Crucial moment for the European stock exchanges after losing the EuroStoxx 50 this Thursday “the bullish guideline that was guiding perfectly the rally that was born last August”, warns Joan Cabrero, director of strategy of Ecotrader, who explains that this ” together with the loss of the minimums that marked last week in the 3,745 points threatens the conclusion of this movement. “Something that would be confirmed” if it gives up the key support of the 3,706 points“he concludes.
A previous signal would mark the suitability of selling stock exchanges: “If today Friday the Eurostoxx 50 does not recover that intermediate support of 3,745 points it would already be indicative of a weakness that would invite those who have a high stock exchange exposure to reduce it.” A scenario that is being ruled out this Friday thanks to the strength of the economy, which the last published PMIs have shown, and that are causing increases of more than 1%.
Preventive sales
“In Ecotrader we have already started to reduce it by recommending closing positions in the index, since we are not in the job of waiting for 3,706 points to be lost since in that case we could end up closing very close to where we would be in favor of buying European stock market, specifically the 3,600 points zone, “continues the strategist of the investment strategy portal of the Economist.
As for the Ibex 35, which over the last weeks has consolidated positions within a lateral clearing that has as a base and support the 9,468 points and as a ceiling and resistance the 9,700 points, “the recent failure that we have seen at the time of beating the roof suggests that we are likely to see a relapse to the base of the roof at 9,468 points, where the support that should be maintained is found if we want to continue trusting in a bullish context in the coming weeks without developing a fall before less would seek support at 9,225-9,100 points, “notes Joan Cabrero.
Reasons to trust bullish options
The risks involved in coranavirus are still very present in the stock exchanges, but the WHO reduced the threat on Thursday by ruling out that it is a global emergency. The partial or total closure of Chinese markets also serves to reduce pressure on other markets.
On Wall Street, the technological Nasdaq 100 reissued historical highs this Thursday while the rest of the references quoted flat. A show of strength that should continue, at least, should support the European exchanges, although the crucial data will be the PMIs that will be known this Friday in the eurozone, Spain, France, Germany, United Kingdom, Japan and the United States. Some data that has been improving that could be key to improving the mood of investors.
The ECB will study the effects of negative rates on the economy
The European Central Bank (ECB) kept interest rates unchanged at the first meeting in 2020 and at Christine Lagarde's second at the head of the bank, after announcing a strategic review of the institution's mandate, the first after 16 years and the second in the history of the institution. Lagarde has anticipated that the work will last a year and end over November or December, including the side effects of the negative rates on the economy.
“If Mario Draghi earned a 'deserved' reputation for weakening the euro, just in his second official statement Lagarde seems to be gaining fame for voiding market expectations,” said Olivia Álvarez, an analyst at Monex Europe. “However, a note of attention should be pointed to the margin: investors should not rely on the apparent tranquility of the markets. The lowest volatility plateaus are usually the prelude to notable market explosions,” concludes the expert.
For his part, David Kohl, chief economist of foreign exchange at Julius Baer, points out that “the expectations that interest rates remain unchanged over the next year should be reinforced, with a more flexible inflation target, since only an increase Sudden and lasting inflation will force the ECB to tighten monetary policy. “
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