Technical Analyst, Saxo Bank
Summary: European Equity Indices have reversed its downtrends and are now pointing to higher levels. Question is whether they can break resistance levels. Strength Indicator is still showing divergence can they be reversed?
BEL20 is frontrunner with a confirmed uptrend.
DAX closed yesterday above 14,150 reversing the very short-term downtrend. The big question is now whether Bulls can lift the Index to test resistance at around 14,654. If DAX closes above the spike from 13th December at 14,675 DAX will confirm its medium-term uptrend.
Minor resistance at 14,900.
If Buyers lose power and DAX slides to close back below 14,150 down trend is likely to resume.
There is still massive RSI divergence, but RSI has not closed below 40 threshold i.e., still showing positive sentiment. If RSI closes above its falling trendline it could be a good indication that the uptrend will continue.
Weekly RSI is showing positive sentiment supporting the bullish view. Resistance at 14,925
Euro Stoxx 50 has bounced off its 55 daily SMA and is moving towards 4K. Similar picture as on DAX with regards to RSI. A close above its falling trendline will indicate Euro Stoxx 50 is likely to take out its December peak at 4,035. If Euro Stoxx 50 does close above 4,035 a move to the 0.786 retracement at 4,165 is likely. For Euro Stoxx 50 to reverse this picture a close below 3,792 is needed.
AEX25. 715 is the key level for AEX. A close above and the Index is back in bullish territory with potential to 736-741 i.e., December peak.
If AEX fails to close above 715 the Index could slide back towards 690. A break below 690 is likely to fuel a sell-off down to 670-660.
BEL20 closed yesterday above 3,767 thereby confirming its uptrend. There is still divergence on RSI but if BEL20 moves higher that divergence will be traded out and furthter confirm upside potential. Resistance at around 3,875. A close below 3,631 will reverse the uptrend
CAC40 is back in bullish mode and could test the resistnace at around 6,830. A close above is slikely to extend the uptrend furhter. However, 7K could be a struggle to break with resistance at around 6,986. If CAC40 closes above 7K there is no restistance until previous highs at 7,385.
For this bullish scenario to be reversed a close below 6,470.
There is still massive RSI divergence, but RSI has not closed below 40 threshold i.e., still showing positive sentiment. If RSI closes above its falling trendline it could be a good indication that the uptrend will continue.
RSI divergence: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.