Technical Weekly 07092007

The short-term recovery remains in place. If the SP 500 can break above key resistance at 1490 it is likely to extend its long-term uptrend and rise to another new all time high.
The pattern looks like an inverse head and shoulder pattern but needs to be confirmed because the neckline has not been broken yet.(chart 1)

On the negative side volume has been very low, this suggest that this technical recovery could end soon.
The downside risk is a move below the 1460 level that could imply a retest of the recent low around 1370.
Note that the Banks sector markedly underperformed the broad indices, the sector’s largest component in the US, Citicorp, in fact, making new lows in relative terms this week.
On the contrary the DJ Europe Stoxx Technology made a new high in relative terms.
An absolute break above the 345 resistance level would be technically very bullish.
In Europe Nokia and SAP have great charts.
We think that equity markets will remain volatile in the coming months.
Sector and stocks picking will be very important and as you can see in the tables below there are huge differences between sectors returns since the beginning of the year.(SP 500 table 1 and STOXX table 2)

Bonds
Bonds yields are testing support around the 4.2% level.
This is a very important technical level which includes the 200 day moving average.(in green) I suspect that the correction is over and that renewed strenght may follow soon.

Brent
After a rebound on the 68 $ support, further good progress is expected towards the 80 $ resistance zone.(rectangle on the chart)A break above this year’s high would be very bullish.

Euro
After having validated a minor double top pattern in July the rate rebounds on the 1.343 support level.
The uptrend remains intact, with the upper rising trendline as next target/resistance levels.