Archive for the ‘European Markets’ Category
Frankfurt’s Infineon Comes Up Short
Here is Frankfurt’s one and only INFINEON TECH, who has recently started a new upwards trend. Upon first glance at the chart below, it is my gut reaction to say “good time to buy” because it has indeed hit the supporting upwards trend line and should be at an optimum price for a strong buy. But technical factors, and too many of them, are in the way.
For one, a very natural line can be drawn above the current trend. This and the line of the trend itself form a pattern we call an opening fan. These can become unstable as they run their course and for the short term, these 6 weeks are enough. The pattern is expected to break soon and it will probably be in the downwards direction because several technical factors are here to influence this.
For one, the Moving Average 5 has been crossed by the MA 21 and the MA 13 is on its way to do the same. Five days ago the Directional Movement DI+(blue) crossed the DI-(pink) going downwards, a clear sell signal. And the Price Oscillator shows a slope down to zero and heading into negative territory, this being another strong sell signal. Add to this failure to be supported at current levels, and the fact that the nearest support below is at 4.43, about 10% below current market price, and here you have a good case for a sell-short position on this darling equity.
This is the way the Chart looks:
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Is The FTSE 100 Index Headed Down?
The FTSE 100 is close to providing the major bear signal needed to prompt a sustained break below the 5000.00 level, which in turn would attract a fresh wave of bear pressure to 4365.00, but potentially 4160.00. The index of the U.K.’s blue-chip companies has been on the back foot ever since the collapse off the 2010 high at 5833.73 in mid-April. The age-old adage suggesting stock investors should sell in May and go away has been an accurate one this year, and a series of lower highs and lower lows has been evident since then. However, since the beginning of May, the lower lows have met an unusual and very strong negative divergence in the RSI, a possible foretell of a bullish break that is so unexpected by most Market Analysts and Technicians. For details, see the FTSE 100 daily chart for details.
This is the way the Chart looks:
This setback can be broken down into impulsive and subdividing downwards moving waves, where the May 7 reaction low at 5045.30 marks the first impulsive wave low, followed by the corrective rally to 5435.99. The subsequent impulsive move downwards then starts to subdivide after setting a lower low at 4898.49 on May 25, before correcting higher to 5262.50 last week.
Looking closely at that June 3 reaction high at 5262.50 reveals it to be a bull failure/bull trap high, and dominant bears are looking to force a break below this week’s low at 4984.66 to expose the 4898.49 reaction low. A break through this 4898.49 low would provide the strong sell signal, as a subdivided third wave decline is usually a very powerful destructive wave, initially exposing the 4647.00 area where an equality target and the 50% Fibonacci Retracement levels of the 3460.71/5833.73 rally coincide.
However, wave extensions larger than 1:1 are usually associated with this type of decline, exposing congested support between 4365.00 and 4392.82, and possibly the 4160.00 target, being a 1.618 extension target projected off the 5435.99 lower reaction high. Meeting this 4160.00 target would represent a decline of approximately 18% from current levels.
To question the intensity of the prospective bearish outlook, a break above the 5262.50 bull failure high is needed. However, to completely negate the bear threat would require a break above the 5435.99 high. As I mentioned above, the strength of the break possibility is heightened by the RSI divergence and other important technical factors. If one looks at the world picture, he sees bottoming and retesting supports all over. The turnaround of the World Markets may be coming and there is ample reason to believe in this.
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European Stock and Currency Summary
The Federal Reserve Bank chairman Ted Bernanke commented Tuesday that the U.S. recovery will remain intact. This continues to lend a prop to risk appetite as did talk that Thursday’s China export data will show a 50% increase. European equity exchanges traded positive throughout the session.
The risk currencies advanced, CDS rates came down and peripheral Euro Dollar zone bond rates came down somewhat. EUR/USD nudged 1.20 from a 1.1924 low, GBP/USD recovered from its ratings-worry sell off Tuesday adding one cent to 1.4534, despite a surprise widening in the visible trade balance to GBP7.2B. USD/JPY pivoted around 91.50. The main European indices are up around 0.4%, gold is down $3 at 1234oz after printing a lifetime high Tuesday and oil is up $1 at $73bbl.
Where the turnarounds are happening are all around strong support/resistance lines all historic in importance. The Dollar Index Futures hit a major resistance line yesterday at an in day high above 89 points and retreated. This seems to be the end of the monthly upwards trend that started when prices broke the long-term symmetric triangle upwards as I pointed in my previous article. The Futures Index will not, it seems to me, make its intended goal of 92.3 points, but this is true for most pattern breaks. It is hard to say for now what will be with the US Dollar rates around the world, but the upswing seems to be ended when looking at Dollar/World Currency pairs as they end streaks and hit s/r lines in addition to seeing the Dollar Index Futures as is shown on the Chart Below.
This is the way the Chart looks:
