Blood on the street!

DJ EURO STOXX 50 members :the picture is clear, indicators are bearish(red) and a lot of (financial) stocks are breaking down on heavy volume.

click on the tables to enlarge

Bearish again?

The SP500 and the DJ EURO STOXX 50 have broken their supports.The next 2 charts are thus clearly bearish.

SP 500 hourly chart

DJ EURO STOXX 50 daily chart

The long term picture is still "bull" but as you can see on the weekly term chart of the SP 500, we are approaching the lower uptrend line that was active since the beginning of the bull market ( 2003).
What is worriyng to me is that most long -term indicators (like the MACD) are already bearish.

Technical scoring Stoxx sectors

After the recent correction I take a look at European sectors.
This is a technical scoring from 0 to 10 points based on the positions of the price versus different moving averages.

After the steep decline, the presence of the telcos&technos in the top 3 may astonish some people.

Technical scenari

The 4 technical scenarii for the equity markets for the coming weeks/months coming from ODDO technical analyst Jean-Christophe Dourret.


"click on the chart to enlarge"

EURO-DOLLAR

Today the €/$ validates a short- term bearish double top.

Sentiment indicators

Here are 2 very interesting charts coming from a colleague strategist.

The first one shows that corporate insiders (corporate insiders are corporate members who has special knowledge and/or access to confidential information = smart money) are buying massively. This group of investors is usually right and one should look at their action with a momentum approach rather than a contrarian one!). This is a very encouraging sign as it translates the fact that those investors do believe that the recent correction is a good buying opportunity.

The second one comes from the sentiment index computed by Ned Davis Research.
While it did not generate a formal buy-signal yet, it indicates that investors are too pessimistic towards equity markets.

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.

Trading buy in the US?

Trading buy also in the US.

The SP 500 validates a short -term broadening pattern.

The upside target is +/- 3% higher.

Trading buy?

Today the DJ Euro Stoxx 50 validates a "trading buy" signal.
This is a good risk/reward entry point but on as you can see on the second chart there is no confirmations coming from daily indicators.

The SP 500 moves under the long term support on Friday.

Hedge funds have turned net short on S&P 500 futures and have even increased short positions over the last weeks.

On the contrary fund managers remain quite confident (complacent?)
and are still net long.

Technical Weekly 03082007

Equities
Still catching my breath from one of the worst weeks in years, I'm going to show you a short -term chart that suggest a bounce may occur in the coming days.
After a very steep decline the price DJ Euro Stoxx 50 was halted by strong support in the 4200 zone.The 200 day moving average in green and the rising lower uptrendline are technically speaking a possible good entry points for “dippers”(buyers).(chart 1)

Chart 2 is the hourly chart showing that the index is trying to make a short- term double bottom.A break above the 4315 level could open the door to the 4450 level (3% upside potential).

On the other way, the long term technical model I follow is currently in sell mode.
The model turns negative last week .

A break below the 4200 level could produce another wave of selling.

What is striking is the performance of the different sectors during the last 3 months.
Cyclicals sectors are performing very good but financials (banks&insurances) perform very badly.

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%.

Brent
Still bullish but need a rest after the strong rise.
The 80$ level is a strong resistance and on the weekly chart you can see that the Brent was not able to break above it. Moreover the TD Combo indicator is now flashing a sell signal (arrow).

Euro
Long term bullish.Short-term the rate should stay above 1.365 in order to keep the pressure to the upside with the upper rising trendline as next target/resistance levels.

Long term model

The long term technical model (metastock) I follow is currently in sell mode for the DJ Euro Stoxx 50.
The model turns negative one week ago.
The short term trend (3 months) is now down but the medium (6 months) and the long term model (1 year)
are still up.
As you can see the signals are pretty good.

click on the chart to enlarge

Bearish trend?

If the market doesn’t bounce soon (Monday or Tuesday) and the support lines break down for all the indices, then look out as we may be in a seriously bearish trend.
The 200 day moving average is the last defense.(green line)
But as the VIX spikes on Friday, I favor a rebound in the coming days.

DJ Euro Stoxx 50

SP500

VIX

BREAKDOWN!

members of the DJ Euro STOXX 50 : a lot of short term breakdowns.

"click on the table to enlarge"

A TOP IN JUNE PART 4

Back to business!

Last year in December, in the beginning of February and in the end of April,
I showed you some charts of the STOXX and the Dj Euro Stoxx50 based on Fibonacci sequence.
Elliott wave analysis with a regression line + 2 std deviations (here is the last one)

This chart suggested that the 5 and final wave will resolve in June 2007 (top)
Now this is a quick update but this time it is a daily chart (zoom).

