Looking for Short Term Italian Strength Against Germany

• Posted by Greg Harmon
• on February 26th, 2013

The elections in Italy threw Europe and then the rest of the world markets into turmoil Monday. But by the end of the day in US trading there were some signals that the Italian move might be over done. The ratio chart of the Germany iShares, $EWG against the Italian iShares, $EWI, pierced through the highs from April and then July of 2012 before pulling back. The solid Black candle shows the price movement was bearish intraday, showing relative strength in Italy over Germany after the initial move higher. It would not surprise many if it filled the gap below, a bounce back in Italy stock prices. Many were calling for a bounce based on overreaction during US market hours. But it will not happen Tuesday, as the ratio is continuing higher. The bounce back may not happen

at all. The technicals show that the Relative Strength Index (RSI) is is bullish for this ratio and the Moving Average Convergence Divergence indicator (MACD) is moving higher on the signal line and is positive and growing on the histogram. These support a continued move higher in the ratio, showing more strength in Germany over Italy. This fits with the rising trend support seem in the chart. Translation: Say Auf Wiedersehen or Arrivederci too any thoughts you have about looking for a big Italian bounce back relative to the German markets.

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