Something has begun in last few days in Europe. Price action in Eurostoxx50 index has been really strong both outright and relative to SP500.
Stoxx50/SPX spread - weekly (left panel):
- Spread rallied quite a lot since June, crossed back above Kijun Sen. This was remarkable, as the value had been holding below Kijun Sen since July/2015! From the October top, we saw retracement slightly below Kijun Sen again.
Last week, before Italian referendum market still looked to continue bearish. But this week we have a remarkable signal! -> Price spikes back above Kijun, and Heikin-Ashi shows a clear reversal.
- Smoothed haDelta+ indicator confirms with a cross up. MACD shows a bearish failure and likely to continue up. EWO ticks higher too.
So far it is just a very early signal, but looks like the underperformance of Stoxx50 relative to SPX may come to an end as the spread could not make a lower low.
As a strategy I'd suggest buying Stoxx50 on dips vs selling SPX. You don't have to rush, probably there will be some dips before the Stoxx50 weekly chart confirms a bullish breakout.
In other words, if you don't trade the spread, but you look to buy equities, Europe can be a better opportunity, while on bearish side SPX has to be picked (if a sell signal confirms)
Stoxx50 - Weekly (right panel):
- Ichimoku is still neutral as price is located in the Kumo cloud, but watch out for forward Senkou B! The 52 weeks average has dropped to 3000, while Senkou A (average of Tenkan and Kijun) started to turn up. This makes some initial bullish bias in the thinner forward Kumo. Chikou Span is trying to cross above past candles too.
Tenkan/Kijun has been weak bullish since August, and all selling attempts were blocked by the weekly Kijun Sen.
The supports of this market are very clear now: 3000 / 2955 / 2900
- Heikin-Ashi signal is bullish, haDelta made a bullish cross above zero. EWO and MACD has initial bullish bias too. Until we get some more bullish confirmation, try to buy retracements to 3080 rather than rusing into longs here.
Stoxx50/SPX spread - weekly (left panel):
- Spread rallied quite a lot since June, crossed back above Kijun Sen. This was remarkable, as the value had been holding below Kijun Sen since July/2015! From the October top, we saw retracement slightly below Kijun Sen again.
Last week, before Italian referendum market still looked to continue bearish. But this week we have a remarkable signal! -> Price spikes back above Kijun, and Heikin-Ashi shows a clear reversal.
- Smoothed haDelta+ indicator confirms with a cross up. MACD shows a bearish failure and likely to continue up. EWO ticks higher too.
So far it is just a very early signal, but looks like the underperformance of Stoxx50 relative to SPX may come to an end as the spread could not make a lower low.
As a strategy I'd suggest buying Stoxx50 on dips vs selling SPX. You don't have to rush, probably there will be some dips before the Stoxx50 weekly chart confirms a bullish breakout.
In other words, if you don't trade the spread, but you look to buy equities, Europe can be a better opportunity, while on bearish side SPX has to be picked (if a sell signal confirms)
Stoxx50 - Weekly (right panel):
- Ichimoku is still neutral as price is located in the Kumo cloud, but watch out for forward Senkou B! The 52 weeks average has dropped to 3000, while Senkou A (average of Tenkan and Kijun) started to turn up. This makes some initial bullish bias in the thinner forward Kumo. Chikou Span is trying to cross above past candles too.
Tenkan/Kijun has been weak bullish since August, and all selling attempts were blocked by the weekly Kijun Sen.
The supports of this market are very clear now: 3000 / 2955 / 2900
- Heikin-Ashi signal is bullish, haDelta made a bullish cross above zero. EWO and MACD has initial bullish bias too. Until we get some more bullish confirmation, try to buy retracements to 3080 rather than rusing into longs here.