To learn more click here
The MIB Index had a relatively strong week for the first half, only to selloff in the very end. The resulting candle is a shooting star, and it is just under previous resistance at the 16,500 level. However, this looks more congestive than bearish to us, and as such we think that the 15,000 level will offer quite a bit of support.
Looking below that however, if we get below the 15,000 level we think this market will go much lower, probably as far as 13,000 or so. Certainly there are a lot of problems in the Italian economy right now, and as the Europeans doddle with the debt crisis, it's very possible that we will see some type of punishment from the market aimed at the European Union.
Looking at this chart, it is most certainly a bearish downtrend, and possibly a bit of consolidation over the last year or so. Nonetheless, this makes the 17,000 level very important as it has been tested twice and failed both times. In fact, as far as a long term trade is concerned, we would be much more comfortable buying this market above the 17,000 level as it is such an obvious spot on the chart to pay attention to. Nonetheless, that simply will not be able to happen until we see some type of solid solution for the European debt crisis - something that is probably far away from this point time.
Financials will be hit the hardest, but industry will do poorly as well. As a general rule, we believe that the European stock markets on the whole offer value; you have to be very careful as to which stocks you choose. In much the same way that the Americans had a year or two ago, we have a situation in Europe where household names of the only stocks you can be trusted at this point. In a world of economic uncertainty, Italy is probably not where you want to be and we believe this chart does show that.