Overbuying and divergences
The market right now is overbought. However we are seeing different reactions to this situations. Some countries like Germany keep going up non-stop, other like Spain and UK are starting corrections. Lets go through it:
- Italy: Italy was slowing down in the last days but today it sprinted up a bit more and closed on what is a ‘new-high’ since 2011. This gives the market some more space to look foward to hit 2009’s highs around 24000.
- FRANCE: France keeps going up, new high’s again. However we can observe how this last days the tendency is not so steady and some divergences start to appear.
- GERMANY: The situation is similar to France but more extreme. The market is going up even more steadily. However divergences are there and this should be taken as a warning signal. Volume is also falling and this is normally a sign of end of trend. A correction will come sooner or later and its time to start having it in mind.
- UK: UK has started its correction. Its now on the level we where comenting on the last post, around 6700. So now will be very interesting to see where it holds. If its too low then the lateral market that we’ve seen for the last months will still prevail. However if it stops quite high then I think we will see big up movements with new high’s.
- SPAIN: Finally i’ll make a little comment on Spain. Spain has already stopped going up. It has a strong resistance at 11200 and it has stopped there. Now we are seeing a consolidation between that 11200 and 10880. It looks like on the next days the Index is going to have to decide if its enough or if its going to have to go further down until 10700 or so. As you can see in the graph the price its just in a point where there are various trends, supports and resistance so it has to make a choice.