Category: UK & Europe

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Europe: Tensions rising

Moscow’s MICEX index plunged over the last two weeks as tensions rise over the fate of Crimea and the Ukraine.

MICEX

Countries neighboring Ukraine, such as Poland, have also suffered from increased uncertainty. The Warsaw WIG index is testing primary support at 50,000. Follow-through below 49,500 would signal a primary down-trend.

Warsaw WIG

Germany’s DAX is also testing primary support, at 9000. Failure would signal a primary down-trend. Bearish divergence on 13-week Twiggs Money Flow continues to warn of medium-term selling pressure.

DAX

Rising DAX Volatility, above 20, reflects moderate risk.

DAX

The Footsie is headed for another test of primary support (6400) after breaking 6700. Breach would signal a down-trend, but respect of support remains as likely.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

A monthly chart shows the Euro testing its long-term descending trendline at $1.39. Follow-through above $1.39 seems incongruous at present, but would signal an advance to $1.44*. Bearish divergence on 13-week Twiggs Momentum continues to warn of medium-term weakness, however, and reversal below $1.37 would indicate another correction.

Euro

* Target calculation: 1.36 + ( 1.36 – 1.28 ) = 1.44

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Euro strong but European stocks retreat

The Euro broke through resistance at $1.38, signaling an advance to $1.43*. Retracement that respects the new support level would strengthen the signal. Bearish divergence on 13-week Twiggs Momentum continues to warn of medium-term weakness, however, and reversal below $1.38 would suggest another correction.

Euro

* Target calculation: 1.38 + ( 1.38 – 1.33 ) = 1.43

Germany’s DAX retreated below 9500 to warn of another correction. Bearish divergence on 13-week Twiggs Money Flow indicates medium-term selling pressure. Respect of primary support at 9000 — and the rising trendline — would confirm a healthy up-trend. Breach of support is unlikely, but would signal reversal to a down-trend.

DAX

DAX Volatility at 20 reflects moderate risk.

DAX

The Footsie retreated to support at 6690/6700 on the daily chart. Breach would indicate another test of primary support at 6400. The primary trend is upward and a 21-day Twiggs Money Flow trough above zero would reflect medium-term buying pressure.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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The Crimean principle

The Crimean regional government in the Ukraine plans to hold a referendum, to leave Ukraine and join the Russian Federation, amongst its predominantly Russian-speaking population. The Russian parliament has voiced its over-whelming support for the idea.

Gary Kasparov, former world chess champion and member of the Russian opposition, points out that the same principle could apply to Kaliningrad.

Geographically isolated from the rest of Russia, Kaliningrad — formerly known as Königsberg — was part of Germany (East Prussia) until annexed by Josef Stalin at the end of WWII.

Kaliningrad

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Putin’s ploy

The Wall Street Journal quotes Vladimir Putin’s justification for occupying the Crimea:

Russian President Vladimir Putin said Tuesday that Russia reserves the right to use force in Ukraine to protect Russian-speaking residents there…….”

This was a ploy used by Hitler to assert control of the Sudetenland in 1938. Sudetenland is the name given to the border districts of Bohemia, Moravia, and parts of Silesia, within Czechoslovakia, that had large German-speaking populations. Hitler encouraged Konrad Henlein, leader of the Sudeten Nazis, to rebel, demanding a union with Germany. When the Czech government declared martial law, Hitler threatened war. This led to the September 1938 betrayal of Czechoslovakia by France and Britain. Adopting a policy of appeasement, the two countries agreed to give Hitler the Sudetenland, with Chamberlain describing the crisis as “a quarrel in a faraway country, between people of whom we know nothing”. On his return to London, Chamberlain asserted that the accord with Germany signaled “peace for our time”.

Hitler enters the Sudetenland, October 1938

Hitler enters the Sudetenland, Bundesarchiv, Bild | October 1938

In March 1939, German troops occupied the rest of Czechoslovakia. In September 1939, Hitler invaded Poland on a similar pretext of protecting the German minority from persecution. War followed, leaving more than 60 million dead. Almost two-thirds were civilians.

