Europe: Bullish except for FTSE

European markets continue to display healthy primary up-trends with the exception of the FTSE 100 which warns of selling pressure.

Germany’s DAX broke through medium-term resistance at 8500, offering a medium-term target of 9000* and a long-term target of 9500*. Reversal below 8000 is unlikely, but would warn of another test of primary support at 7500.

DAX

* Target calculation: 8500 + ( 8500 – 8000 ) = 9000 ; 8500 + ( 8500 – 7500 ) = 9500

France’s CAC-40 is testing resistance at its 2011 high of 4200. Retracement to short-term support at 4100 is likely. Respect of support would be a bullish sign, while breakout above 4200 would offer an immediate target of 4300* and a long-term target of 4500*. Reversal below 3900 is unlikely but would warn of a bull trap.

CAC-40

* Target calculation: 4100 + ( 4100 – 3900 ) = 4300 ; 4050 + ( 4050 – 3600 ) = 4500

Spain’s Madrid General Index followed through above 900, but is now retracing to test the new support level. Respect would confirm a long-term advance to 1050* (960* in the medium-term). Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 840 is unlikely, but would warn of a bull trap.

Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050 ; 900 + ( 900 – 840 ) = 960

Italy’s MIB Index is testing resistance at 18000. Retracement to support at 17500 is likely, but respect would be bullish. Breakout above 18000 would offer an immediate target of 18500 and a long-term target of 20000*. Reversal below 16500 is most unlikely, but would warn of a bull trap.

MIB Index

* Target calculation: 17500 + ( 17500 – 15000 ) = 20000

Bearish divergence on the FTSE 100 (13-week Twiggs Money Flow) warns of strong selling pressure. Reversal below 6400 would warn of a primary down-trend, confirmed if the rising trendline is broken. Reversal of TMF below zero would strengthen the signal. Breakout above 6750 is unlikely, but would signal a medium-term advance to the 1999 high of 7000.

FTSE 100

Europe: Improving but beware of The Joker

Monthly charts best reflect the state of play in Europe. Germany and France are improving but there are still pockets of weakness elsewhere that threaten to destabilize the monetary union.

Germany’s DAX recovered above its 2007 high at 8200. Reversal below 8000 would indicate hesitancy, with another test of primary support (and rising trendline) at 7600. But the up-trend is intact and follow-through above 8500 would offer a long-term target of 9500*. Momentum is slowing but 13-week Twiggs Momentum holding above zero suggests continuation of the up-trend.
DAX Index

* Target calculation: 8500 + ( 8500 – 7500 ) = 9500

The FTSE 100 fell through support at 6500 but the long tail indicates buying pressure. Reversal below 6400 would confirm a correction to the rising trendline. Breakout above 6750 would signal an advance to the 1999 high of 7000, but strong bearish divergence on 13-week Twiggs Money Flow warns of a correction. Breach of primary support at 6000 would signal a reversal.
FTSE 100 Index
France’s CAC-40 is headed for another test of its 2011 high at 4200. Breakout would offer a long-term target of 4800*. Reversal below 3600 is unlikely but would signal a primary down-trend.
CAC-40 Index

* Target calculation: 4200 + ( 4200 – 3600 ) = 4800

Italy’s MIB Index is testing resistance at 18000. Momentum is weakening so one needs to be prepared for another correction. But breakout would offer a target of 21000*.
MIB Index

* Target calculation: 18000 + ( 18000 – 15000 ) = 21000

Adam Taylor at Business Insider quotes Tim Parks from New York Review of Books:

If Nixon had refused to accept impeachment and had tried somehow to hang on to power, he would have been summarily removed. The same goes for any leader in Europe’s main democracies. Most will step down at the first sign of a serious criminal charge against them, aware that their parties will not support someone who damages their cause. The truly disquieting aspect of the present situation in Italy is not so much Berlusconi’s brazenness, but that his blackmail is possible and credible, that he has such complete control over such a large political party, and that he still commands considerable popular support. Astonishing as it may seem to those not familiar with the country, even serious newspapers and respectable commentators seem reluctant to insist on the enforcement of law, rarely mentioning the details of his crimes and actually giving credence to the argument that removing Berlusconi from the political scene would amount to disenfranchising the millions of voters who supported him at the previous election, as if there was no autonomous party in parliament to represent their views, as if they were not free to choose another leader before the next election.

