Technical weekly 11012007

Equities

The new year on the US and European market got off to one of the worst starts in recent memory, with the SP 500 and the Stoxx 600 breaking below support zone.

Despite the amplification of the correction in the United States and the opening of bearish tendencies on the three principal indices (SP 500, dow Jones and the Nasdaq), the European narrow indices (Footsie 100, Eurostoxx 50, Cac 40, Dax 30) resist on or around their decisive supports. Currently, there is thus exists a dichotomy between the small and mid caps and the large caps which are overall considered as safe haven.Now that bearish tendencies were open on the three American indices, the realization of pullbacks bulls (which will come to reinforce these mid-term bearish tendencies) is foreseen at the immediate horizon. In Europe, the good resistance of the narrow indices during the American corrections makes it possible to think that many stocks are able to benefit from pullbacks and to rebound appreciably on a short term basis. That will not change their trend but will allow to sell under better conditions that in the beginning of the year.

The recent sector moves have been easy to track.

Investors have started the year buying defensive sectors (health care, telecom, utilities, oil majors) and selling cyclicals (auto, industrials, retail).

Bonds

No change, since May, the German 10 year bond yields are trading in a downside trading range. A move towards 4% is a high probability.

Brent(Oil)

The Brent has reached our target is still challenging the ascending support trend-line.A break below this support could extend the correction towards 90 $ but the long term trend is still up.

Euro

The recent correction was short lived and the rate is now close to challenge the 1.5 resistance level. As it is now overbought and close to resistance zone, I think that a more significant rise is unlikely for the coming days/weeks.