EURO STOXX 50

It is true that Europe has debt problem, it is true that most of the major economies in Europe still have very high yields and it is true that Euro has weakened against major currencies. From all aspects Europe is the weakest link.

The daily chart of Euro Stoxx 50 suggests positive technical action at least in the short-term. Stoxx 50 has possibly completed a cup with handle formation with a flat resistance at 2,380 levels. Strong resistance was breached yesterday and today so far price managed to stabilize above this level. Resistance becomes support. Now that the index is above its 200 day moving average (bullish) and breached above 2,380 levels, we will watch Stoxx 50 with a bullish bias and expect it to find support between 2,350 and 2,380 during any pullback. If the index has completed a cup with handle formation (confirmation should come with price moving upwards without falling below 2,350-2,380 area) then we should expect higher prices towards 2,500 levels in the next few weeks.

This could be a bullish breakout and help European equities to recover in the short-term.