This is a short update on the European markets. The two key indexes in Europe are the German DAX (the largest German companies) and the Euro Stoxx 50 (the largest European companies).
Both indexes have a very similar chart setup. In sum, this setup does not look very constructive. There is certainly a possibility of a bounce at this level, but the chart formation of lower highs since April of 2015 is very concerning.
If this first support, indicated in purple (highest of the two lines), does not hold, then there is a second chance, but it will be a last chance. That is correct: a last chance before things turn very ugly. We are not there yet, and it probably will not be that ugly. Why? Because in a couple of weeks, Mr. Draghi is likely to announce additional monetary stimulus, i.e. during his March speech. At that time, there is a possibility that the DAX and Euro Stoxx 50 have reached their lower support level (DAX 8500 points and Euro Stoxx 2750 points). We believe, by then, a central bank driven rally will take place. For now, the market should take these indexes urgently higher, before they fall much lower.
