Amsterdam´s AEX could play a key role to assess the European economies´strength

Stocks markets will have to face a difficult week, mainly due to the fact that the uncertainty continues to be the most relevant feature in the short-term scenario. Weakest European markets have spread fears on investors worldwide. As a result, nor stakeholders neither bondholders have been exempt from concerns about their investments yields. So far, gold has been the refuge for frightened people, keen to flee from risky assets. However, even metals seem to have brought about doubts on their rally sustainability.

Previous weeks, attention has focused on Mediterranean countries such as Greece, Portugal and Spain and their capability to meet their financial commitments. Their 10-year bonds incremental yields reveal their overall deterioration, which, especially in the case of the Hellenic country, could finish in default. Despite the endeavours of International Institutions, such as the International Monetary Fund and the European Central Bank, which have repeatedly stated that they strongly backed those European countries that are in trouble, the euro has consistently plunged against the dollar and other currencies. This fact demonstrates that the market shows little or none conviction about the Financial regulators ´speech.

Mediterranean countries have seen their stocks markets plummeting in the last months. The Spain´s Ibex have decreased a 26% since the first week of 2010 and the Greek and Portuguese Indexes have equally undergone severe corrections. By contrast, the Dow Jones and the Germany´s Dax have become the strongholds where money has tried to look for refuge.

Market direction could be a goal complicate to forecast in the short term. Perhaps the behaviour of the Stocks Markets of some Northern European countries could contribute to clarify a short and middle-term strategy. The Amsterdam´s AEX, for instance, has experienced so far a similar movement to the German Index. Nevertheless, last week, prices broke down its 200-session moving average, which has worsened significantly its technical situation, because this index had already a negative element: its primary rising trendline had been lost at the beginning of May.

Therefore, next week the Dutch index will have to prove its ability to be free from Southern European economies ´contagion. There are two key elements which should behave as the crucial tests to determine their future for the coming quarters: the supports of 310 and 300 points. If they eventually are broken, the bearish pressure could lead the AEX to a significant correction. Otherwise, the likelihood to recover its upward structure would remain intact.

There is a single bullish technical element that could suffice to make the AEX experience an increase in the short-term: the positive divergence that the RSI is forming. However, it will have to struggle with too many negative aspects which rule over the market´s sentiment.

The technical recommendation for the AEX is to open short positions if prices break the level of  295 points. It´s advisable to set a stop loss in the level of 335 points.

European Markets: Does History repeat itself?

The technical movement that Stock markets are carrying out is very similar to the recovery cycle that they developed in 2004. At least this conclusion could be made after the analysis of the French Index, Cac 40.

The current chart compares two different moments, 2004 and 2010, which may be considered as analogous from a technical perspective.

In 2004 the market had soared a stunning 57% since March 2003. Subsequently, the Parisian Index got stuck for the whole year in a lateral range, which in the chart appears as a 12%-height rectangle. Prices hit the support of this pattern (the zone of 3.500 points) three times. Finally, it demonstrated that it was strong enough to ensure the continuity of its rising long-term structure.

Currently, the situation is very alike. Despite the collapse of the European Stocks markets in May 2010, the balance remains, as it shows the new rectangle formed by the support of 3.500 and the resistance of 4.000 points. The first level is playing a key role in the short term because it concentrates the purchasing interest. This area has been reached for three times in the last seven months as it happened in 2004.

Despite the general weakness of the Financial Markets, if History repeats itself, the main French Index could withstand the bearish pressure. In that case, the index could deploy the same movement that in 2005 when it eventually broke the top of the rectangle, which brought about a new upward impulse that led the CAC very close to an all-time high.

Consequently, the support of 3.500 points is a key level to watch over, because the likelihood of a similar move to the one that happened in 2004 will depend on its resilience. 

The recommendation is to hold. Stop loss in 3.300 points.

Dollar against euro: The support of 1.25 is ready to try to stop the bearish pressure

The currency of the European Monetary Union has continued to demonstrated its weakness, especially after the bail-out approval that Greece is waiting for. This final decision would be key to prevent the Hellenic country from having to declare a default. However, despite the strong support that the other members of the European Union has revealed and the remarks of the President of the European Central Bank, Jean Claude Trichet, at the moment there is not guarantee that other Mediterranean economies could avoid a financial contagion.

