With less than a month to go before the end of the year, the eyes of investors and stock market analysts are turning in only one direction: the appearance of the “Christmas Gathering”. And furthermore, knowing that despite the consolidation of recent weeks, the supports of the main European stock exchanges still remain standing.
This is the case, for example, ofYou 10,900/11,000 points of the Ibex 35whose drilling did not take place. In fact, for now, the national index “continues to remain strong and in a price zone that is in no man’s land,” says Joan Cabrero, technical analyst and strategist at eco-retailer.
They didn’t fall eitherThe supports to which indices such as the EuroStoxx 50 in its Total Return SX5R version (the one which takes into account the distribution of dividends) face 10,900 points (corresponding to August minimums) or like the 18,900 points of the German Dax 40, the other major index which since eco-retailer monitoring is recommended.
The EuroStoxx 50 Total Return has at times in recent days been close to 11,050 points, or only 1.3% of this key support. Especially, after the publication this Friday of preliminary readings of the purchasing managers’ indices (PMI) prepared by S&P Global. “The eurozone economy appears headed for contraction as the end of the year approaches, at least according to this month’s composite PMI for business activity, which fell to its lowest levels since January,” he explained as soon as he learned of the leading indicator. of private sector activity, Matthew Ryan, head of market strategy at global financial technology company Ebury.
“In this context, it would be ideal for the market to threaten to cross this level and then execute a reversal, a technical figure that usually marks significant turning points, especially if a bullish gap appears in this turning point,” explains the expert in his weekly . strategic comment from Ecotrader, while ensuring that, if this happens, “we would be faced with an unbeatable opportunity to position ourselves upwards“The risk of purchasing in this area would be minimal compared to the potential reward.”
And that’s it, The first bullish objective would be to reach the annual highs, currently at 6%; it would be 10% if it gets close to support again. “Overcoming it would open the door to further increases, possibly of at least another 10%, so in total we could talk about potential increases of between 10% and 20% if the support of 10,900 points remains firm,” sentence.
That is to say the key to a possible Christmas rally is in the hands of the support of 10,900 points of the EuroStoxx 50 Total Return. This will depend on the investor’s ability to close the year with optimism or face a more difficult start to 2025.
Operational strategy
“On an operational level, I propose to manage a stop weekly at 10,900 points, which means we will only execute sales if this level is lost at the close of a Friday. If the market approaches the August lows without crossing them, I don’t think it’s a bad idea to buy the European exchanges again around 10,900/11,000 points, as they offer a great risk-reward equation.“, details Cabrero, while reiterating that “it is more time to buy than to sell, always keeping in mind that if critical supports are lost, we will have to retreat and go into winter quarters.
The main thing is to be disciplined and not lose sight of these strategic levels… and to take advantage of the liquidity obtained thanks to the exposure reductions that could be made once on the other side of the Atlantic. , two weeks ago the Russell 2000 – the index which reflects the behavior of small and medium-sized American companies – reached the objective it had set for the height of 2021.
“Those who followed Ecotrader’s recommendations and alerts will have been able to navigate calmly recent falls. Reducing exposure by 25% of invested capital – that is, selling 25,000 euros out of 100,000 – gave them liquidity to take advantage of opportunities, and now this ammunition can be directed to Europe or reserved until the North American indices fell 10.% from their last peak, a rule that worked very well last August.
This rule encourages you to buy or increase your exposure to stocks from a medium-term perspective, as long as the indices, in general, have corrected at least double digits since their last maximum. In other words, it is a technique that involves patience and waiting.
Pay attention to central banks
Market behavior in the coming weeks and months will largely depend on the actions of central banks. This is one of the catalysts that analysts and investors focus on the most.
Especially since it is possible that the central European entity will apply a rate cut of 50 basis points at the December meeting, which has strengthened in recent sessions, exerting downward pressure on the euro and favoring a rebound in trade which, in the short term, has slightly separated the Ibex 35 and the EuroStoxx 50 from their key supports.
Euro/dollar rebounds from its lows
After four sessions of decline, the euro managed to reverse the trend of recent weeks at the start of the week, rebounding against the US dollar with an advance which at certain times of the day exceeded half a percentage point.
And in nine of the last eleven days, the community currency has traded negatively against the greenback, becoming one of the most bearish currencies among the ten most traded currencies on the planet.
