European Resistance

European Resistance

European stock markets continue to trade in bearish mode. In December 2018, a key support level, which had held since the 2009 lows, was broken. The recent rally has made it back to that trend line, which is a common occurrence, but support has now turned to resistance. The STOXX Europe 600 Index closed on Friday at 358, below its long-term, downward-trending 50-week moving average, which closed on Friday at 372. The Relative Strength Index for $STOXX600 is still below 50, which only happens in bearish declines and momentum (MACD) is also clearly trending lower. Each of these metrics needs to reverse higher before I can take a position in EU equities.

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Trouble Brewing in Europe

Trouble Brewing in Europe

I have been following the performance of the STOXX Europe 600 Index with interest, waiting to see if it could muster the strength to break out of the triangle consolidation that has formed since European stocks peaked in 2015. I was unsure whether the market would break out higher or lower, so I have been patiently waiting for the market to show its hand. A break higher and I planned to take a position in EU stocks in the Active Asset Allocator; a break lower and an overweight holding in cash would remain the order of the day.

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Hanging in There...

Hanging in There...

European stocks continue to consolidate below multi-decade resistance. A breakout above 400-415 on the Eurostoxx 600 Index would be a very bullish development and I would take a position in EU shares in the Active Asset Allocator if a break higher was confirmed. European shares have so far failed to muster the strength to break out and are losing strength and at risk of breaking down. I have marked on the chart key periods when the Relative Strength Index (RSI) has traded below 50.

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The Year of Divergence

The Year of Divergence

While the S&P has added +12% in local currency terms this year, the United States is the only major market in positive territory year-to-date. European stock markets are rolling over while many emerging markets appear to be grappling with developing crises. The technical indicators I follow are confirming the weakening trend across equity markets. Perhaps we are experiencing another correction before the bull market resumes…

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