Hopefully Western leaders have learned from history. Appeasement is not an option.

Read more at BBC History and Wikipedia: The Sudeten Crisis.

An appeaser is one who feeds a crocodile, hoping it will eat him last. ~ Winston Churchill

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Footsie signals buying pressure

The FTSE 100 is testing resistance at 6850. Rising troughs above zero on 13-week Twiggs Money Flow signal buying pressure. Breakout would encounter further resistance at the 1999 high of 7000, so the calculated target of 7200 may be unrealistic. Reversal below 6700 is unlikely, but would test primary support at 6400.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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Europe: Shaken but not stirred

The Euro has held up well despite rising tensions with Russia over the Ukraine. Reversal below $1.365 would warn of a test of primary support at $1.35. Bearish divergence on 13-week Twiggs Momentum suggests another correction. Breakout above $1.38 is less likely at present, but would signal an advance to $1.43*.

Euro

* Target calculation: 1.38 + ( 1.38 – 1.33 ) = 1.43

Dow Jones Euro Stoxx 50 retreated below 3100 and is likely to test primary support at 2920/2950. Breach of primary support would signal reversal to a down-trend.

Dow Jones Euro Stoxx 50

* Target calculation: 3150 + ( 3150 – 2950 ) = 3350

Germany’s DAX is stronger, with rising 13-week Twiggs Money Flow suggesting another attempt at 10,000. But retreat below 9500 would test primary support at 9000.

DAX

DAX Volatility spiked above 20, but still reflects moderate risk.

DAX

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DAX and Euro bearish

The Euro encountered resistance at $1.38 and is again testing the new support level of $1.37 on the weekly chart. Bearish divergence on 13-week Twiggs Momentum warns of trend weakness, but only reversal below zero would indicate a primary trend reversal. Breach of primary support at $1.35 would signal a down-trend, while breakout above $1.38 would offer a target of $1.43*.

Euro

* Target calculation: 1.38 + ( 1.38 – 1.33 ) = 1.43

Germany’s DAX paints a similar picture to the Euro, with bearish divergence on 13-week Twiggs Money Flow suggesting sellers at 10,000. Retreat below 9600 would warn of another test of primary support at 9000.

DAX

DAX Volatility below 20, however, continues to suggest low risk typical of a bull market.

DAX

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London Calling…..

The strong advance for Sterling, over the last 8 months, is likely to encounter substantial resistance at the 2011 and 2009 highs of $1.68 and $1.70 respectively. Resistance also coincides with the target of $1.68* from the double bottom completed in September 2013. Breakout above $1.70 would offer a long-term target of $1.90, but reversal below $1.66 would test support at $1.62 in the short-term.

FTSE 100

* Target calculation: 1.58 + ( 1.58 – 1.48 ) = 1.68

The FTSE 100 is likely to break out above resistance at 6850 after a higher trough on 13-week Twiggs Money Flow flagged a surge in buying pressure. Target for an advance is 7200* but expect committed sellers at the 1999 high of 7000. Retreat below primary support at 6400 is most unlikely, but would warn of a primary down-trend.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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Footsie recovering

The FTSE 100 is headed for another test of 6850 after recovering above 6600. Completion of a higher trough above zero on 13-week Twiggs Money Flow would flag buying pressure. Failure of primary support at 6400 is unlikely, but would warn of a primary down-trend.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

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DAX volatility suggests bull market

Germany’s DAX paints a similar picture to Dow Jones Euro Stoxx 50. Recovery above 9600 suggests an advance to 10600*. Breakout above 9800 would confirm. Completion of another 13-week Twiggs Money Flow trough high above zero would signal strong long-term buying pressure. Reversal below the latest rising trendline is unlikely, but would warn of a test of primary support at 9000.

DAX

* Target calculation: 9800 + ( 9800 – 9000 ) = 10600

DAX Volatility below 20 suggests a bull market.

DAX

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