This chart, which shows the evolution of the euro against the American dollar expresses in some way the overall situation we have just described. As we analyzed in our last report, http://timelymarkets.blogspot.com/2010/03/euro-against-dollar-european-currencys.html , there was a serious likelihood that the european currency could reach the level of 1.30. The next sessions involved a brief recovery, after a rebound to the resistance of 1.37. But, the aforementioned events brought about a sharp collapse. Even the strong support of the 1.30 has been unable to offset such a intense bearish movement.

The scenario for the euro remain downwards. The next support, placed in 1.25, should concentrate new bullish interest. Because of that, this area could be a strategic level to open long positions for those investors who are less risk averse.

The recommendation is to buy euros at the zone of 1.25. We´d close this position as long as it hits again the level of 1.30 -1.31. Stop loss in 1.23.

Dow and Dax shine among Securities markets, but they reach their goals

The Dow Jones and the Dax have demonstrated so far their resilience among the most representative worldwide Stocks Markets. As their charts show, they have been able to maintain their upward tendencies during the past two months, despite the general weakness which many Securities Indexes have been immersed in.

Nevertheless, their technical situation has begun to deteriorate, which can led both of them to look for lower goals. However, the strategy remains unchanged as it should focus to watch over the first supports: 10.960 and 6.140 points respectively.

The recommendation for the German Index is to sell if prices finally break the support of 6.140 points. Stop loss in the level of 6.350 points.

As for the Dow Jones the recommendation is to sell if prices break the level of 10.940 points. Stop loss in 11.250 points.

Dow Jones and Dax: Markets correction consequences

Last Friday alleged fraud accusations against Goldman Sachs brought about a significant correction in the Stock Markets, whose technical consequences have differed if we compare both North American and European main securities Indexes.

For instance, the most representative German Index, the Dax, has experienced a short-term scenario change towards a more bearish situation. In fact, its accelerating line is beginning to undergo a bearish pressure increase. As a result, its rising structure can be seriously damaged. The significant decrease that European Stocks suffered last week was, on the one hand, the result from a evident overbought situation that technical indicators had begun to show and, on the other, an excuse that investors had been looking for during the last sessions to make a profit-taking movement.

So far, it´s unclear which the extend of the correction could be. It will depend on the 6.140 support resilience. If it eventually can´t withstand the selling pressure, the accelerating trend will be considered as definitely lost. In that case, the decrease goal would be its primary rising trend, which passes by the level of 5.900 - 5.750 points. By contrast, if it concentrates enough buying interest, its short-term rising structure could be re-built again.

The recommendation is to close the long strategy if prices finally break the support of 6.140 points. Stop loss in 6.300 points.

The Dow Jones has demonstrated so far a healthier situation that European indexes. In fact, the 14% decline that the aforementioned banking investment firm underwent on Friday didn´t interrupt the rising movement that the most popular North American Index has been carried out since the beginning of February.

However, the fall was so abrupt, that a more intense falling technical movement could be unleashed in the coming sessions. To assess the likelihood of such a significant fall is very important to watch over the level of 10.950 points (whose role is absolutely key)  and secondly, the support of 10.850 points (by far less significant, although it should theoretically be more resilient).

The recommendation is to open short positions if prices break the level of 10.800 points. Stop loss in 11.150 points.

Allianz: As many German securities, its technical situation has improved significantly

Allianz has been one of the Eurostoxx 50 index´s components whose performance has been more outstanding int the past eight weeks. Since February the eigth, the Financial services provider has soared a 22%.

Despite the vertical increase, its technical situation hasn´t experienced any deterioration at all. So far, it has formed two consecutives higher-lows. The first one around the level of 81 euros and the next over the area of 87 euros. This investors' willingness to pay higher prices points out that the German company´s scenario is gradually improving. Currently, the prices are trying to accumulate bullish interest near the zone of 92 - 92.50 euros. As a result, this area could become a new support which would confirm its short-term upward trend.

Apart from these successive supports, there is a second crucial element: its rising channel, which has been so far an excellent framework to indicate the prices the way to follow. In other words, this channel has driven perfectly the share prices towards a substantial recovery, which has been consolidated after the resistance of 90.00 euros break-up.

