Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Technical Analyst, Saxo Bank
The EuroStoxx50 sell-off yesterday has formed a bearish engulfing top and reversal candle, taking out the previous three days of trading, which is a strong sign of a power shift from buyers to sellers.
Closing below its lower rising trendline gap support area at 5,007-4,976 is likely to be tested.DAX formed an evening star top and reversal-like pattern. It is not perfect as the opening price on Tuesday was not below the body (not below the opening price) of the star candle on 28th March.
However, with the sell-off yesterday, the sellers have taken control and are likely to push the index to test its lower rising trendline.
A close below the lower rising trendline could push the index lower to test the key support at around 17,900.
It should be noted, however, that RSI is not showing divergence – it was canceled last week with a higher value - indicating higher levels after a correction could be seen.
That means the strewnght indicator on EuroStoxx50 is showing divergence, but not on DAX – which of the indices will be right remains to be seen, but caution in taking new longs is advisable.
To demolish this top and reversal picture and resume uptrend, DAX must close above 18,567