20 day (short), 50 day (mid), 100 day (long) and 200 day (very long) moving averages.From zero to ten points, scoring is green when improving red when deteriorating and blue when unchanged.

Bond markets - temporary blip or more turmoil?

The first chart is a monthly chart the bund future (in price) since the beginning of the 90's.
Technicaly speaking we had a sell signal in June 05 (double 13 arrow on chart).
This signal was later confirmed by a breakdown of a very important up-trendline in the beginning of this year.
This a very bearish chart and as you can see there is still downside potential as the target was not yet reached.

If we zoom and take a look at the daily chart we can observe that the recent fall was very steep and that we are now approaching the target of the the bearish descending triangle.
Thus, on a short term basis bonds are oversold and may be due for a bounce in the coming days (or weeks) but on a long term basis the change in trend is likely
to continue and that is why I don't change my target of 4.85%(10 YR BUND YIELD) for the coming months.

Equities
While I remain optimistic on equities, I have been faced with increased investor concern that the market is ripe for a correction. Despite the long-term uptrend, a short-term setback cannot be ruled out.
Please note as highlighted last week, how well TD Combo and TD Sequential indicators identified the recent sell signals on the DJ Euro Stoxx 50.(arrows on chart)
I think that a fall to the lower band of the rising channel is a strong possibility in the coming days or weeks.

Only 12% of the members of the Stoxx 600 are in a short-term uptrend (32% mid-term and 71% long-term.

On the positive side we have sentiment readings continuing to indicate more fear than greed among investors.
On the negative side we have some emerging markets (Russia, China) and real estate already in downtrend.
Pressure on the inter-market side also continues to build; the negative trends in bond markets are starting hurting equities and oil prices are breaking above important resistances.
So I address cautious investors’ concerns by looking for ways to protect portfolios from the riskiest areas without giving up exposure to equities and sacrificing potential upside.
That is why the Japanese market seems interesting today as the Nikkey recently broken up above 17500.Moreover the Yen in Euro has an inverse correlation to equity markets.

Bonds
Breaking above my first target of 4.5% (first time since end 2002!)
The second upside target iss 4.85% but at current levels investors could be interested in buying some bonds and selling some equities.
The US 10 year bond yield also rise above the psychological level of 5%.
Our technical target for the coming months is close to the 5.4% level.

Brent
No change, still bullish above 70$.The Brent could soon challenge the 75$ resistance zone(rectangle on the chart).

Euro
The trend remains positive for the Euro but a deeper pull-back towards the major support line is still my scenario. This support must hold in order to expect a resumption of the uptrend.
The first minor support is 1.33 (red dot line).

Technical dilemma

This histogram below (% bullish for members of the Stoxx 600) shows that the overall trend remains positive for equities.(68% short term bullish, 71% mid term bullish and 88% long term bullish)

click on the chart to enlarge

But recently some warning signals appear from a market timing technique, called TD Combo & TD Sequential used mainly by contrarian and aggressive traders.
Those indicators recently gave low risk sell indications on several indices, including on the Euro STOXX 50 and the S&P 500.

On the chart of the Dj Euro Stoxx 50 you can see arrows when the TD Combo indicator is flashing sell signals.
The last signals were pretty accurate but the negative point is that this method does not give any target.

The German government bonds yield is approaching the 4.5% first (weekly chart) target and strong resistance zone but I think that in the mid-term yields will move higher because the long term downtrend has been broken on the monthly chart and because we have a big bullish ascending triangle pattern on the daily chart.

So for conclusions I can say that equities are still bullish but overbought and bonds are still bearish but oversold.