The correction that Allianz has experienced this week has been very useful to diminish the overbought situations of several technical indicators, such as Williams and Stochastic. Consequently, the prices could keep upward potential yet.

The recommendation is to watch over the level of 92 euros. As long as it remains intact, a short-term investor should keep Allianz within his/her portfolio. It's advisable to set a stop loss in the area of 91.50 euros.

Nokia: Be attentive to the level of 12 euros. A potential rising cycle could be coming

As we´ve seen in previous analysis, most Stocks Markets have initiated a remarkable recovery since March 2009. As a result, many securities have experienced significant increases whose amount depends on the industry, the geographical area and many other different variables related to Microeconomics and Macroeconomics. 

Despite this general improvement, the mobile phone supplier has remained in a lateral situation, whose technical movement has swang between the support of 8 euros and the resistance of 11.50 - 12.00 euros. If we focus on the current chart, once the falling channel was broken up, Nokia´s technical situation can be characterized by a lasting steadiness for the whole 2009. In fact, its recovery beginning can´t be properly considered until February 2010, when bullish positions started to demonstrate that could overpower bearing interests.

The Finnish company is going to face a key level during the coming sessions. The resistance of 12 euros will decide if this security can eventually develop a new rising cycle. Some leading indicators are too overbought, which could prevent the telecom enterprise from continuing going up. Anyway, its technical outlook has improved considerably.

The recommendation is to open long positions if it overtakes the level of 12.20 euros or it undergoes a correction to the zone of 11.30-11.40 euros. Stop loss in 10.95 euros.

Spain: Its main Stock market Index, Ibex 35, reflects a troublesome economy

The Spanish Stock Market has had one of the poorest performances amongst the European countries in 2010. So far, the Ibex 35, its most representative Index, has decreased about a 7%, as the German DAX or the French CAC 40 have increased a 5% and a 3% respectively. Its behaviour seems to be more sluggish if we compare with another European indexes, especially Nordic Economies, such as Finland, whose Index HEX has soared around a 13% during the first quarter of this year.

The collapse of some of the most significant “blue chips”, such as “Santander” or “BBVA”, that plumbed 37% and 30% between January the eleventh and February the twenty sixth, has partially explained the weak situation of the Spanish market. Apart from these multinational banks, Telefonica had fallen a 19% in the same period. We have take into account that this three securities account for a 50% of the Ibex 35.

Despite this apparently discouraging situation, a fair analysis should take into consideration the fact that these stocks had a staggering recovery last year. Santander, for instance, soared a 235% in the last three quarters of 2009. Therefore, its correction of 37% should not be dubbed as “worrying” from a long-term perspective.

Once the one-year scenario has been dissected, the main question is what investor can expect for the coming months. If we examine in detail its technical situation, there are relevant elements to look at. The key level of 11.200 points is going to play a crucial role in the short term. So far, it has prevented the Ibex from carrying out an upwards movement, like the European ones we have previously mentioned. If this area was broken up, the Ibex would still keep a potential recovery.

This chart shows a second important factor that can influence the result: the psychological zone of 10.000 points behaved as a bottom two times. The subsequent break-up of the 10.750-point level could have made an impartial spectator think that the Spanish market is trying to develop a double-bottom pattern and that the falling stage could be close to an end.

However, despite this appealing hypothesis for bullish strategies, the resistance of 11.200 points, which was a phenomenal five-month support, remains decisive. If finally it´s broken up, the way to the next resistance (12.250 points) will have been cleared. Otherwise, the Ibex will stay in a range-bound situation between 10.750 and 11.200 points.

The recommendation is to hold. Stop loss in 10.680 points.

DAX: It achieves the goal of its inverse head-and-shoulders pattern

In the video tutorial we published at the beginning of March,http://timelymarkets.blogspot.com/search/label/Video%20Tutorial we explained that the main German Index could develop an inverse head-and-shoulders pattern which should lead the Dax to the highest level that was reached on January the eleventh: 6.100 points. The rise measurement was done according to the basic principles of Technical Analysis: once the neckline is broken up, the upwards movement should coincide with the head height. The rising tendency which was born in March doesn´t seem to have finished. However, the presence of a resistance in that level of 6.100 points should be considered as a call for prudence.

