Europe threatens a relapse to support it finds at June lows

In the trading sessions after the historic agreement reached by the European Council, many of the large equity indices in Europe ended up giving up their supports. The EuroStoxx 50 and the Ibex 35 ?? among others ?? they pierced levels of technical relevance in a move that left the German Dax 30 as the last burning nail to which the bulls clung so that a broader context of consolidation in the European market would not be confirmed. However, after several sessions of consolidation, the German selective gave up yesterday the support it found at 12,800 points, as pointed out by Joan Cabrero, Ecotrader advisor, when it fell 3.45%. It did so after knowing data on GDP in the Teutonic country that was worse than initially expected and that left the biggest contraction of the last 50 years in its economy. The GDP of the leading European power plunged 10.1% between April and June. With yesterday’s stock declines, stemming from the German economic collapse and other disappointing data in the Euro Zone, such as the higher than expected unemployment rate or consumer confidence below expectations, the door is now open to that the rest of the European exchanges can develop a broader consolidation that returns them towards the lows set in June. “These are levels up to which there is a margin of fall of almost an additional 5% in the case of the EuroStoxx 50, which finds them at 3,055-3,100 points and in which the index will have to decide whether to opt for a correction in all rule or everything stays in a consolidation “, points Joan Cabrero, who emphasizes that the return / risk equation at this point is more attractive. Not surprisingly, with support levels at the lows in June, the European investor who now opts to go public faces potential earnings of 7% with a risk of 5% decline. And this equation could improve even if we return to the aforementioned June supports, which is where we should consider taking positions. The door is opened for the European stock markets to develop a broader consolidation What is clear for the moment is that in the short term the bears have the frying pan by the handle. At least on the Ibex 35, which yesterday gave up the key supports it found at 7,060 points, “which was the basis for the winger who had been limiting consolidation in recent weeks,” says Cabrero. “After confirming the transfer of this support, the chances that we will see a fall towards objectives that in the case of the Spanish selective would be at the lows of April and March, at 6,420 points, greatly increase,” he adds. And, the Spanish selective must face the threat posed to him that two heavyweights such as Banco Santander and BBVA have lost their key short-term supports after announcing their results for the first half of the year. Europe suffers without Wall Street losing supports The unpredictable evolution of the coronavirus pandemic and its impact on the global economy, as demonstrated by the growth data of Germany yesterday, continue to invite caution. And even more if the latent diplomatic tension between China and the US is added to the equation, where Wall Street is still pending the evolution of the technological selective Nasdaq 100. “The risks that the North American market, especially the technological one, will finally enter the phase of correction of the increases that were born in March, have increased considerably, “says Cabrero. Now the bassists need to finish the job to cancel the possibilities of seeing higher increases. For this, the selective must cancel its weekly bullish series of seventeen consecutive weeks, closing above the lows of the previous week, for which this Friday it should lose at closing levels of 10,313 points, something that for now has not happened. Know your investor profile: For readers who want more: Ecotrader, elEconomista’s premium investment strategy portal commentsforum0WhatsAppFacebookTwitterLinkedin