The Euro Stoxx 50 went sideways over the last three trading sessions as we hang about the €3750 region. This is an area that previously has been both support and resistance, so is not a huge surprise to see that these stocks are hanging around this vicinity. At this point, traders are trying to determine whether or not they are going to go short or try to pick up a bit of value.
Notice that the candlestick from the Thursday session the last week was an inverted hammer, sitting right on top of the €3700 level. This is an area that I will be paying close attention to because it could kick off massive selling in not only the Euro Stoxx 50 Index, but most European indices in general. After all, stocks do tend to move in the same general direction in the region, so this index is a great indicator of where we may go in other markets.
Keep in mind that the Euro Stoxx 50 represents nine different European countries, so this gives you a good overall indicator of the EU. Obviously, there has been a significant problem in the European Union as of late due to the lack of economic growth, and there are a lot of concerns when it comes to the energy policy of the European Union, as the continent is essentially held hostage to Russian energy, so it needs to sort that situation out before it can step away from an impending recession.
It is worth noting that the Germans have recently had to bring down their estimates of GDP, and that shows just how dire the situation could be. Furthermore, inflation is going to be a major issue in a region that has a major problem for its central bank, as they are struggling with the idea of trying to tighten monetary policy to fight inflation. In other words, the European Union is a mess at the moment, so it is difficult to imagine that this index is going to rise very rapidly. Note that the 50-day EMA sits just below the €3900 level and is racing lower. I think that offers dynamic resistance, and I would be a seller of signs of exhaustion after short-term rallies. I would also short this market below the €3700 level. As things stand right now, I do not have any interest in trying to buy this market.