The Joker may still have the last laugh.
Silvio Berlusconi as The Joker

Reproduced with thanks to Vincos on Flickr.com.

Spain’s Madrid General Index is testing resistance at 900. Momentum is weakening so, again, be prepared for another correction. But breakout above 900 would indicate an advance to 1050*.
Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050

Europe: Dax faces selling pressure while UK and Italy rally

Germany’s DAX found support at 7500 and is again testing long-term resistance at 8000 (shown on the quarterly chart below). 13-Week Twiggs Momentum and Twiggs Money Flow both display bearish divergences, warning of selling pressure. Reversal below 7500 remains likely and would signal a correction to test the rising trendline.
DAX Index

* Target calculation: 7500 – ( 8000 – 7500 ) = 7000

Italy’s MIB index found support at 15000. Follow-through above 17000 would indicate a primary advance and penetration of resistance at 18000 would confirm the primary up-trend signaled earlier by bullish divergence on 13-week Twiggs Momentum.
FTSE MIB Index

* Target calculation: 18 + ( 18 – 15 ) = 21

The FTSE 100 is testing resistance at 6500. Rising 13-week Twiggs Money Flow and Twiggs Momentum both suggest that breakout is likely — which would signal an advance to 7000.
FTSE 100 Index

* Target calculation: 6500 + ( 6500 – 6000 ) = 7000

Europe: FTSE and European markets rising

The FTSE 100 broke out from its rising flag on the weekly chart and is headed for a test of resistance between 6800* (the high from 2007) and 7000 (from 1999). Rising 13-week Twiggs Momentum indicates strong buying pressure.

FTSE 100 Index

* Target calculation: 6400 + ( 6400 – 6000 ) = 6800

Italy’s MIB Index found support at 15500. Respect of zero by 13-week  Twiggs Money Flow would suggest another primary advance. Recovery above 17000 would confirm. Reversal below 15000, however, would warn of a primary down-trend.
FTSE MIB Index
Spain’s Madrid General Index displays buying pressure with rising 13-week Twiggs Money Flow. Breakout above 900 would signal a primary advance to 1000*.
Madrid General Index

* Target calculation: 900 + ( 900 – 800 ) = 1000

Germany’s DAX rallied to test resistance at the 2007 high of 8000. Bearish divergence on 13-week Twiggs Money Flow still warns of selling pressure but breakout above 8000 would overcome this. Reversal below 7500 would indicate a correction to test the rising trendline — rather than a primary trend reversal.

DAX Index
The quarterly chart shows strong resistance between 8000 and 8200. Breakout would offer a long-term target of 10000*.
DAX Index

* Target calculation: 7500 + ( 7500 – 5000 ) = 10000

Europe: DAX selling pressure continues

Germany’s DAX is consolidating between 7500 and 7900. Bearish divergence on 13-week Twiggs Money Flow still warns of selling pressure. Failure of 7500 would indicate a correction to test the rising trendline — around support at 7000.

DAX Index

* Target calculation: 7500 + ( 7500 – 7000 ) = 8000

The Italian MIB Index broke support at 16000. Following the earlier trendline break this warns of a primary reversal. Confirmation would come from breach of primary support at 15000. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. Respect of primary support would still not mean that trouble is over, as a lower peak followed by failure of primary support may follow.
FTSE MIB Index

The FTSE 100 displays a rising flag on its weekly chart, below resistance at 6400. Upward breakout would offer a target of 6800*. Downward breakout is unlikely but would signal a correction. Another 13-week Twiggs Momentum trough above zero would indicate strength in the primary up-trend.

FTSE 100 Index

* Target calculation: 6400 + ( 6400 – 6000 ) = 6800

Europe: Italian stalemate

Reuters reports that support for Mario Monti’s centrist coalition is fading.