We can see that the DJ Euro Stoxx 50 was not able to reach new highs and that it recently broken down below an important support.(small triple tops)
I'm not excessively bearish because for now this is just part of a normal correction and not a major reversal.
BUT A BREAK BELOW THE RISING LOWER UPTRENDLINE (ARROW) WILL CHANGE MY VIEW.(+/-3% downside potential left)
MY FIRST IMPRESSION IS THAT I THINK IT IS TOO SOON TO ACCUMULATE STOCKS.

HOLIDAYS

I will be on holidays during the month of July!

Je serai en vacances pendant le mois de juillet!

PS:le portefeuille constitué de 10 valeurs (big cap) a performé de 18.7% depuis le début de l'année.Les 10 valeurs présentes actuellement sont : IBA OMEGA PHARMA LONMIN PHILIPS SOLARWORLD ABENGOA TECHNIP VALLOUREC DASSAULT SYSTEM et un tracker sur le DJ Stoxx Oil&Gas.

US STRATEGISTS

Bloomberg's recent strategist survey showed a (strong) decrease in the recommended allocation for stocks.
As you can see on the charts during the last 5 years there is (often) an inverse correlation between the SP500 and the % stocks recommended.

Short term bullish

Just as it looked like the major averages were ready to break the downside (double tops), the buy-the-dips mentality came back in force.
On a short term basis the DJ Euro STOXX 50 made a morning star bullish pattern (circle).
As sentiment is still showing fears (volatiliy is rising and us investors are very bearish) in the short term the risk of a fall is decreasing and
in the same time the probability of the rise continuing is increasing.

VERY BULLISH CALL ON ENERGY STOCKS

Today the DJ Oil&Gas index validates a long term bullish breakout.As you can see the target is more than 15% higher.

The long term momentum indicator is also close to give a long term bullish signal.(the medium and short term are already positive).

Moreover the sector is now in the top 5 of my ranking system.
A few weeks ago it was in the bottom 3.

€/$

The $ bounce is over as the eur is now trading above the 1.345 resistance level.
Next target towards new highs in the coming weeks.(dot green line)

TA-double tops update

Today many equity indices are close to confirm double tops patterns.
In the US, the SP 500 is already trading below the neckline.
If they don't quickly move above this danger level (1490 for the SP 500) then I'm betting on a retest of the 200 day moving average in the coming weeks.(+-4% decline).

BONDS

After some very difficult weeks on the bond markets, we see some (early) signals that the worst could be over.
The Bund has tested the 4.70% resistance level in recent days and has now turing down.
MACD and slow Stochastic are showing sell signals, which could indicate that the correction is not over.
We could find around 4.50% the first support level, but if we break below (for now I don't think so) , bond investments could start making some money in the coming months.

PUT CALL RATIOS

Les put-call ratios sur les grands indices (graphique du Dax et du SP500 ligne noire et ligne rouge pour le put-call ratio) ont récemment atteint leur plus haut niveau.
Les investissurs (surtout les professionnels) ont donc acheté massivement des protections.
Ceci implique que ces derniers n’auront pas besoin de vendre en masse si les marchés continuent à corriger.
Cette situation est donc fort différente de ce qui s’est passé en 2000 où les investisseurs étaient forts complaisants.
Concrètement si l’on se base sur cet indicateur, le potentiel de baisse à court terme des marchés d’actions semble donc limité.

Double tops?

De nombreux indices sont sous la menace d'une figure baissière en double top.

Par exemple le SP500 dont la ligne du coup se situe à 1490 points, l'Euro Stoxx50 ou la Chine(indice CSI300).

A ce stade, aucune des figures n'est validée mais cela vaut la peine de faire très attention dans les prochains jours car un risque d'accélération baissière faisant suite à la cassure de la ligne du cou est probable.Néanmoins si baisse il y a elle devrait rester peu importante en amplitude (mais rapide en temps)

Maximun buy&sell DJ Euro STOXX 50

DJ Euro STOXX 50

L'indice se rapproche d'un soutien important mais il y a un risque d'accélération baissière (double top) si ce dernier ne tient pas.

Ce message est confirmé par le MACD qui est toujours baissier mais pas encore en-dessous du zéro et par la stochastique lente qui vient juste de valider un signal de vente.

En terme de vagues d'Elliott la vague C est toujours en cours ce qui renforce encore mon sentiment de prudence à court terme.