Ominous Prolog on a Top 100 ~ The Risk Averse Alert

Monday, April 02, 2012

Ominous Prolog on a Top 100

Here's a relevant index whose performance these past couple years raised a red flag whenever trans-Atlantic markets were on the verge of coming under pressure. The EUROTOP 100 ($EUR) is an equity options index composed of 100 of the most actively traded stocks in nine European countries at the epicenter of a collapsing daisy chain of leverage connecting banking systems on both sides of the Atlantic...


The degree to which this index was well along in turning down going into early-May 2010 is a first point of reference, followed by last year's February peak well in advance to major U.S. indexes peaking on May 1st, 2011. These recent early warnings raise concern that, $EUR again might be pointing the way lower.

Presently, both the index's relative strength (top panel) and momentum (bottom) are on the verge of turning into the negative reaches of their respective ranges, this after negatively diverging at $EUR's mid-March peak. So, technically speaking, the index is well-poised for a beating and raising warning of difficulty ahead in the U.S. (which from my perspective is right on cue).

The second momentum oscillator appearing in the bottom panel is the Williams 14-Day %R. Its current position, too, raises prospect $EUR is vulnerable to selling. (Way back in the 1980s I used to plot by hand this indicator, along with indexes themselves! At present it appears to offer a means of assessing MACD's trend, and on this count suggests $EUR's momentum is vulnerable to fading over days ahead).

Just as is the case with U.S. indexes, though, five waves up from late-November 2011 bottom still could be forming (specifically, the fourth of these five waves higher presently might be developing, thus leaving one final lift over days ahead before markets on both sides of the Atlantic fall like a stone). However, $EUR also suggests the trans-Atlantic might be very close to tanking, so should past prove prolog, this is a heads up.

Fast Money
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