Opinion polls give the centre-left coalition led by the veteran former industry minister Pier Luigi Bersani a narrow lead but the race has been thrown open by the prospect of a huge protest vote against austerity policies imposed by Monti and rage at a wave of corporate and political scandals.

Without a strong government, resolution of Italy’s current crisis is unlikely. The Italian MIB Index retreated below new support at 17000 and last week penetrated the rising trendline, warning of a primary reversal. Breach of support at 16000 would strengthen the signal — as would reversal of 63-day Twiggs Momentum below zero. Confirmation, however would only come from a lower peak followed by failure of primary support at 15000.
FTSE MIB Index

The FTSE 100 continues its advance toward long-term resistance at 6750. Failed down-swings within the recent reverse pennant (broadening wedge) suggest continuation of the advance. Upward breakout would offer a target of 6750, strengthened if 21-day Twiggs Money Flow recovers above 20% to form another trough above zero.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Germany’s DAX continues to test support at 7500. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Failure of 7500 would indicate a correction to test the rising trendline — and support at 7000.

DAX Index

* Target calculation: 7500 + ( 7500 – 7000 ) = 8000

Europe: DAX selling pressure

The FTSE 100 is retracing to test its (secondary) rising trendline on the daily chart. Respect would signal another advance — as would a 21-day Twiggs Money Flow trough above zero.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Germany’s DAX is retracing to test support at 7500 on the monthly chart. Bullish divergence on 13-week Twiggs Money Flow warns of selling pressure. Breach of support would indicate a correction to test the rising trendline — around 7000.

DAX Index

* Target calculation: 7500 + ( 7500 – 7000 ) = 8000

Italy’s MIB index retreated below the new support level of 17000. Breach of the rising trendline — and support at 16000 — would warn of a bull trap. But a 63-day Momentum trough above zero would signal a primary advance to 19000*.

DAX Index

* Target calculation: 17000 + ( 17000 – 15000 ) = 19000

Europe: Italy tests support while UK and Germany surge

Italy’s MIB index retreated from resistance at 18000 to re-test the key support level of 17000. Respect would confirm the primary up-trend with an initial target of 19000*. Rising 13-week Twiggs Money Flow indicates long-term buying pressure.

DAX Index

* Target calculation: 17000 + ( 17000 – 15000 ) = 19000

Germany’s DAX primary advance is approaching the 2007 high at 8000/8200.  Resistance is evident, with shorter candles over the last two months and 13-week Twiggs Money Flow declining from its 2012 peak. Expect a correction, but long-term buying pressure (signaled by rising 13-week Twiggs Money Flow) should see continuation of the primary up-trend.

DAX Index

* Target calculation: 7500 + ( 7500 – 7000 ) = 8000

The FTSE 100 broke through resistance at 6000 and is advancing toward its 2007 high of 6750*. Rising 13-week Twiggs Money Flow indicates long-term buying pressure, while the recent spike should see strong gains in February.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

European revival

Madrid General Index broke above 720 to complete a double-bottom reversal with a target of 840*. Bullish divergence on 13-week Twiggs Money Flow indicates buying pressure. Penetration of the descending trendline would strengthen the reversal signal.

Madrid General Index

* Target calculation: 720 + ( 720 – 600 ) = 840

Italian FTSE MIB Index also completed a double bottom reversal, offering a target of 16500*. Bullish divergence on 13-week Twiggs Money Flow again indicates buying pressure.

FTSE Italian MIB Index

* Target calculation: 14500 + ( 14500 – 12500 ) = 16500

The FTSE 100 is headed for a test of major resistance at 6000. Expect strong resistance between 6000 and 6100 because of the number of previous peaks at this level. Breakout would offer a long-term target of 6750*. 13-Week Twiggs Money Flow oscillating above zero suggests a primary up-trend.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Europe on the rise

Dow Jones Europe Index broke through 260 to signal a primary up-trend. Respect of the zero line by 13-week Twiggs Money Flow confirms strong buying pressure. Target for the advance is 310*.

