Reverse fly to quality?

The bund (yield) rebounds on an important up-trendline and is close to give a buy signal.

At the same time, the DJ Euro STOXX 50 validates a short -term trading buy today.

% above moving averages

The Stoxx 600 remains in a bearish correction.The table below shows that only 22% of the members of the index are trading above the 20 day moving averages, 9% above the 50 day MA and 28% above the 200 day MA.

If the equity markets fail to hold short-term support of the August recovery rally, then the risk of another major downleg is definitely increasing.
On the contrary bonds are improving ; on the 17 bonds funds I follow 76% of them are trading above the 20 day MA 59% above the 50 day and 65% above the 200 day MA.

Years ending in 7

A few months ago I publish an interesting chart about the decennial cycle.
Please find here an update were you can see that years ending in 7 have always be difficult over the last 100 years (in average -3.8% for the Dow Jones) and what is more worrying to me is that the selloff often starts in the second part of the year.

Reprise technique

Le rebond en cours sur le DJ Euro STOXX 50 semble déja se terminer.La moyenne mobile à 200 jours (en jaune) et l'oblique baissière jouent clairement le role de résistance. Mais le point le plus négatif est l'absence de volume depuis la reprise technique.La configuration est identique sur les marchés US.

US equity strategists

Since the top of the market in June US equity strategists (yellow line) have raised their stock allocations 3 times.Is this a contrarian indicator?

Blood on the street!

DJ EURO STOXX 50 members :the picture is clear, indicators are bearish(red) and a lot of (financial) stocks are breaking down on heavy volume.

click on the tables to enlarge

Bearish again?

The SP500 and the DJ EURO STOXX 50 have broken their supports.The next 2 charts are thus clearly bearish.

SP 500 hourly chart

DJ EURO STOXX 50 daily chart

The long term picture is still "bull" but as you can see on the weekly term chart of the SP 500, we are approaching the lower uptrend line that was active since the beginning of the bull market ( 2003).
What is worriyng to me is that most long -term indicators (like the MACD) are already bearish.

Technical scoring Stoxx sectors

After the recent correction I take a look at European sectors.
This is a technical scoring from 0 to 10 points based on the positions of the price versus different moving averages.

After the steep decline, the presence of the telcos&technos in the top 3 may astonish some people.

Technical scenari

The 4 technical scenarii for the equity markets for the coming weeks/months coming from ODDO technical analyst Jean-Christophe Dourret.


"click on the chart to enlarge"

EURO-DOLLAR

Today the €/$ validates a short- term bearish double top.

Sentiment indicators

Here are 2 very interesting charts coming from a colleague strategist.

The first one shows that corporate insiders (corporate insiders are corporate members who has special knowledge and/or access to confidential information = smart money) are buying massively. This group of investors is usually right and one should look at their action with a momentum approach rather than a contrarian one!). This is a very encouraging sign as it translates the fact that those investors do believe that the recent correction is a good buying opportunity.

The second one comes from the sentiment index computed by Ned Davis Research.
While it did not generate a formal buy-signal yet, it indicates that investors are too pessimistic towards equity markets.

Technical weekly 10082007

Equities
What a week! The DJ Euro Stoxx 50 was able to rebound from the 4200 support level and breaks up above the short- term resistance.
Unfortunately this event appears to be a bull trap.(chart 1)

Volatility is very high (the VIX is above 26) and false signals are common on hourly charts.
Nevertheless if we look at the daily yearly chart we can see that the odds seems to be bullish.
The reversal at the 200 day line (green) combines with a reversal at the lower uptrendline was technically bullish.(chart 2)

In fact, I suspect a couple of bearish retests and false starts.
Indicators like Macd and stochastics are also close to give buy signals
As long as the 200 day line and the 4200 level hold up as support on any subsequent pullback, we think the odds favor a bounce in the coming days/weeks.
But as I said last week a break below the 4200 level could produce another wave of selling.

Bonds
The target of the double top pattern was recently reached (4.3%).
I suspect that the correction is over and that renewed strenght may follow towards 4.5%. in the coming weeks.
But in the coming days a trading range is the most likely scenario.

Brent
Last week we said that the TD Combo indicator was flashing a sell signal.
This week, the Brent is trying to stabilize around the 70$ level.
A break below this level implies a bearish target of 61.6$

Euro
The euro continues to set higher tops and higher bottoms indicating that the uptrend remains intact. As long as the euro stays above its horizontal support line at 1.365, we will stay bullish with the upper rising trendline as next target/resistance levels. A break back below this level would negate the immediate bullish view suggesting a deeper correction instead with the lower rising support line as next target/support.

Trading buy in the US?

Trading buy also in the US.

The SP 500 validates a short -term broadening pattern.

The upside target is +/- 3% higher.

Trading buy?

Today the DJ Euro Stoxx 50 validates a "trading buy" signal.
This is a good risk/reward entry point but on as you can see on the second chart there is no confirmations coming from daily indicators.

The SP 500 moves under the long term support on Friday.

Hedge funds have turned net short on S&P 500 futures and have even increased short positions over the last weeks.

On the contrary fund managers remain quite confident (complacent?)
and are still net long.

Technical Weekly 03082007

Equities
Still catching my breath from one of the worst weeks in years, I'm going to show you a short -term chart that suggest a bounce may occur in the coming days.
After a very steep decline the price DJ Euro Stoxx 50 was halted by strong support in the 4200 zone.The 200 day moving average in green and the rising lower uptrendline are technically speaking a possible good entry points for “dippers”(buyers).(chart 1)

Chart 2 is the hourly chart showing that the index is trying to make a short- term double bottom.A break above the 4315 level could open the door to the 4450 level (3% upside potential).

On the other way, the long term technical model I follow is currently in sell mode.
The model turns negative last week .

A break below the 4200 level could produce another wave of selling.

What is striking is the performance of the different sectors during the last 3 months.
Cyclicals sectors are performing very good but financials (banks&insurances) perform very badly.

Bonds
The target of the double top pattern was recently reached (4.3%).
I suspect that the correction is over and that renewed strenght may follow towards 4.5%.

Brent
Still bullish but need a rest after the strong rise.
The 80$ level is a strong resistance and on the weekly chart you can see that the Brent was not able to break above it. Moreover the TD Combo indicator is now flashing a sell signal (arrow).

Euro
Long term bullish.Short-term the rate should stay above 1.365 in order to keep the pressure to the upside with the upper rising trendline as next target/resistance levels.