Technical Weekly 21012008

Equities
Last week was another bearish week for the market. It is now clear that the technical outlook remains bearish following the recent breakdown below key major supports. I also still think that technical bounces could start anytime,(see last weekly) because most indices are deeply oversold and sentiment is now very bearish. In these conditions, we do not think that the current downside move will be sustained. Nevertheless, it remains extremely difficult to time such technical bounces and even more dangerous to trade them, which confirms that the mid-term trend has changed. In a bear market, technical bounces are always surprising and often preceded by unexpected downside accelerations. So, due to the technical damage on long term trending indicators, we can not anticipate a major bullish reversal at this stage (even if we anticipate a sharp but short term rebound) and prefer to wait for a more significant bottom or at least a stabilization to start some bottom fishing. The long term chart of the Stoxx 600 presents a long-term view, which makes it more clear how serious the situation is. The questions remain as to how far down prices will go and how long the bear market will last? In the shorter term we have a minimum downside projection from the bearish descending triangle of 300-310, which correspond to the bottom of wave 4. That could mark a medium term low from which a bear market rally (wave B) could rise.

Bonds

Last week I said that a move towards the 4% was a high probability. This week, we believe a deep break below this level seems unlikely. For the coming months we can not exclude the possibility of a deeper correction towards the 3.65%.

Brent(Oil)

No change, the Brent is still correcting and a clear breakdown below the neckline (see arrow on chart) could validate a double top pattern. In this case the target of this bearish pattern would be 80$.

Euro

Start a pullback last week, this correction may continue towards 1.43. There is a strong resistance around 1.5.