European markets are consolidating after recent gains with the exception of Italy, which is suffering from political instability, while the FTSE 100 displays persistent selling pressure.
The FTSE 100 is heading for a test of primary support at 6400, having broken medium-term support at 6500. Declining 21-day Twiggs Money Flow after a lengthy period below zero indicates medium-term selling pressure; bearish divergence on the 13-week indicator also warns of strong selling pressure. Failure of support at 6400 would signal a primary down-trend; respect is unlikely, but would suggest another test of 6700.
Germany’s DAX retraced to the new support level at 8500. Respect would offer a medium-term target of 9000* and a long-term target of 9400*. Reversal below 8000 is unlikely, but would warn of another test of primary support at 7600.
* Target calculation: 8500 + ( 8500 – 8000 ) = 9000 ; 8500 + ( 8500 – 7600 ) = 9400
France’s CAC-40 is similarly testing support at 4100. Recovery above its 2011 high of 4200 would offer an immediate target of 4300* and a long-term target of 4500*. Reversal below 3900 is unlikely but would warn of a test of primary support at 3600.
* Target calculation: 4100 + ( 4100 – 3900 ) = 4300 ; 4050 + ( 4050 – 3600 ) = 4500
Spain’s Madrid General Index displays healthy buying pressure on 13-week Twiggs Money Flow. Retracement that respects support at 900 would confirm a long-term advance to 1050*. Reversal below 900 is unlikely, but would warn of a correction.
* Target calculation: 900 + ( 900 – 750 ) = 1050
Italy’s MIB Index is weaker, following a rift between Prime Minister Enrico Letta and his coalition partner, Silvio Berlusconi. Follow-through below the rising trendline would test support at 16500. Recovery above 18000, on the other hand, would signal a primary advance with a long-term target of 20000*.
* Target calculation: 17500 + ( 17500 – 15000 ) = 20000