- New Science in old markets -

Bottom extensions in European stock indices – bounce coming

There were bottom extensions yesterday in Portuguese and Austrian equity index futures. Both these markets have suffered from worries about banking problems in the last few weeks and these signals indicate that prices have now fallen too much. A bounce is likely from hereabouts and this confirms other signals that we saw last week from the German second-rank index, the MDAX on both Friday and Monday:

07-08-2014 10-47-43

The recent German weakness has been greater than in most other markets, presumably because it is thought that German business will suffer most from Russian sanctions. The longer-term forces pushing Germany upwards are still in place however as we have often argued here (basically being in the Euro, which makes interest and exchange rates too low for German conditions) so this is a good chance to buy Germany. Other European markets will probably also rise, and some may rally more briskly than Germany but we think this is a rare chance to buy ‘value’ in Germany so would choose it as our preferred candidate.