The Coming Schism Between Germany and France or WWIII

Throughout the European Crisis there have been the haves, France and Germany, and then varying degrees of the have nots. The PIIGS, can be ranked according to their importance as easily as their problems from top to bottom as Italy, Ireland, Spain, Portugal and Greece. You can argue about the position of Spain and Ireland but save yourself from doing so. What is becoming more interesting is that the haves and starting to put some distance between each other. Germany is looking relatively stronger than France. Lets take a look at a few charts. The French CAC 40

French CAC 40 Index, $CAC

Index, $CAC, is falling back after failing to reach the previous high from October and historic support level from August 2010 at 3400. There is hope for it if it can turn around Tuesday, perhaps on a retest of the descending trend line break and before the Relative Strength Index (RSI) makes a new lower low. But the Moving Average Convergence Divergence (MACD) crossing negative bodes for more downside. As does the red candlestick finishing near the low. Falling with a downside bias. The German DAX Composite, $DAX, is is a better place. The candle Monday held above the recent consolidation area and October high near 6400 and over the 200 day Simple

German DAX Composite, $DAX

Moving Average (SMA). The RSI is holding above the rising trend line and the MACD is still positive, although heading towards zero. A bullish up trend. But the distinction is more pronounced when looking at the ratio chart of the $DAX against the $CAC. This chart shows a tightening of the range between the two Indexes in favor of the $DAX. In fact it appears to be peeking above downtrending resistance and will confirm this on a break above a ratio of 1.99, the November 21 high. The RSI is rising and bullish and the MACD is rising and positive, with all of the SMA below the

German DAX Composite, $DAX vs French CAC 40 Index, $CAC

ratio and sloping higher. This is a bullish chart on the break and bodes for further strength in the German DAX Composite at the expense of the French CAC 40 Index. Will this lead eventually to World War III, perhaps. Stranger things have happened. But in the meantime follow this ratio and what it means as a possible macro trading opportunity.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog