Are European Stocks Finally Ready To Take Off?
After lagging considerably during the post-February rally, European equities are threatening to break above major chart resistance.
Among the dynamics that have served to perpetuate the post-February rally in global equities has been rotation. While the concept is probably overused among the media and analysts, it genuinely appears to fit the current rally’s circumstances. Various sectors and groups have taken turns in the leadership role over the past 7 months and that rotation has kept the stock averages headed in an upward trajectory. There are some areas of the market, however, that have failed to take the lead in carrying the weight of the rally. Included among these laggards is Europe. Although, the region may be getting another opportunity now to step up.
We say this because, as of today, one of the continent’s broadest indices – the Dow Jones STOXX Europe 600 Index – is threatening to break out above a major confluence of resistance.
As our Chart Of The Day reveals. the STOXX 600 closed at, or slightly above the following layers of potential resistance:
- The Post-2015 Down Trendline ~346
- The 38.2% Fibonacci Retracement of the April 2015-February 2016 Decline ~346
- The 50% Retracement of the December 2015-February 2016
Decline ~345
- The Series of
Tops from March to August ~346-351
The STOXX 600 closed today at 350.44, so it is seriously threatening a break above this resistance cluster. If the breakout is successful, the index could probably trade up to the mid-370′s, or about 7% higher, without a lot of trouble – that is, if the rest of the global stock market isn’t rolling over.
A breakout by European stocks, however, could help prevent the global market from rolling over. As long as one major region is pressing on, the odds of a widespread global collapse is unlikely. Thus, by finally charging ahead, Europe could step into the leadership rotation and fill the void that is threatening to develop so late in the rally.
Then again, should the STOXX 600 fail again here, it could be adios, au revoir and auf wiedersehen to the post-February rally.
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The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.
