Pierre and Deiter’s Party Prep

• Posted by Greg Harmon
• on December 7th, 2011

If there is going to be a big relief rally in Europe after a solution to the debt crisis is agreed then it is not showing itself in the charts of the French and German stock market indexes. Take a look.

French CAC 40 Index, $CAC

The French CAC 40 Index, $CAC, has been in a bear flag or symmetrical triangle since falling lower in August. After trailing lower the Relative Strength Index (RSI) has been unable to reclaim bullish territory and although the Moving Average Convergence Divergence (MACD) indicator is positive it has stopped growing and is moving sideways. Add to that Wednesday’s Bearish Engulfing candle and downward sloping Simple Moving Averages (SMA) with the exception of the flat 50 day SMA and you get a neutral to bearish picture. The German DAX Composite, $DAX, is even worse.

German DAX Composite, $DAX

The DAX has also has been unable to move back above the resistance established with the fall in August with a RSI that is more strongly heading negative and a MACD that is fading. It printed a uglier bearish engulfing candle falling out of the short term bull flag. This looks lower. And the Euro, as shown by the Currency Shares Euro Trust ETF, $FXE, is also looking to head lower. After falling from the ascending triangle in September to the October low it made a lower high in late October and fell back to a Double Bottom under 132. The latest short move higher was stalled by the 50

Currency Shares Euro Trust ETF, $FXE

day SMA and it has now printed a couple of candles in a new bear flag. All of the SMA’s are sloping lower and the RSI is bearish while the MACD flirts with a positive divergence. A mixed picture but in a broader bearish trend. A move under 133 could send this to the prior bottom and below to a target of 128 on a Measured Move.

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