Complacency in Europe has been shaken, with Dow Jones Euro Stoxx 600 testing medium-term support at 380. Bearish divergence on the Trend Index, with intervening troughs below zero, warns of strong selling pressure. Breach of 380 is likely and would indicate a test of primary support at 366.
The UK’s Footsie broke medium-term support at 7350 and is headed for a test of primary support at 7200. Bearish divergence on the Trend Index again warns of strong selling pressure. Breach of 7200 would signal reversal to a primary down-trend.
Asia was also affected, with Japan’s Nikkei 225 Index the only major index to end the week on a positive note, after finding solid support at 22000.
South Korea’s Seoul Composite Index below 2500 warns of a correction, though nothing more.
China’s Shanghai Composite Index broke support at 3340 to warn of a correction. Bearish divergence on the Trend Index warns of selling pressure but this appears to be secondary in nature.
India’s NSE Nifty Index is still bullish but reversal below 10000 would warn of a strong correction.
Target 10000 + ( 10000 – 9000 ) = 11000
The S&P 500 is as bear-proof as you can get in the current climate, with the trend index reflecting strong buying pressure.
A bear market in Europe may not be sufficient to dent the animal spirits driving US markets but would certainly influence more cautious investors to change to a risk-off stance and shorten the time left for more adventurous souls.