Technical Weekly 10122007

Equities
On a short term basis equity indices are still bullish but as you can see on this first chart of the DJ Stoxx 50, the index is now overbought and a test of the resistance is now developping.

The second chart shows the same index but with a DMI system. The DMI system is made up of three lines ; the green line which measures the buying pressure (+DMI), the red one which measures the selling pressure(-DMI) and the white line which is the ADX.
This indicator measures the difference between +DMI and –DMI and indicates the trend of the market.
For now the system is bullish.(green line above red line)

What is interesting is the level of the ADX, a level below 25 indicates that the market is caught in a trading range and a level above 25 indicates a trading market. The latest values of the ADX for major indices confirm that equity markets are now range bounded and that the “buy and hold” approach must be change into a “buy and sell” approach.
DJ EuroStox50 :ADX :18.43

SP 500 : ADX: 20.26

MSCI World : ADX :19.94
MSCI Emerging markets : ADX : 20.56

Bonds

The German 10 year bond yields are still trading around the 4% level.

The ADX indicator (16.07) indicates a sideways range between 4% and 4.25% for the coming days.

Brent(Oil)
The short-term correction continues and Brent is now challenging the 88 support zone.

A break below this support could extend the correction towards 80 $ but the long term trend is still up.

Euro

After the recent correction, the trend of the euro remains long term bullish.

As long as the euro remains above its channel support line (currently, this line lies around 1.46), the outlook would remain higher with the upper part of the channel 1.500 as first target.
A break below channel support would suggest a much larger correction.