European stock markets break important longer-term support levels
The DAX 30 future has collapsed from a post-August 2015 recovery high at 11419. We had already seen a sell-off of course last year after the market peaked in March 2015 and suffered a mini-crash in August. In January we tested the August and September lows and managed a good bounce but February has seen us take out that level.
The triangle pattern in the weekly chart above was broken on the downside in mid-January and, after a re-test of that trendline, prices have fallen steeply once again. The last lines of defence for bulls were the 200-week moving average at 9105/00 and the 38.2% Fibonacci support at 9052.
This Fibonacci is measured from the financial crash lows in 2009 so we have now lost of 40% of that six-year bull market in just 11 months as you can see in the weekly chart below.
The only hope bulls have this week is to see a bounce and a weekly close at least above 9050 and preferably above 9105. It is possible we can then count this move as merely a spike lower, not confirmed by a weekly close. However if this is not seen, further moves to the downside are expected of course.
So what are the targets? The first big longer-term price level is the mid-2013 high at 8561 coupled with the longer-term 38.2% Fibonacci support at 8517. This is measured from the 2000-2003 crash low at 2187 up to the 2015 all-time high. Obviously this 45-point band from 8561 to 8517 should be hugely important and it is the next big chance for bulls to mount a defence.
Ideally if you are looking to pick a potential bottom at this level you would need a stop below the 2014 lows at 8350. The next target and support would be the 2007 pre-financial crisis high at 8253/8215.
The Euro Stoxx 50 gives a more negative picture in that the index never managed a recovery as far as the 2007 peak. It has also already collapsed below the 2014 low at 2771 and 50% Fibonacci support (from the 2009 low) at 2765, as well as the various trendline supports you can see in the weekly chart below.
Bulls must force a close on Friday above 2765 for a chance to signal a false intraweek break of the important trendline and 50% Fibonacci support here.
Taking the 2012 low and adding Fibonacci levels we can see there is more minor 61.8% support at 2694 and we are closing in fast on this level. Failure here risks a slide as far as the 2012 double-top highs at 2607.
The FTSE 100 is now testing the 200-month moving average at 5585 and the January low at 5545. A weekly close below here on Friday will therefore add pressure into the end of February and risks a slide to 5410/00 and then the 2012 low at 5215/11. This is just below the less important 50% Fibonacci support at 5265 that you can see in the monthly chart below.
You can also see that failure here is likely to target the 61.8% Fibonacci at 4835. This is not too far above the 2011 and 2010 lows at 4757/4701, so this 100 or 125-point band will be enormously important if we fall another 15% from where we are trading today.
Technical Analyst & Trader
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