Technical Weekly 21082006

EQUITIES
The DJ Euro Stoxx 50 was able to break above resistance (black line-chart 1) last week.
This was also the case for most indices that have successfully lifted out of the two-month “W” pattern.(double bottom)
Overall the short-term technicals look basically positive.
However, this positive technical event was not validating by volume and the index is now facing important resistance near 3870.
The worst month of the year historically has been September (chart 2 for the Dax since 1974), which means that the return/risk for the equity markets isn’t favourable.
It is also still too early to say that we are going to have an additional down leg but we keep a risk averse strategy so as to be in a position to take advantage of bargain values that can be expected in the autumn.














COMMODITIES
Brent
The Brent is now close to major support and oversold.I expect a rebound this week.















Gold
The long-term uptrend remains intact (the 200 day moving average is still rising). The medium-term is neutral (triangle pattern).On the short –term basis a small bearish double top formation could be developing.
















GERMAN 10 YEAR YIELD
In the US, yields reached their lows of the week on Friday and touched levels last seen in March/April following the lower than expected release of the Michigan consumer confidence.
This is one more sign that the economy is weakening.
It now seems a market consensus that the Fed is taming inflation and will keep interest rates steady.
That is usually good news for bond prices, which do better in a slowing economy.
The monthly chart of the 10-year German yield shows the price testing a major down- trend-line connecting the highs of 1990, 1994, 2002 and 2006.
Technically, this is a logical spot for bond prices to start doing better and bond yields (which move in the opposite direction) to start dropping.
This place would be a logical spot for bond yields to start to weaken as the monthly stochastics indicator is overbought and close to give a sell signal.(see arrow on chart)
The 4.9% support level for the German 10 year yield is thus an important support to watch.














EURO-DOLLAR
The euro remains trapped in a long-term uptrend.As long as the long -term support line (in red) currently at 1.25 continues to hold, the outlook would remain higher with 1.30 as next resistance and 1.34 as next target.