Technical weekly 12112007

Equities
A few weeks ago the DJ Euro Stoxx 50 was trying (for the second time this year) to challenge new highs.
Unfortunately the index fails to do so and after a double top pattern, breaks quickly below important support zone.
The all move move since the bottom in August could be consider as a bearish rising wegde pattern.
The rising wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows.
The correction that follows is often steep and quick in time.
The first downside target is 4200 and the next one is the August low.














In October I said that in the long-term the general technical environment was in degradation but that I did not observe sell signals validated on this horizon.
This scenario has now changed and as you can see in the table below, momentum as measured by the Macd indicator is now bearish on all time frames, meaning that we should see a continuation of the downtrend in the near term.






Bonds
As usual bonds rally when stocks fall and the German 10 year yield breaks below the important rising uptrend line active since December 2006.














Moreover the bonds/equities ratio Ifollow is close (but no signal yet-circle on the chart below) to give a buy signal for the first time since 2002.
A breakdown below August low would be very bullish for bonds.















Brent
The Brent has now reached all of my short term targets.(the last one was 94$) and is now overbought on all time frames.
The uptrend still prevails but short-term profit taking could occur soon.














Euro














Long term bullish but very overbought as the rate is now trading in the top half of the risng channel on the weekly chart.
But for now I don’t see any bearish signal yet.