The recommendation is to sell partially around the area of 6.050 - 6.100 points and to close totally long positions if it achieves the next goal, between the zone of 6.250 and 6.300 points.

Euro against dollar: the goal is achieved

As we pointed out in our last analysis, http://timelymarkets.blogspot.com/2010/02/el-euro-no-da-senales-tecnicas-de.html ,the euro had no many chances to experience a sustainable recovery against the North American currency. A potential rebound could essentially be brought about by the positive divergences that the indicador RSI was showed by comparison with the prices. However, the dominant element within the short term scenario was the incipient downward trend which began to develop itself by the beginning of December 2009.

So far, its key role remains unchanged. Because of that, this falling tendency has been able to interrupt this apparently short-lived rise of the European currency.
In addition, the overbought situation of Momentum provides more evidence that the euro could be pushed down by the falling scenario.
Consequently, for the time being, there is not reason to abandon bearish positions. Therefore, our recommendation is to close long positions. We establish a stop loss in 1,3900 dollars/euro.

Nokia, is the lateral movement over?

The Finnish Telecom company underwent a staggering fall in the Stock Markets, from the level of 28 euros at the last quarter of 2007 to 7 euros by the beginning of March 2009. Since then, Nokia has kept a lateral movement between the support of 8.40 euros and two resistances, which are placed approximately on the level of 11 and 12 euros. This technical situation has led to a balance between bearish and bullish positions which involves an ideal scenario to make an aggressive trade for short-term investors. Currently, the horizontal situation remains unchanged. Therefore, the sooner the prices approach this resistances, long strategies should be closed. Volume continues being very low. Consequently, there are not technical reasons to open a long strategy in the short run.

If prices overtake the resistance of 12 euros, the situation would be completely different. In that case, bullish strengths would take over the battlefield and it would be the chance to initiate a long strategy.

Eurostoxx 50. Difficulties to develop a reversal pattern

The Eurostoxx 50 had appeared to be very weak during 2010, especially after the rising trendline breakout in January 15th. Since that moment, the most coherent strategy has been the bearish one. However, prices seem to have found out a reliable support in the short term: the level of 2.670 points. A reversal pattern of shoulder-head-shoulder is beginning to appear. The key points to ensure a successful long strategy is, on the one hand, to go through the neckline, and on the other hand, to do it with the technical indicators in a neutral position. Some fast indicators such as Williams and Stochastics are overbought. Therefore, it should be necessary to have a rest before trying more ambitious goals.

Technical recommendation is to take advantage of possible corrections to the level of 2.750 points, to add long positions. Stop loss in 2.650 points.

Dax: To be attentive is a must. A pattern of shoulder-head-shoulder might be carried out

The main German index was up about 69% since March 2009 to December 2009. During this period it was able to keep an upwards tendency. As soon as prices touched that trend, quick upwards movements were brought about. This scenario indeed facilitated the proper strategy: according to Technical Analysis basic principles, a trader must be coherent with a trend direction. Therefore, long positions should have been kept for the last three quarters of 2009. However, by the beginning of the second fortnight of January 2010, the situation changed dramatically. That tendency, which had played a key role, was broken and therefore, it didn't make sense to maintain the same strategy.
It was difficult to evaluate the consequences of such a tendency break, especially because the volume was significantly higher than the monthly average. From that moment, perhaps the indicator which has taken the lead in the new scenario has been the 200-session moving average. This indicator has allowed the Dax to build the foundations of its recovery. In the short term, it´s developing an inverse shoulder-head-shoulder. The most important element is the neckline that the level of 5.735 represents. If prices pierce it with an important volume increase, the next goal would be the high levels of 2010, that´s 6.100, which implies a recovery of 6.30%.
From a Technical point of view, we recommend to open long position above 5.750 and a stop loss on 5.480.

BBVA puede empezar a recuperarse de las fuertes caídas de este año

BBVA acumula unas caídas de un 30% desde que en enero alcanzase los 13,30 euros. Aunque aún no se observa una figura de cambio de tendencia, el RSI comienza a mostrar divergencias alcistas que pudieran llevar al valor a vivir un período de recuperación si éstas llegasen a desarrollarse. La recomendación es de compra para trading con stop loss en 9,00 euros.