Dow Jones Europe Index

* Target calculation: 260 + ( 260 – 210 ) = 310

Italy’s MIB Index reflects a similar pattern, signaling an advance to 21000*.

FTSE MIB Index

* Target calculation: 17000 + ( 17000 – 13000 ) = 21000

The FTSE 100 is already in a primary up-trend. A trough high above zero on 13-week Twiggs Money Flow indicates strong buying pressure and a likely breakout above resistance at 6100.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5000 ) = 6400

The DAX shows similar strong buying pressure and breakout above the 2011 high of 7500 is likely.

DAX Index

* Target calculation: 6400 + ( 6400 – 5400 ) = 7400

European markets

The FTSE 100 is testing resistance at 5750 but bearish divergence on 13-week Twiggs Money Flow warns of selling pressure. Respect of resistance would suggest another test of primary support at 5050. Upward breakout is less likely, but would indicate an advance to 6300*.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5100 ) = 6300

The DAX is testing resistance at 6400. Breakout would indicate an advance to 7400*, but reversal of  below the rising trendline — or 13-week Twiggs Money Flow below zero — would warn of another test of primary support at 5000.

DAX Index

* Target calculation: 6400 + ( 6400 – 5400 ) = 7400

Italy’s MIB Index is more hesitant than the DAX. Breakout above 17000 would signal a primary advance, but failure of support at 13000 would indicate a decline to 9000*. Reversal of 13-week Twiggs Money Flow below zero would warn of increased selling pressure.

FTSE MIB Index

* Target calculation: 13 – ( 17 – 13 ) = 9

Europe weakens

A monthly chart of Dow Jones Europe shows the index testing primary support at 210. A peak below zero on 63-day Twiggs Momentum indicates a strong primary down-trend. Failure of support would offer a medium-term target of 160*.

Dow Jones Europe Index

* Target calculation: 210 – ( 260 – 210 ) = 160

Italy’s MIB Index is headed for another test of primary support at 13000 on the weekly chart. Respect of the descending trendline suggests another primary decline. Reversal of 13-week Twiggs Money Flow below zero would also warn of rising selling pressure. And breach of primary support would signal a decline to 9000*.

Italian MIB Index

* Target calculation: 13 – ( 17 – 13 ) = 9

The UK’s FTSE 100 index is also headed for a test of primary support at 4800. 63-Day Twiggs Momentum peaking below zero indicates a strong primary down-trend. Failure of primary support would offer a target of 4000*.

FTSE 100 Index

* Target calculation: 4800 – ( 5600 – 4800 ) = 4000

Europe: breach of medium-term support would signal decline

Italy’s MIB index is testing medium-term support at 15000 on the weekly chart. Failure — and respect of the descending trendline — would warn of another decline, with a target of 9000*. Breach of primary support at 13000 would confirm.

FTSE MIB Index

* Target calculation: 13 − ( 17 − 13 ) = 9

France’s CAC-40 index is similarly testing support at 3000. Breach of support would warn of another decline — as would reversal of 13-week Twiggs Money Flow below zero. Failure of primary support at 2700 would offer a target of 2000*.

CAC-40 Index

* Target calculation: 2700 – ( 3400 − 2700 ) = 2000

The DAX is also testing medium-term support. Reversal below 5600 would warn of another test of primary support at 5000. Failure of 5000 would offer a target of 3600*.

DAX Index

* Target calculation: 5000 – ( 6400 − 5000 ) = 3600

Even the FTSE 100 index is testing medium-term support. 13-Week Twiggs Money Flow looks stronger than its European neighbors, but reversal below zero would warn of a further decline. Breach of medium-term support at 5350 would warn of a test of primary support at 4800.

FTSE 100 Index

* Target calculation: 4800 – ( 5600 − 4800 ) = 4000

Europe consolidates

The FTSE Italian MIB index found support at 15000. Expect an upsurge in response to news that Mario Monti has been asked to form a new government. Breakout above 17000 would signal a rally to 19000. Rising 13-week Twiggs Money Flow indicates consistent buying pressure over the past few weeks.

