It has been a challenging week for the equity markets. Especially in Europe, fears on Spain’s debt triggered heavy speculation in the equity and bond markets. Yields have jumped and equities sold-off. Weakness in Spain spread to Italy and Portugal. We have seen clear technical sell signals in Spain, Italy and Portugal. These were the weak markets of euro zone and as a result they were the first one to experience further set backs.

In this post I’m updating Spain, Italy and Portugal’s equity indices. On the 3rd of April, I reviewed all the European equity indices and since then there has been major breakdowns that needed to be revisited. Spain’s IBEX 35 index is now breaking down the 7 month-long consolidation range at 7,800 levels. Sideways consolidation was a symmetrical triangle and breakdowns from these type of continuation patterns are usually followed by weakness. Next support for IBEX 35 is at 6,700 levels.

Italy’s MIBTEL Index is also breaking down its sideways consolidation at 15,000 levels. 7 month-long choppy sideways consolidation is likely to be followed by a downtrend towards the next support at 12,300 levels.

Portugal’s PSI 20 index is another poor performer that is now breaking down its bearish wedge pattern. Unless the index moves back above 5,670-6,000 area, PSI 20 will experience more selling pressure.

It was mid-March when U.S. CPI data was higher than expected and everyone feared from a possible inflationary environment. Bonds sold-off and equities rallied with commodities. On the 17th of March I reviewed Euro Bund & 10 Year T-Note prices and concluded that it is still early to call for an inflationary environment and a major correction in govt. bonds. Both govt. bonds were testing their long-term moving averages (200-day) and were likely to rebound from these levels.

http://techcharts.wordpress.com/2012/03/17/euro-bund-us-10-year-t-note-2/

Since the last update bonds have rebounded sharply and deflation and RISK OFF environment is back again. Equities are weak and bonds are strong. Long-term uptrends are still intact BUT with one major warning; weekly RSI divergences! Though bonds are moving higher, momentum is not supportive of the last 8 months price action. Price is trying to move higher with weaker momentum. Watch govt. bonds with a positive bias and place an intermediate/long-term stop at the 200 day moving averages. For Euro Bund strong support is at 136 and for U.S. 10 Year T-Notes strong support is at 129 levels.

Since my last update on Copper on the 19th of March price resumed its consolidation in a tight range.

http://techcharts.wordpress.com/2012/03/19/copper-3/

This has increased the likelihood of a strong breakout from the possible symmetrical triangle. Given that Dr. Copper held above its long-term moving average (200 day moving average) and rebounded after each test, I would expect this breakout to occur on the upside. Current technical outlook suggests higher prices but again I would like to see the market confirming the direction of the breakout. For now we can conclude that we are very close to a major breakout. Boundaries of the symmetrical triangle should be watched closely. Breach above 395 will confirm an upward breakout and price will target 415-420 area in the short-term. Breach below 375 will be negative for Copper in the short-term.