Stocks & Bonds
European Stocks Suffering Double Failed Breakout?
With the past week’s global equity selloff, a great number of notable trendlines came into play across the stock universe. Most of them were of short-term consequence, althoughyesterday, we touched on the fact that U.S. small-caps and mid-caps were testing trendlines stemming back to 2009. In general, most encounters saw prices hold above their respective trendlines. It was not unanimous, however. One area where we are seeing a potential breakdown of key trendlines – 2 of them, in fact – is in European equities. Specifically, we’re talking about the Dow Jones STOXX Europe 50 Index.
The STOXX 50 broke out above several key areas earlier this month and appeared as if it was poised to join in the global equity rally to a larger extent than it had. However, after a week of selling, the index is closing this week with the appearance of failed breakouts on several fronts.
In the short-term, the STOXX 50 looks to have failed the breakout above its post-2015 Down trendline.
From a longer-term perspective, since the beginning of 2015 the STOXX 50 has been dueling with a Down trendline originating at the 2000 top and connecting the 2007 top. After breaking out above the line for most of 2015, it has spent much of 2016 back below it, with the trendline alternating as support and resistance. Recently, it appeared as if the index was making another attempt to recapture the topside of the trendline. Alas, as of the past few days, it looks like this trendline too has failed.
The STOXX 50, along with most European equities has done relatively little during the post-February rally. The breakout above the 14-month downtrend and the 16-year downtrend a few weeks ago looked as if it might provide a springboard for European stocks to finally play some catch-up. As it stands today, however, it appears as if it was simply another failure in a long running comedy of errors for the continent’s stocks.