Good Thing the European Crisis is Over

• Posted by Greg Harmon
• on September 14th, 2011

I have been reading in the press and hearing on the television that the market has fully priced in a Greek Debt default. I have to say that it was so much easier to sleep last night knowing this. Why you ask? Well aside from the obvious relief that the world will not end, when I was looking at the charts for the Paris CAC 40 Index, $CAC, the German DAX Composite, $DAX, the Euro STOXX 50, and the Currency Shares Euro Trust, $FXE, last night they were pretty frightful. Here let me show you.

Paris CAC 40 Index, $CAC

The CAC 40 Index, $CAC, had a long fall from the 4000 level in July before basing in a bear flag between 2970 and 3300. Monday it broke that flag lower and it had a Moving Average Convergence Divergence (MACD) indicator cross negative. Combined with the Relative Strength Index (RSI) moving sideways along the 30 level this is a bearish setup with a target of 2300, if it cannot confirm the hammer print higher. So far it is looking like it might, but is not quite back to the flag yet.

German DAX Composite, $DAX

The German DAX, $DAX, is not any better. After a near vertical drop from the 7200 level down to 5900, it has been ion a falling wedge for the past month. The RSI is trending off of the lows but still deep in bear territory and the MACD is flirting with a cross negative. Look out below if that happens.

Euro STOXX 50

The broader Euro STOXX 50 Index fell from the 2800 level in late July into a symmetrical triangle centered on 2250 in August. It’s RSI is hugging the bearish zone at 30 and the MACD is crossing negative. After falling out of that triangle a week ago it has extended lower and has a targets of 1900 and then 1600 on the Measured Move (MM) lower.

Currency Shares Euro Trust, $FXE

Even the currency, proxied by the Currency Shares Euro Trust, $FXE, looked weak. It has fallen out of the descending triangle with a RSI firmly in bearish territory and a MACD growing more negative. The pattern break lower carries a target of 130.

So you see, until I heard this news, I mistakenly thought that outlook for European markets was horrible, and that the world could end. Thank goodness for the mainstream media setting me straight.

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