Sell off V2 or just a pull back?

Η ανάπτυξη του συστήματος των συναλλαγών σας
July 20, 2015
My daily analysis on Gold and the Dollar index
July 23, 2015

On July 9th I posted and article about my technical view on European indices and I said that despite the fears of a GREXIT (that would not happen) and despite the China Stock Market sell off, European indices were showing signs of an upward reversal from important support levels and that the declines from their highs were corrective overlapping patterns. In that post   I was more optimistic as started my epilogue in that article…’So should we fear for the worst. I do not believe so. I believe that we are in a corrective process and we should soon see some reversal signals. The bull market is far from being over despite all the talks about GREXIT in Europe…my belief is that this is not gonna happen‘. Now after 13 days and a huge rally in European markets we see again the first signs of a possible bearish reversal.

IBEX

European indices have all staged an impressive move from their July lows and it is now time for a retracement. There are two scenarios in play now. The first and most probable scenario in my humble opinion is for the pull back to be corrective.

EU50

The pull back should be of a corrective pattern and should reach the 61.8% Fibonacci retracement of this latest rally. Some stronger indices could even see a retracement of only 38% but the overall picture implies a pull back over the next few days. This pull back will need to hold above the July lows and then give a new bullish reversal signal that will bring the bigger and strongest upward wave to new highs in all indices. This summer is expected to be very hot…towards either direction because even the bearish scenario has still some chances of success.

MIB

So what is the bearish scenario and how will we identify it? Since yesterday markets are showing some weakness and have given short-term reversal signals. If this decline continues below the 61.8% retracement levels this will be a  bad sign for bulls. Bears want the indices to hold below recent highs and break below July lows. Breaking below July lows will open the way for a much deeper correction in equities.

dax

Bulls on the other hand will want this decline to be a healthy retracement and hold above the July lows. Then they would get confirmation of the impeding new highs once we break above yesterday highs. For more detailed analysis and live signals on my trades, become a subscriber today for only 34.95$ through my Premium Services page.

As always, thank you for taking the time to catch up on my thinking.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.