Technical Weekly 23102006

Equities
Equity market remains overbought, but bullish.
The only concern is that consensus is now becoming complacent about the current advance.
Volatility for instance is very low and even though the market can continue to advance while these volatility indices remain low, it is a sign of overconfidence and complacency.
In any case, there are no confirmed sell signals, so the major trend remains upward.
The chart below shows the DJ Euro Stoxx 50 facing resistance around the 4000 points psychological level.
The next upside target according to Fibonacci projection is located around 4070.















Commodities
This week, we want to focus your attention to the Dow Jones-AIG Agriculture.
The Dow Jones-AIG Agriculture Sub-Index consists of the following seven commodity futures: Coffee, Corn, Cotton, Soybeans, Soybean Oil, Sugar, and Wheat.
Technically speaking the monthly (long term) chart looks very promising.
After a very sharp decline from the highs at 185 (November 1997) to the lows around 87 (November 2001) the index seems to be building a large base formation.
The montly Macd indicator is also close to validate a long- term buy signal.














Euro-dollar
Last week, the rate was able to rebound on the 1.25 support zone.
I favor a technical bounce from this support because most daily indicators are now in bullish mode.(see macd and slow stochastic on the chart)
Only a break below 1.25 would modify my scenario.














German 10 Year Yield
Yields continue to rise and seem to be breaking out above resistances.
On a short- term basis bond yields may have been forming a minor reverse head & shoulder pattern since late August.
The upside target of this pattern is located above the psychological level of 4%.