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.