El Eurostoxx 50 se estabiliza en un rango lateral entre 2.600 y 2.800

La media móvil de 200 sesiones ha jugado un papel decisivo en la interrupción de la corrección bajista de este año. En el corto plazo su movimiento se ha estabilizado entre los 2.600 y los 2.800 puntos, que pasan a convertirse en las dos zonas de referencia de este índice. La posibilidad de volver a dirigirse a los máximos de principios de 2010 pasa por la superación de la resistencia de los 2.800. Por el contrario, la perforación de los 2.600 añadiría potencial bajista a su situación técnica. La recomendación es mantener posiciones largas con stop loss en 2.550.

El Bund, prudencia ante la verticalidad de su reacción alcista.

El Bund alemán, después de no haber desarrollado una estructura chartista de caída similar a una cabeza y hombros, ha tenido una precipitada reacción alcista hasta el límite superior de dicho canal. La excesiva verticalidad de la subida, unido a la presencia de una resistencia en los 124.50, aconsejan actuar con prudencia en los niveles de precios actuales. Se recomienda entrar en posiciones cortas con stop loss en 125.50

Análisis de la correlación positiva entre el dólar/euro y el Dax de Alemania

Si analizamos de manera conjunta por una parte, la evolución de la cotización del euro frente a la divisa norteamericana, y por otra, el comportamiento del Dax de Frankfurt, llegamos a la conclusión de que su correlación es positiva con una Beta cercana a 1, a excepción de algunas sesiones a finales de diciembre de 2009. Durante 2010 el desplome de la moneda única europea se ha vistado acompañada de un descenso muy significativo del indicador germano. La cuestión ahora sería si una recuperación del euro podría implicar consecuencias alcistas para el Dax. A tenor de lo sucedido en el pasado, existen indicios para pensar que así podría ser. Es necesario, en consecuencia, calibrar esas posibilidades de rebote al alza de aquél. En principio, el único argumento a favor de un rebote es la divergencia alcista del RSI, que podría apuntar a una ralentización de su ritmo de caída. A pesar de tratarse del único punto a favor, no es un argumento despreciable. La consecuencia podría ser una reacción al alza hasta niveles próximos a los 1,40 dólares por euro. Ello abriría la posibilidad de una reacción alcista al Dax hasta los máximos de principios de 2010. La primera prueba de fuego sería para el índice alemán la resistencia de los 5.750. La superación de este nivel favorecería la hipótesis apuntada anteriormente. En caso contrario, seguiría el escenario de debilidad técnica.

El nivel psicológico de los 5.000 puntos del Footsie 100 impulsa una reacción alcista

La importante recuperación del principal índice londinense ha conseguido una mejora significativa en su situación técnica. El origen de la misma ha estado en la solidez defensiva demostrada por el nivel psicológico de los 5.000 puntos. Esa reacción alcista posterior ha conseguido poner fin a la directriz bajista que había dominado este índice durante gran parte de 2010. La verticalidad de la subida, sin embargo, ha dejado algún indicador técnico como el Stochastic demasiado sobrecomprado. En consecuencia no es descartable una cierta consolidación de las subidas durante esta semana con el objeto de disminuir esa sobrecompra acumulada.
La recomendación es aprovechar caídas para aumentar posiciones compradoras con un stop loss en 5.100 puntos.

Siemens realiza un desplazamiento lateral entre los 60 y los 68 euros

Uno de los miembros del DJ Eurostoxx 50, Siemens, presenta un comportamiento de lateralidad. La recomendación es aprovechar esta situación, entrando en posiciones largas en las cercanías de los 60 euros y vender a medida que el valor se aproxime a la resistencia de los 68 euros.

El Ibex comienza a reaccionar al alza tras el período correctivo desde los máximos de 12.000

El índice selectivo del mercado español ha dado muestras de una profunda debilidad a lo largo de 2010, liderando el porcentaje de caídas entre los mercados de valores europeos. Ayer superó una decisiva resistencia en la zona de 10.550 puntos. El principal inconveniente sigue siendo el escaso volumen de negociación que acompaña a las subidas.

La recomendación técnica es abrir posiciones largas si supera los 10.600 puntos estableciendo como primer objetivo los 11.300 y un stop loss en 10.250