FTSE MIB Index

* Target calculation: 17 + ( 17 – 15 ) = 19

France’s CAC-40 index similarly found support at 3000. Recovery above 3400 would offer a target of 3800, but 63-day Twiggs Momentum, a long way below zero, indicates a primary down-trend.

CAC-40 Index

* Target calculation: 2800 – ( 3400 – 2800 ) = 2200 AND 3400 + ( 3400 – 3000 ) = 3800

The German DAX found support at 5700. Recovery above 6400 would offer a target of 7100, while failure of support would warn of another test of primary support at 5000.

DAX Index

* Target calculation: 6400 + ( 6400 – 5700 ) = 7100

The FTSE 100 is also consolidating above medium-term support — this time at 5350. 13-Week Twiggs Money Flow continues to signal strong buying pressure. Breakout above 5700 would re-test the 2011 highs at 6100. Failure of support is unlikely, but would warn of another test of primary support at 4800.

FTSE 100 Index

* Target calculation: 5700 + ( 5700 – 5300 ) = 6100

We need to remember, however, that this is still a bear market. We have seen one or two favorable news headlines but very little substance. And the European economy faces strong headwinds over the next few years.

Europe stumbles onwards

Markets have been fed a steady diet of press releases out of Europe for the past few weeks but very little substance. This is a dangerous strategy as hopes are raised and reaction to any form of disappointment will be strong. No matter how it is dressed up, we are likely to witness a substantial default of Southern European borrowers, requiring recapitalization of French and Northern European banks. With public debt close to danger levels in many of these countries, there are no ready funds available for a bailout. Quantitative easing by the ECB has been touted as a possible solution, but aversion to this is so strong — particularly in Germany — that it would be political suicide for Angela Merkel to support this. So Europe stumbles onwards, searching for a disguised form of QE solution that is palatable to German voters.

Germany’s DAX is testing support at 5600. Breach would test 5000, while respect would signal a primary advance to 7200*. 13-week Twiggs Money Flow is relatively weak and reversal below zero would warn of renewed selling pressure.

DAX Index

* Target calculation: 6400 + ( 6400 – 5600 ) = 7200 OR 5700 + ( 5700 – 5000 ) = 6400

France’s CAC-40 index is testing medium-term support at 3000. Failure would test 2700, while respect (signaled by breakout above 3350) would signal a further advance. 13-week Twiggs Money Flow remains weak and reversal below zero would also warn of renewed selling pressure.

CAC-40 Index

* Target calculation: 2700 – ( 3300 – 2700 ) = 2100

Italy’s FTSE MIB index is similarly testing support at 15000. Again, 13-week Twiggs Money Flow is weak and reversal below zero would warn of renewed selling pressure.

FTSE Italian MIB Index

* Target calculation: 13 – ( 17 – 13 ) = 9

The FTSE 100 index is testing support at 5350. Failure would test primary support at 4800, while respect (signaled by breakout above 5700) would confirm a primary advance to 6100*. Rising 13-week Twiggs Money Flow favors an advance.

FTSE 100 Index

* Target calculation: 5400 + ( 5400 – 4800 ) = 6000

Europe rebounds

The FTSE 100 index is headed for a test of its 2011 high at 6000/6100. Rising 13-week Twiggs Money Flow signals strong buying pressure. Expect retracement to test support at 5400. Respect would confirm a primary up-trend; failure would re-test support at 4800.

FTSE 100 Index

* Target calculation: 5400 + ( 5400 – 4800 ) = 6000

Germany’s DAX is testing resistance at 6500. Retracement would test support at 5600. A 63-day Twiggs Momentum peak that respects the zero line would warn that the bear market will continue.

DAX Index

* Target calculation: 5700 + ( 5700 – 5000 ) = 6400

Italy is the latest canary in the coal mine. The FTSE MIB index rallied to test its secondary descending trendline at 17000. Respect would warn of another test of primary support at 13000, while breakout would offer a target of 19000*. The primary trend remains downward despite 13-week Twiggs Money Flow having crossed above zero.

FTSE Italian MIB Index

* Target calculation: 17 + ( 17 – 15 ) = 19